Opinion ID: 510980
Heading Depth: 3
Heading Rank: 2

Heading: Jurisdiction Based on General Arising Under Principles

Text: 20 If complete displacement of state law cannot be the basis of federal question jurisdiction, does the presence of a federal aspect in Willy's state cause of action create federal jurisdiction? With the exception of state actions completely displaced by federal law, the plaintiff is generally master to decide what law he will rely upon, The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 33 S.Ct. 410, 411, 57 L.Ed. 716 (1913), and he may avoid federal jurisdiction by exclusive reliance on state law. Caterpillar, 107 S.Ct. at 2429 & n. 7 (1987) (footnote omitted). 11 Here, of course, Willy in part relies upon federal law and the question remains whether his case therefore arises under federal law. 21 One answer is found in Justice Holmes' test for federal question jurisdiction: A suit arises under the law that creates the cause of action. American Well Works Co. v. Layne & Bowler Co.,241 U.S. 257, 36 S.Ct. 585, 586, 60 L.Ed. 987 (1916). Federal jurisdiction is not shown by this test, for Willy alleges an asserted cause of action created by Texas law. 22 However, it is well settled that Justice Holmes' test is more useful for describing the vast majority of cases that come within the district courts' original jurisdiction than it is for describing which cases are beyond district court jurisdiction. We have often held that a case 'arose under' federal law where the vindication of a right under state law necessarily turned on some construction of federal law, see, e.g., Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 41 S.Ct. 243, 65 L.Ed. 577 (1921); Hopkins v. Walker, 244 U.S. 486, 37 S.Ct. 711, 61 L.Ed. 1270 (1917), and even the most ardent proponent of the Holmes test has admitted that it has been rejected as an exclusionary principle, see Flournoy v. Wiener, 321 U.S. 253, 270-272, 64 S.Ct. 548, 556-557, 88 L.Ed. 708 (1944) (Frankfurter, J., dissenting). Franchise Tax Board, 103 S.Ct. at 2846. 23 Following Franchise Tax Board, we addressed federal question jurisdiction premised on vindication of a state right that necessarily turned on some construction of federal law. In Oliver v. Trunkline Gas Co., 796 F.2d 86, 88-89 (5th Cir.1986) (on petition for rehearing), we discussed the two cases cited in Franchise Tax Board for this proposition, Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 41 S.Ct. 243, 65 L.Ed. 577 (1921), and Hopkins v. Walker, 244 U.S. 486, 37 S.Ct. 711, 61 L.Ed. 1270 (1917). We read Hopkins, a suit to remove a cloud from title originating in a federal patent, as distinguishable from a seemingly inconsistent decision in a quiet title action, Barnett v. Kunkel, 264 U.S. 16, 44 S.Ct. 254, 68 L.Ed. 539 (1924), based on traditional distinctions in the pleading requirements for these two actions. We thus found Hopkins to have narrow applicability. We read Smith, a shareholder suit to enjoin investment in bonds allegedly issued under an unconstitutional federal act, as irreconcilable with Moore v. Chesapeake & Ohio Railway, 291 U.S. 205, 54 S.Ct. 402, 78 L.Ed. 755 (1934). We found it unnecessary to resolve this dilemma, however, because in neither case did federal law provide a private remedy, and the recently rendered majority opinion in Merrell Dow, 106 S.Ct. 3229, required a federal remedy for the statute to be a basis for federal jurisdiction. The Merrell Dow Court found Smith and Moore reconcilable based on the difference in the nature of the federal issues at stake. 106 S.Ct. at 3236 n. 12. Merrell Dow suggested that Smith challenged the constitutionality of an important federal statute, whereas Moore was simply a state tort action that incorporated a federal standard. Merrell Dow, 106 S.Ct. at 3236 n. 12. 24 Justice Cardozo formulated the other well-recognized test for determining when an action arises under federal law: a right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action ... [and] must be such that it will be supported if the Constitution or laws of the United States are given one construction of effect, and defeated if they receive another. Gully, 57 S.Ct. at 97. In Franchise Tax Board, the Court then explained that the Holmes and Cardozo tests are alternative analyses, though the Court slightly altered the Cardozo essential element language and instead required the well-pleaded complaint to require resolution of a substantial question of federal law. 103 S.Ct. at 2848, 2856. See also Fabrique, Inc., 813 F.2d at 726. 25 Defendants argue that the federal statutes to which Willy refers as a feature of his claim raise a substantial issue of federal law, as demonstrated by the private, federal remedy granted by those statutes. However, Franchise Tax Board only held that a case might arise under federal law when a state claim requires resolution of a substantial question of federal law, and we have interpreted the substantial question test to be a narrow exception to the rule that a suit arises under the law that creates the cause of action. Oliver, 796 F.2d at 88. Merrell Dow recognizes that the mere presence of a federal issue in a state cause of action does not automatically confer federal-question jurisdiction and cites with approval the passage from Justice Frankfurter's dissenting opinion in Textile Workers v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 912, 928, 1 L.Ed.2d 972 (1957), defining the proper test as the degree to which federal law must be in the forefront of the case and not collateral, peripheral or remote. Merrell Dow, 106 S.Ct. at 3235 & n. 11. While Merrell Dow held that a private, federal remedy was a necessary predicate to determining that the presence of a federal element in a state-created cause of action resulted in that cause of action being one which arose under federal law, it did not hold that the presence of any private, federal remedy would in all instances suffice for that purpose. See Merrell Dow, 106 S.Ct. at 3232 (no single, precise definition of section 1331 arising under jurisdiction), 3235 ([f]ar from creating some kind of automatic test, Franchise Tax Board thus candidly recognized the need for careful judgments about the exercise of federal judicial power in an area of uncertain jurisdiction.). 26 Finally, because Merrell Dow, 106 S.Ct. at 3235, and Franchise Tax Board, 103 S.Ct. at 2852, relied heavily upon Gully, we return in conclusion to its frequentedly cited passage:What is needed is something of that common-sense accommodation of judgment to kaleidoscopic situations which characterizes the law in its treatment of problems of causation. One could carry the search for causes backward, almost without end.... Instead, there has been a selective process which picks the substantial causes out of the web and lays the other ones aside. As in problems of causation, so here in the search for the underlying law. If we follow the ascent far enough, countless claims of right can be discovered to have their source or their operative limits in the provisions of a federal statute or in the Constitution itself with its circumambient restrictions upon legislative power. To set bounds to the pursuit, the courts have formulated the distinction between controversies that are basic and those that are collateral, between disputes that are necessary and those that are merely possible. We shall be lost in a maze if we put that compass by. 57 S.Ct. at 100. 27 Cf. Belknap, Inc. v. Hale, 463 U.S. 491, 103 S.Ct. 3172, 3177, 77 L.Ed.2d 798 (1983) (LMRA does not preempt state law where claim only of peripheral concern to LMRA and deeply rooted in local law); Farmer, 97 S.Ct. at 1561-62 (same). 28 Turning to Willy's complaint, we begin with the minimum requirement that the federal statutes involved provide a private, federal remedy. See Merrell Dow, 106 S.Ct. at 3234-37; Oliver, 796 F.2d at 89. But Willy does not claim that defendants violated the whistleblower provisions of the federal statutes. 12 Instead, he pleaded that he was fired for refusing to violate, or seeking to cause his employer to comply with, state and federal reporting requirements. Defendants have not argued that Congress has provided a private, federal cause of action for violation of these federal regulations. Furthermore, the whistleblower provisions expressly limit the remedy to an administrative claim with the Secretary; therefore, the district court could not have exercised jurisdiction over Willy's claim if he had originally brought it in federal court under those provisions. See In re Willy, 831 F.2d 545, 546 (5th Cir.1987). Just as it would flout congressional intent to allow a federal court to exercise federal question jurisdiction over a removed claim for violation of a federal statute that does not provide a private cause of action, Merrell Dow, 106 S.Ct. at 3234-35, it would equally flout congressional intent to give the federal court original (and hence removal) jurisdiction based on statutes that limit the federal remedy to an administrative action. 13 29 Assuming, however, that the whistleblower provisions meet the requirements of Merrell Dow, the federal element in Willy's Sabine Pilot-type claim is not substantial enough to confer federal question jurisdiction. 30 We note to begin with that Willy's wrongful discharge claim 14 was predicated on his alleged attempts to cause his employer to comply with, or his refusal to violate, state as well as federal environmental laws and federal securities laws. For example, Willy alleges that he refused to permit Defendants to continue to operate in violation of the environmental laws of the federal and state governments, that had he permitted the Defendants to continue to operate in violation of the laws and regulations of the federal and state governments, he would have been in violation of the laws of the United States and the various states, and also not in compliance with the code of ethics governing the actions of lawyers in Texas, and that his 31 actions ... also would have required Defendant Coastal ... to report to the U.S. Environmental Protection agency any non-compliance with the laws and regulations of that agency, and to report to the respective state environmental agencies, any failure to comply with state law and regulations. Among the state agencies to which reporting would have been required was the Texas Department of Water Resources and the Kansas Department of Health and Environment. 32 He further alleged that Defendant Coastal would have been required to report these conditions to the investment public and its shareholders in its SEC Form 10K and 10Q. While Willy did not expressly allege why he was fired, the plain inference from his pleading is that he was discharged because of his refusal to violate, or his insistence that his employer comply with, state as well as federal environmental laws and federal securities laws. Willy also alleged in connection with his wrongful discharge claim: 33 A contract for employment at will under the laws of the State of Texas prohibits discharge for compliance with the laws of the United States and the various states, including the State of Texas. All actions relevant to this cause of action undertaken by Donald J. Willy were to comply with the laws of the United States and the various states. 34 Thus, Willy's wrongful discharge claim was supported by alternate theories, first that his discharge was wrongful because it was on account of his attempt to cause employer compliance with or his refusal to violate federal law, and second that it was wrongful because it was on account of his attempt to cause employer compliance with or his refusal to violate state law. Nothing in Willy's state pleading or in the Texas common law as announced in Sabine Pilot or otherwise indicates that the first (federal law related) theory is necessary to Willy's wrongful discharge claim or that the second (state law related) theory is not sufficient of itself and without the first theory. 15 35 In its recent decision in Christianson v. Colt Industries Operating Corp., --- U.S. ----, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988) the Court considered an analogous situation in determining whether a claim was one arising under any Act of Congress relating to patents for purposes of jurisdiction under 28 U.S.C. Sec. 1338(a). The Court noted that resolution of this question was governed by the same principles that applied in determining arising under jurisdiction for purposes of section 1331. Christianson, ---U.S. at ----, 108 S.Ct. at 2172-74. It then announced that a claim supported by alternative theories in the complaint may not form the basis for section 1338 jurisdiction unless patent law is essential to each of these theories, id., and further explained: 36 The well-pleaded complaint rule, however, focuses on claims, not theories, see Franchise Tax Board, 463 U.S., at 26, and n. 29 [103 S.Ct. at 2855 and n. 29]; Gully, 299 U.S., at 117 [57 S.Ct. at 99-100], and just because an element that is essential to a particular theory might be governed by federal patent law does not mean that the entire monopolization claim 'arises under' patent law. Id. --U.S. at ----, 108 S.Ct. at 2175-76. 37 The Christianson Court proceeded to hold that neither of the two Sherman Act claims there involved, an attempted monopolization claim under section 2 and a group boycott claim under section 1, arose under the patent laws because [t]he patent-law issue, while arguably necessary to at least one theory under each claim, is not necessary to the overall success of either claim. Id. The theory on which the plaintiff actually prevailed in the district court was the patent law theory as to each claim, id. -- U.S. at ----, 108 S.Ct. at 2170-72, but the Court pointed out that the complaint also alleged alternative theories of recovery, not involving patent law, on each of the two claims. Id. --- U.S. at ----, 108 S.Ct. at 2175-76. Hence, none of the claims met the section 1338 arising under requirement, and accordingly the suit was not one within the district court's section 1338 jurisdiction. 38 We conclude that the Christianson doctrine is properly applied to this case and results in the conclusion that Willy's wrongful discharge claim does not arise under federal law. 39 Our conclusion in this connection is strengthened by our view that the federal issues in Willy's claim are not ones in the forefront of the case, but are more collateral in nature, and are not substantial in relation to the claim as a whole, which is in essence one under state law. The Texas common law doctrine stated in Sabine Pilot is one intended to protect the rights of any employees, and whether the law that they are fired for refusing to violate is state or federal, environmental or otherwise, is wholly immaterial. 16 It is likewise immaterial to the Texas action whether the employee sought to aid a law enforcement agency or to bring to official cognizance violations committed by others. The federal whistleblower statutes, by contrast, promote enforcement of environmental laws by protecting employees who aid the government enforcement agency. Accordingly, in this Texas common law wrongful discharge case, the role of issues of federal law is more collateral than in the forefront. 17 40 Further, other issues of Texas law are substantially implicated in all theories of the wrongful discharge claim. In their motion to dismiss, defendants argued that Willy's ethical obligations as an attorney prohibited him from bringing this action. The Texas Code of Professional Responsibility, DR 2-110(B)(4), requires an attorney to withdraw when discharged by his client; DR 2-110(C)(1) allows an attorney to withdraw if his client intends to pursue an illegal course of action. Tex.Rev.Civ.Stat.Ann., Title 14 App., art. 12, Sec. 8 (Vernon 1973). In either case, DR 4-101(C) prohibits an attorney from revealing confidences without permission except in limited situations not applicable here. Willy argues, on the other hand, that the attorney-client privilege does not allow Coastal to fire him illegally. Tex.Rev.Civ.Stat.Ann., Title 14 App., art. 12, Sec. 8 (Vernon 1973). Thus, the primary legal issues in this case will involve regulation of employment relationships and attorney conduct, both of which are areas deeply rooted in local interest. See, e.g., Belknap, 103 S.Ct. at 3183 (employment misrepresentation case). Resolution of these issues in defendants' favor could well mean that the federal issues would never arise. 41 We conclude that Willy's wrongful discharge claim is not one that arises under federal law for purposes of section 1331, and is hence not removable on that basis. We have previously concluded that possible federal preemption does not serve as a ground for removal here. There is no diversity. Accordingly, the district court erred in denying Willy's motion to remand, and the judgment below must be reversed with directions to remand the case to the state court. The only remaining issue is that of the Rule 11 sanctions against Willy and his attorney.