Opinion ID: 767716
Heading Depth: 3
Heading Rank: 1

Heading: Jurisdiction Based on the Preemption Issue

Text: 13 Although neither party has questioned the District Court's subject matter jurisdiction, the matter is not self-evident, and we are obliged to consider it. See Fax Telecommunicaciones Inc. v. AT&T, 138 F.3d 479, 485 (2d Cir. 1998). And, although an objection to the propriety of removal is forfeited by failure to assert it, see id. at 487-88, subject matter jurisdiction must exist, if not at the time of removal, then at least at the time the District Court entered judgment, see Grubbs v. General Electric Credit Corp., 405 U.S. 699, 705 (1972); Fax Telecommunicaciones, 138 F.3d at 488. 14 The Appellees removed from the Vermont Environmental Court a civil action brought to that court by the appeal of the Homeowners from the administrative ruling of the ZBA. An appeal of an administrative ruling to a state court is removable to a federal district court so long as the complaint to the state court presents a well-pleaded claim arising under federal law. See City of Chicago v. International College of Surgeons, 522 U.S. 156, 163-64 (1997). 15 Whether the pending case satisfies the standard of City of Chicago merits careful consideration. City of Chicago, although involving review of an agency decision, presented a traditional federal-question case: the state court plaintiff's complaint alleged that the action of the defendant (a city agency) and the ordinance under which the defendant acted violated the plaintiff's constitutional rights. As the Supreme Court explained, even though state law (Illinois's Administrative Review Law) created the plaintiff's cause of action, that cause of action nonetheless arose under federal law because the plaintiff's 'right to relief under state law require[d] resolution of a substantial question of federal law.' Id. at 164 (quoting Franchise Tax Board of California v. Construction Laborers Vacation Trust for Southern California, 463 U.S. 1, 13 (1983)). 16 The pending case differs from City of Chicago in three respects. First, unlike the state court plaintiff in City of Chicago, who filed a complaint, the Homeowners invoked the jurisdiction of the Vermont Environmental Court by filing a notice of appeal. That technical difference is irrelevant for purposes of determining the district court's removal jurisdiction. District courts have original jurisdiction over federal claims seeking review of an administrative decision, whether the court case is initiated by a complaint, see, e.g., 42 U.S.C. 405(g) (authorizing action to review final decision of Commissioner of Social Security), or a petition for review, see, e.g., 28 U.S.C. 2344 (authorizing action to review final order of various federal agencies). 17 Second, the plaintiff's initial pleading in the state court in City of Chicago set forth a cause of action, whereas the Homeowners presented their issues to the Vermont Environmental Court by a Statement of Questions, pursuant to the required local procedure. See Vt. R. Civ. P. 76(e)(4)(B) (Supp. 1999). Although a Statement of Questions does not present a claim that may be examined to determine if it arises under federal law in quite the same manner as a complaint asserting a cause of action, this technical difference also provides no basis for rejecting federal subject matter jurisdiction. The well-pleaded complaint rule is concerned with the existence of a federal question on the face of the document invoking a state court's jurisdiction, not whether that document bears the label complaint. 18 Arguably more significant is a third distinction: the issue tendered to the Illinois state court in City of Chicago was whether the local agency's ordinance or action violated the Constitution, whereas the issue tendered to the Vermont Environmental Court was whether federal law preempted enforcement of the condition of the Appellees' permit. The preemption issue was initially tendered in this case when it was asserted by the Appellees before the ZBA as a defense to the Zoning Administrator's notice of violation. Under the well-pleaded complaint rule, see Franchise Tax Board, 463 U.S. at 9; Gully v. First National Bank, 299 U.S. 109, 113 (1936) ([T]he controversy must be disclosed upon the face of the complaint, unaided by the answer or by the petition for removal.), a state law complaint, filed in a state trial court, that tries to anticipate a defense of federal preemption will not support federal question removal jurisdiction, see Caterpillar Inc. v. Williams, 482 U.S. 386, 393 (1987); Gully, 299 U.S. at 116 (By unimpeachable authority, a suit brought upon a state statute does not arise under an act of Congress or the Constitution of the United States because prohibited thereby.), unless the limited doctrine of complete preemption applies, see Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58, 63-64 (1987). Under that doctrine, the plaintiff's state law claim, recharacterized pursuant to the artful pleading rule, see Travelers Indemnity Co. v. Sarkisian, 794 F.2d 754, 758 (2d Cir. 1986), is said necessarily to arise under federal law, regardless of how the plaintiff has pled the claim, see Metropolitan Life, 481 U.S. at 63-64. In the FCA context, we have ruled that the complete preemption doctrine does not apply with respect to state law billing claims and other business practice claims. See Fax Telecommunicaciones, 138 F.3d at 486; Marcus v. AT&T Corp., 138 F.3d 46, 53 (2d Cir. 1998). It is arguable, however, that the complete preemption defense applies to state law claims that concern technical aspects of electronic transmissions, and we might well support subject matter jurisdiction in this case on that basis. We need not do so, however, because of an alternative basis for satisfying the well-pleaded complaint rule. 19 Although the preemption issue was initially asserted defensively by the Appellees at the administrative level, later, when the Homeowners invoked the jurisdiction of the Vermont Environmental Court, they did so by tendering the preemption issue affirmatively as the initial question to be decided in their effort to reverse the decision of the ZBA. After explaining that the ZBA had ruled that the condition of WIZN's permit was void because of federal preemption, the Homeowners' Statement asked as a first question, Does federal law preempt state and local jurisdiction over interference? Although it is arguable that the defensive nature of the preemption issue when first injected into the case at the agency level should govern throughout the litigation, at least for purposes of determining federal question jurisdiction, we think the better approach is to permit removal when a litigant's initial entrance to a state court seeks a decision that an administrative ruling upholding a federal preemption defense is erroneous. 2 Our view rests on the reason why the well-pleaded complaint rule has been fashioned to bar anticipation of a federal defense. 20 The well-pleaded complaint rule is usually justified as a protection against the undue expansion of federal court jurisdiction that would occur if a plaintiff with only a state law claim could invoke federal jurisdiction simply by speculating that the defendant might assert a federal defense. See, e.g., Richard H. Fallon et al., Hart and Wechsler's The Federal Courts and the Federal System 910-11 (4th ed. 1996) (Hart and Wechsler) (well-pleaded complaint rule designed to avoid making original jurisdiction turn on speculation as to what issues will be decisive in the litigation) (footnote omitted). However, after a state or local agency has considered a federal defense, such as preemption, tendered by a defendant, and ruled that the defense is valid, the reason for the well-pleaded complaint rule has been substantially diminished: the federal defense is no longer merely a matter of speculation. 3 Thus, when the Homeowners sought judicial review of the ZBA's preemption ruling, the federal defense had been adjudicated, and the Homeowners entered the state court to obtain judicial review of the agency ruling. They were not merely seeking a declaratory judgment from the Vermont Environmental Court, which might well not have been removable, 4 but rather exercising their state law right to obtain judicial review of agency action, the same procedural route that justified removal in City of Chicago. And, as in City of Chicago, the state court suit, though authorized by state law, arose under federal law because of the nature of the federal question on which the outcome depended. 21 The logic of permitting removal once a federal defense has been adjudicated could arguably be invoked to justify removal of a state court appeal from a state trial court decision adjudicating a federal defense. 5 However, removal of such an appeal would encounter the obstacle of the Rooker/Feldman doctrine, prohibiting a federal district court from exercising appellate jurisdiction over a state court. See District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 474 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413, 416 (1923). Since this case involves removal of a case pending in a state court of first instance, seeking review of an agency decision adjudicating a federal issue, it could have been brought originally in a district court, and is therefore properly removable. See 28 U.S.C. 1441(a) (1994). We also observe that had the state agency adjudicated the federal issue adversely to the Appellees, they could have brought an action in the District Court to enjoin enforcement of the condition of the zoning permit. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96 n.14 (1983).