Opinion ID: 200765
Heading Depth: 2
Heading Rank: 3

Heading: Substantial Question of Federal Law

Text: 25 The Courts of Appeals, including this Circuit, have elaborated on the holding announced in Merrell Dow. We begin with a review of our post- Merrell Dow cases. 5 Three of our recent decisions are relevant to the present controversy. PCS 2000 LP v. Romulus Telecommunications, Inc., 148 F.3d 32 (1st Cir.1998) dealt with the issue of whether the Federal Arbitration Act (FAA) alone could be a source of subject matter jurisdiction. The Supreme Court held in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 25 n. 32, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), that the FAA created a federal body of law, but not an independent source of federal jurisdiction. Elaborating on that point, we held that the complaint at issue in PCS 2000 LP must be dismissed for lack of subject matter jurisdiction. PCS 2000 LP, 148 F.3d at 34. Specifically, we noted the fact that th[e] case peripherally involve[d] [federal] bidding practices, and that cases sometimes arise under federal law when an interpretation of federal law is outcome-determinative. Id. at 35 (citing Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 199, 41 S.Ct. 243, 65 L.Ed. 577 (1921)). However, we further stated that section 503(b) of the Communications Act confers no private right of action, and the plaintiffs' complaint only advances non-federal claims. Id. We deemed the connection too tenuous to confer federal jurisdiction. Finally, we observed that, [n]o less an authority than the Supreme Court has made this clear. Unless a federal statute bestows a private right of action, courts ought to presume that Congress did not intend the statute to confer federal jurisdiction. Id. Therefore, PCS 2000 LP endorses the view espoused by appellee, but recognizes that when the interpretation of federal law is outcome-determinative, subject matter jurisdiction may be properly exercised. 26 We explored the same issue in Almond v. Capital Properties, Inc., 212 F.3d 20 (1st Cir.2000). There, the plaintiff's action was removed from state court on the ground that it came within the federal court's subject matter jurisdiction. We assumed for the purposes of the holding that the cause of action was not created under federal law. Id. at 23. We went on to explore an alternative basis for obtaining federal jurisdiction — that a substantial question of federal law was involved. Id. We characterized the claim as follows: [t]he central issue properly presented ... is whether [defendant's] promise to the [Federal Railroad Administration] includes an obligation to obtain the FRA's approval before implementing the increase in parking charges at issue in this case. Id. Because the Supreme Court has consistently held that the rights and obligations of the United States and its agencies are governed exclusively by federal law, we held subject matter jurisdiction existed. Id. at 24. Appellee argues that this case is inapposite. To the extent that the rights and obligations of the United States and its agencies will always be a matter of federal law, appellee is correct. However, we believe that this case also stands for the proposition that there is a discrete type of case where federal subject matter jurisdiction will lie notwithstanding the absence of a federal cause of action. 27 The reasoning in Almond relied on Judge Posner's opinion in Price v. Pierce, 823 F.2d 1114 (7th Cir.1987). 6 Price involved a contract dispute filed by prospective tenants (designated by the court as third-party beneficiaries) against multiple defendants, including the Secretary of Housing and Urban Development (HUD), challenging the allocation of lower-income family housing. The contract in question was between private parties. However, in order to resolve the dispute the court would have to interpret a contract provision approved by a federal agency pursuant to a federal statutory scheme. The Seventh Circuit held that 28 [t]he issue is potentially so important to the success of the program — since on its resolution may turn the amount of lower-income housing actually provided — that we believe that Congress, had it thought about the matter, would have wanted the question to be decided by federal courts applying a uniform principle. 29 Price, 823 F.2d at 1119-20. 30 The Seventh Circuit's observation is especially relevant: Section 1437f(b)(2) contemplates that HUD will enter directly or (as here) indirectly ... into contractual relations with developers all over the country.... Id. at 1119. In Templeton's case, the EPA has not contracted on its behalf, and therefore Templeton (or anyone else for that matter), would not have standing to sue the agency or its contractors. However, the contract entered into in the instant appeal explicitly contemplated the application of federal grants, which in turn obligated the parties to abide by the EPA regulations. Our opinion in Almond embraces Price pending further enlightenment from the Supreme Court. Almond, 212 F.3d at 24. A subsequent Seventh Circuit case held that a federal rule of decision is necessary but not sufficient for federal jurisdiction. There must also be a right of action to enforce that rule. Seinfeld v. Austen, 39 F.3d 761, 764 (7th Cir.1994) (quoting Dillon v. Combs, 895 F.2d 1175, 1177 (7th Cir.1990)). Seinfeld failed to address the discrete class of cases where a substantial federal question may confer jurisdiction under § 1331. 7 31 Other Circuits reviewing the discrete issue of whether there is a substantial question of federal law have produced confusing (if not conflicting) opinions on the matter. In a case with facts similar to the instant appeal, the Fourth Circuit found that the Clean Air Act conferred jurisdiction under § 1331, notwithstanding the absence of a private right of action under the federal act. Ormet Corp. v. Ohio Power Co., 98 F.3d 799, 807 (4th Cir.1996). Plaintiff sued several defendants claiming that it was entitled to emission allowances issued to Ohio Power by the EPA, and seeking money damages. The court determined that Section 408(i) of the Clean Air Act did not create a private remedy. However, that did not fully resolve the question of whether Ormet's claim, alleging ownership of emission allowances ... arises under federal law.... Id. at 806. Whether there was a question sufficiently substantial to arise under federal law, was another avenue for obtaining jurisdiction. Id. After reviewing Merrell Dow, the Fourth Circuit held that federal jurisdiction did exist, because, to resolve that dispute, a court must interpret both the Act and the contract to decide whether Ormet is party to a `life-of-the-unit, firm power contractual arrangement,' as that phrase is defined in the Act. Id. at 807, 106 S.Ct. 3229. In addition, the Fourth Circuit considered Congress's explicit intent that the EPA not be burdened with resolving private disputes over a unit's allowances, Ormet, 98 F.3d at 805, and the fact that the system of freely transferable allowances was critical to the Acid Rain Program. Id. at 807 (citing the legislative history of the particular section of the Act). Finally, uniformity was considered imperative to the program's success. Id. Therefore, the Fourth Circuit held that there was a substantial federal interest and subject matter jurisdiction was proper under § 1331. In doing so, the court endorsed the continuing validity of Smith and Franchise Tax Board. Cf. Mulcahey v. Columbia Organic Chem. Co., 29 F.3d 148 (4th Cir.1994). 32 The district court in this case relied on the Sixth Circuit case of Board of Trustees of Painesville Township v. City of Painesville, 200 F.3d 396 (6th Cir.1999). In City of Painesville, the City, in an effort to expand its wastewater treatment facilities, applied to the EPA for a grant. Although the grant suggested that the plaintiffs would have access to the new facilities, the City refused to provide it. Plaintiffs brought suit alleging violations of Section 204 of the CWA. The Sixth Circuit held that because the CWA provided no private right of action, the district court could not exercise jurisdiction over the claims. Id. at 400. The court made no mention of Smith or Franchise Tax Board in its opinion. The district court reasoned, on the basis of Painesville, that Templeton's claim under the CWA is, therefore, frivolous and insufficiently substantial to warrant the exercise of federal subject-matter jurisdiction. The opinion goes further still, assuming arguendo that even if Templeton's claim required the interpretation of the CWA, it 33 would still lack subject-matter jurisdiction over the claim because the congressional determination that there should be no federal remedy for violation of this federal statute [i.e. that there is no private right of action] is tantamount to a congressional conclusion that the presence of a claimed violation of the statute as an element of a state cause of action is insufficiently substantial to confer federal-question jurisdiction. 34 (quoting Merrell Dow, 478 U.S. at 814, 106 S.Ct. 3229 (internal quotations omitted)). 35 We arrive at the crux of our decision. We agree with the district court that under Merrell Dow, the plaintiff's cause of action cannot give rise to a federal cause of action as this is clearly foreclosed by the Supreme Court's decision in National Sea Clammers. Nor do we think that plaintiff's argument can succeed under the Smith/Franchise Tax Board rationale. 36 We do not believe that merely because a court will have to interpret the federal regulations, it necessarily follows that federal jurisdiction exists. We agree with the Fourth Circuit that the determination of whether a federal issue is sufficiently substantial should be informed by a sensitive judgment about whether the existence of federal judicial power is both appropriate and pragmatic and that at bottom, we must determine whether the dispute is one that Congress intended federal courts to resolve. Ormet, 98 F.3d at 807. We see no indication, and appellant has pointed to none, that Congress intended the CWA and its regulations to confer federal question jurisdiction. See J.A. Jones Constr. Comp. v. City of New York, 753 F.Supp. 497 (S.D.N.Y.1990)(holding that the incorporation of EPA regulations under the CWA into a contract did not give rise to federal question jurisdiction when suing for breach of contract). The complaint before the district court did not present a substantial question of federal law. We agree with the district court's conclusion that this action is, at its core, a breach of contract claim. 37 Further, while it may be argued that resolution of Count I of appellant's third amended complaint may require some application and interpretation of the Clean Water Act and the EPA Guidelines, this cannot rise to a substantial question of federal law. The federal issue, assuming one exists, is tangential to the parties' contractual rights. In addition, the EPA's interest in effective enforcement will not be prejudiced by the absence of a federal court's review. In fact, the EPA delegates these matters to state agencies as a matter of course. The language of the complaint in this case reflects the collateral nature of appellant's claim. The statute cited, 33 U.S.C. § 1284, requires certain parameters to be met when the EPA issues grants. The grant was contemplated by the Waste Management contract entered into by the parties. If either party should break with the requirements of § 1284 and its accompanying regulations, the EPA may choose to take action. However, the parties cannot create jurisdiction by reference to this section when the dispute arises from their contractual obligations. The federal question here is insubstantial because it does not define the rights of the parties or provide them with a remedy. See Franchise Tax Bd., 463 U.S. at 20-21, 103 S.Ct. 2841 (stating that what is needed is ... a selective process which picks the substantial causes out of the web and lays the other ones aside.). We can discern nothing more in this cause of action than a state law breach of contract claim over which the district court did not have subject matter jurisdiction.