Opinion ID: 666003
Heading Depth: 2
Heading Rank: 2

Heading: justiciable case or controversy

Text: 21 Before addressing the merits of this case, we must pass on the state of Texas' argument that this action must be dismissed for lack of subject matter jurisdiction. Under the Declaratory Judgment Act, a federal district court has the discretionary power to enter a declaratory judgment [i]n a case of actual controversy within its jurisdiction. 28 U.S.C. Sec. 2201. The state of Texas, in its response to the banks' motion for summary judgment, argued that the district court should deny summary judgment because the banks had not shown an actual controversy within the meaning of Sec. 2201. 22 The Supreme Court has told us that the district courts are without the power to grant declaratory relief unless an actual controversy exists. Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 272, 61 S.Ct. 510, 511, 85 L.Ed. 826 (1941). The question, which is admittedly one of degree, is whether the controversy is of sufficient immediacy and reality to permit a declaratory judgment. 10A CHARLES A. WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE Sec. 2757 (1983); see also Middle South Energy, Inc. v. City of New Orleans, 800 F.2d 488, 490 (5th Cir.1986) (A federal court may not issue a declaratory judgment unless there exists ... a substantial controversy of sufficient immediacy and reality between parties having adverse legal interests.). The district court in the instant case implicitly resolved this issue in favor of the plaintiffs, noting that [p]laintiffs fear that if they make, purchase or enforce alternative mortgage transactions, Defendants will enjoin their actions, prosecute them under Texas law and revoke their corporate charter or license. First Gibraltar Bank, 815 F.Supp. at 1010. The court below also noted that the Texas Consumer Credit Commissioner issued an opinion in 1986 that such loans may violate the Texas Deceptive Trade Practices Act, TEX.BUS. & COMM.CODE Sec. 17.41-.63 (West 1987 and West Supp.1994), and that the Texas Attorney General issued an opinion in 1990 that the federal laws now relied upon by the banks had not preempted any aspect of Texas homestead law. First Gibraltar Bank, 815 F.Supp. at 1010, 1011. 23 The state of Texas contends that the plaintiffs have failed to show a real and immediate threat of injury and that [i]t is purely a matter of conjecture whether the State will ... ever file suit against the [plaintiffs] on the theory on which the [plaintiffs] requested a declaration. For support, the state of Texas relies on our opinion in Texas v. West Publishing Co., 882 F.2d 171, 175 (5th Cir.1989), cert. denied, 493 U.S. 1058, 110 S.Ct. 869, 107 L.Ed.2d 953 (1990), in which we applied a two-pronged test fashioned by the Federal Circuit to determine whether an actual controversy existed in the context of an intellectual property case. Under that test, the declaratory plaintiff must show both a real and reasonable apprehension of litigation and a course of conduct that brings it into adversarial conflict with the declaratory defendant. Id. We agree with the plaintiffs, however, that West Publishing is not controlling; the test we applied in that case was adopted specifically for its intellectual property context, and we decline to extend it to this alleged clash between state law and federal right. 24 We find the case of Pacific Gas & Elec. Co. v. State Energy Resources Conservation and Dev. Comm'n, 461 U.S. 190, 103 S.Ct. 1713, 75 L.Ed.2d 752 (1983), particularly instructive. That case involved, inter alia, a California statute that imposed a moratorium on the certification of new nuclear power plants until the state energy commission found that a method of permanent disposal of high-level nuclear wastes had been successfully developed and had received federal approval. Id. at 198, 103 S.Ct. at 1719. The plaintiff utilities filed an action seeking a declaratory judgment that this statute had been preempted by the federal Atomic Energy Act. Id. The Court agreed with the plaintiffs that the aspect of their suit involving this statute was ripe for judicial review. Id. at 200, 103 S.Ct. at 1720. Particularly important to the Court's determination were the facts that [t]he question of pre-emption is predominately legal and therefore fit for judicial decision, and that postponement of decision would likely work substantial hardship on the utilities. Id. at 201, 103 S.Ct. at 1720-21. We conclude that the banks in the instant action are in much the same position as the utilities were in Pacific Gas. Although the banks could simply proceed on the assumption that their view of federal preemption of Texas homestead law is correct, they would risk incurring significant losses should their legal theory prove incorrect. The potential consequences to the banks are sufficiently concrete to support an action for declaratory judgment. See Whitney v. Heckler, 780 F.2d 963, 969 n. 6 (11th Cir.) ([A]n issue is ripe for judicial review when the challenging party is placed in the dilemma of incurring the disadvantages of complying or risking penalties for noncompliance.), cert. denied, 479 U.S. 813, 107 S.Ct. 65, 93 L.Ed.2d 23 (1986). 25 We conclude that the district court's decision not to dismiss this declaratory judgment action for lack of an actual controversy was not erroneous.