Opinion ID: 11909
Heading Depth: 2
Heading Rank: 2

Heading: Artful Pleading Exception ——

Text: Federal Res Judicata Federal courts have over the years created but a few narrow exceptions to the fundamental precept of the well-pleaded complaint 16 28 U.S.C. §§ 1331 & 1441(b). 17 Carpenter, 44 F.3d at 366 (citing Louisville & Nashville R. Co. v. Motley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908). 18 Carpenter, 44 F.3d at 366 (citing Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 12, 103 S.Ct. 2841, 2848, 77 L.Ed.2d 420 (1983)) (emphasis added). 19 Carpenter, 44 F.3d at 366. 20 Gully v. First Nat’l Bank, 299 U.S. 109, 112, 57 S.Ct. 96, 97, 81 L.Ed. 70 (1936). 8 doctrine that “[t]he plaintiff is master of her complaint.”21 The common rationale for these jurisprudential exceptions —— euphemistically known by the cynically sarcastic sobriquet of the “artful pleading exception” —— is that when a plaintiff has available “no legitimate or viable state cause of action, but only a federal claim, he may not avoid removal by artfully casting his federal suit as one arising exclusively under state law.”22 The first and best known specie of artful pleading is the one that arises when the area of state law upon which a plaintiff’s claim is based has been “completely pre-empted” by federal law; i.e., when the “pre-emptive force of a statute is so ‘extraordinary’ that it ‘converts an ordinary state law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.’”23 Only a few types of claims have been held to be “completely pre-empted,” though —— most notably those preempted 21 Carpenter, 44 F.3d at 366. 22 Id. We note that another jurisprudentially created doctrine, more frankly labeled “fraudulent joinder,” supports the assertion of removal jurisdiction on the basis of diversity of citizenship when a plaintiff’s well-pleaded complaint would not otherwise allow removal because of the joinder of a non-diverse defendant. Even though we give great deference to the allegations found in the plaintiff’s state court complaint, we will nevertheless examine the questioned joinder of a non-diverse defendant and hold it to be fraudulent under this doctrine when there is no possibility of recovery against that party. See Dodson v. Spillada Maritime Corp., 951 F.2d 40, 42 (5th Cir. 1992); Carriere v. Sears Roebuck and Co., 893 F.2d 98, 100 (5th Cir. 1990). The parallel between the fraudulent joinder exception and the artful pleading exception should be obvious. 23 Caterpillar, Inc. v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987) (quoting Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987)). 9 by Section 302 of the Labor Management Relations Act of 1947 or by Section 502 of the Employment Retirement Income Security Act of 1974.24 A second and somewhat rarer specie of artful pleading that justifies an exception is the one exemplified by the case we consider today, as illustrated in Federated Department Stores v. Moitie25 —— claim preclusion or res judicata. In Moitie, seven plaintiffs had filed and lost a consolidated antitrust suit in federal court.26 Five of the seven plaintiffs appealed the district court decision, but two (Brown and Moitie) elected to file almost identical second suits (Brown II and Moitie II) in state court, facially based exclusively on state law. After the defendants removed these two state court suits, Brown and Moitie sought remand to state court. The district court first denied Brown’s and Moitie’s motions to remand, finding that their state court actions “were properly removed to federal court because they raised ‘essentially federal law’ claims,” then dismissed the claims on res 24 See Avco Corp. v. Aero Lodge No. 735, Int’l Ass’n. of Machinists, 390 U.S. 557, 559, 88 S.Ct. 1235, 1237, 20 L.Ed.2d 126 (1968) (§ 302 of LMRA); Metropolitan Life, 481 U.S. at 65-66 (§ 502 of ERISA). 25 452 U.S. 394, 101 S.Ct. 2424, 69 L.Ed.2d 103 (1981). 26 Six of the plaintiffs had originally filed their suits in federal court, and one plaintiff who originally filed suit in state court saw his action removed to federal court on federal question and diversity jurisdiction grounds. The district court found that all of the plaintiffs had failed to allege an “injury” to their “property or business” within the meaning of §4 of the Clayton Act, 15 U.S.C. § 15. Id. at 395-96. 10 judicata grounds.27 In the meantime, the Ninth Circuit had ruled in favor of the other original federal plaintiffs —— the five who had appealed their district court losses —— based on a supervening Supreme Court decision that had worked a substantive change in pertinent antitrust law. Consequently, when the two state court plaintiffs, Brown and Moitie, appealed the district court’s denial of their motions to remand and its subsequent dismissals for res judicata, the Ninth Circuit reversed the district court on the merits of its res judicata determination, but —— importantly —— only after affirming the district court’s assertion of removal jurisdiction and denial of remand.28 The Supreme Court then granted certiorari to consider, specifically, the preclusion issues raised by the Ninth Circuit’s res judicata analysis.29 Although the Supreme Court’s decision was primarily focused on the substantive preclusion issues thus presented, the Court, of necessity, also affirmed the district courts’ original assertion of removal jurisdiction over Brown II and Moitie II and the Ninth Circuit’s affirmance of that jurisdiction. In a lengthy footnote, the Court stated: The Court of Appeals also affirmed the District Court’s conclusion that Brown II was properly removed to federal court, reasoning that the claims presented were “federal 27 Id. at 396-97. 28 Id. at 397-98. 29 Id. at 398 (“We granted certiorari . . . to consider the validity of the Court of Appeals’ novel exception to the doctrine of res judicata.”). 11 in nature.” We agree that at least some of the claims had a sufficient federal character to support removal. As one treatise puts it, courts will not permit plaintiff to use artful pleading to close off defendant’s right to a federal forum . . . [and that] occasionally the removal court will seek to determine whether the real nature of the claim is federal, regardless of plaintiff’s characterization. 14 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 3722, pp 564-566 (1976) (citing cases) (footnote omitted). The District Court applied that settled principle to the facts of this case. . . . We will not question here that factual finding.30 Regrettably, the Supreme Court did not explain precisely what there was about the plaintiffs’ state law claims that was so “federal in nature” as to support removal under the artful pleading exception. Even though at least one district court and one commentator have suggested that Moitie should be disregarded either as an aberration that has never been confirmed by the Supreme Court or as an injudicious application of an already suspect doctrine,31 the circuit courts have nevertheless attempted, as they must, to find meaning in Moitie’s enigmatic footnote. As it happens, different circuits have articulated one or the other of two distinct rationales for the Supreme Court’s use of the artful pleading exception in its approval of the district court’s denial of remand in Moitie. One rationale was offered in Travelers Indemnity Co. v. 30 Id. at 397 n. 2 (emphasis added). 31 See Magic Chef, Inc. v. Int’l Molders & Allied Workers Union, 581 F.Supp. 772, 776 n. 4 (E.D. Tenn. 1983 (claiming that Moitie’s value as authority regarding removal jurisdiction was superseded by the Supreme Court’s opinion in Franchise Tax Bd., which was written by Justice Brennan, a vocal dissenter in Moitie, and which does not cite Moitie at all); Robert A. Ragazzo, Reconsidering the Artful Pleading Doctrine, 44 Hastings L.J. 273, 303-315 (1993). 12 Sarkisian,32 in which the Second Circuit interpreted Moitie to permit removal whenever a plaintiff files a complaint based on federal law in federal court and subsequently files an ostensible state law claim in state court containing essentially the same elements. Consistent with the well-pleaded complaint doctrine, this “election of forums” or “consent” rationale recognizes in essence that a plaintiff remains the master of his complaint, but engrafts on this doctrine the limitation that the plaintiff is allowed but one opportunity to characterize his claims.33 Reasoning that the Second Circuit’s “election of forums” rationale would lead to an unwarranted and excessive expansion of federal removal jurisdiction, the Ninth Circuit, in Sullivan v. First Affiliated Securities, Inc.,34 concluded that Moitie is better explained as permitting removal of only those subsequent state court claims that are barred by the res judicata effect of a prior federal judgment.35 As the Ninth Circuit later put it, a plaintiff’s state law claim may be classified as “‘artfully pleaded’ when it is drafted to avoid stating allegations or claims 32 794 F.2d 754, 760-61 (2nd Cir.), cert. denied, 479 U.S. 885, 107 S.Ct. 277, 93 L.Ed.2d 253 (1986). 33 See Ragazzo, 44 Hastings L.J. at 307-308. 34 813 F.2d 1368, 1374-75 (9th Cir.), cert denied, 484 U.S. 850, 108 S.Ct. 150, 98 L.Ed.2d 106 (1987) (critiquing the election of forums rationale as applied in Sarkisian and as discussed in dicta of an earlier Ninth Circuit decision, Salveson v. Western States Bankcard Ass’n, 731 F.2d 1423 (9th Cir. 1984)). 35 Id. at 1376 (“We therefore construe Moitie as limited to removal of state claims precluded by the res judicata effect of a federal judgment.”). 13 already resolved by a prior federal judgment.”36 In a number of subsequent cases, the Ninth Circuit, as well as other circuits, have endorsed Sullivan’s articulation of this “federal res judicata” rationale for Moitie and have applied Sullivan’s principles, all the while recognizing that this additional branch of the artful pleading exception must be used sparingly, in the narrow and exceptional circumstances described by Sullivan and Moitie.37 In Carpenter v. Wichita Falls Ind. School District,38 a panel of this court squarely confronted the same interpretive issue 36 Ethridge v. Harbor House Restaurant, 861 F.2d 1389, 1403 (9th Cir. 1988); see also Clinton v. Acequi, Inc., 94 F.3d 568, 571 (9th Cir. 1996) (stating that Ninth Circuit has consistently “found the artful pleading doctrine to support removal where a plaintiff files his state law claims in state court in an attempt to circumvent the res judicata effect of a prior federal claim that has been reduced to judgment”). 37 See e.g., Ultramar American Limited v. Dwelle, 900 F.2d 1412, 1415 (9th Cir. 1990) (acknowledging that Sullivan recognized a new basis for invoking the artful pleading doctrine but noting that recharacterization of a state court claim under the res judicata branch of the doctrine may only occur when prior federal judgment resolved issues of federal not state law); Doe v. AlliedSignal, Inc., 985 F.2d 908, 912 (7th Cir. 1993) (recognizing Ultramar distinction but also finding that removal was improper because no res judicata was present); Ethridge, 861 F.2d at 1403 (endorsing Sullivan but finding that removal was improper because federal court lacked subject matter jurisdiction over complaint in prior and allegedly preclusive federal action); Redwood Theaters, Inc. v. Festival Enterprises, Inc., 908 F.2d 477, 480 (9th Cir. 1990) (applying Sullivan rule but holding that removal was improper because plaintiff’s claim had never previously been before a federal court and no res judicata defense was available to defendants). 38 44 F.3d 362 (5th Cir. 1995). 14 presented to the Ninth Circuit by Sullivan.39 Explicitly rejecting the Second Circuit’s expansive election of forums approach and agreeing with the Ninth Circuit’s “narrower interpretation,”40 we concluded in Carpenter that the “federal character” of the plaintiffs’ claims justifying removal in Moitie must be found in the federal law of preclusion.41 In so doing we were careful to reiterate our continuing confidence that state courts would comply with their Supremacy Clause obligation to apply federal rules of res judicata.42 In addition, we emphasized our awareness that defendants in state court suits frequently have the option of employing the relitigation exception to the Anti-Injunction Act,43 as an alternative approach to disposing of a state court suit that is precluded by a prior federal judgment. The fact that a defendant could seek to enjoin a state court action and thereby, if successful, achieve the same result that he might have obtained had 39 In Carpenter, the plaintiff, a school administrator, filed two separate suits against the school district she worked for —— one in federal court alleging violations of her free speech rights under the First Amendment to the United States Constitution and one in state court stating a state contract claim and a free speech claim exclusively under the Texas Constitution. 44 F.2d at 365. Similarly, Sullivan involved a federal action under federal securities law and another similar and simultaneous action in state court under state securities law. 813 F.2d at 1370. 40 Carpenter, 44 F.3d 369 n. 6, 370 n. 12. 41 Id. at 370. 42 Id. 43 28 U.S.C. § 2283 (“A court of the United States may not grant an injunction to stay proceedings in a state court except . . . to protect or effectuate its judgments.”) (emphasis added). 15 he instead sought to remove and dismiss the suit under Moitie, does not, Judge Garwood expressly observed in Carpenter, render Moitie superfluous. Rather, Judge Garwood went on to explain, the co- extensive nature of the relitigation exception to the AntiInjunction Act on the one hand and the artful pleading exception to the well-pleaded complaint doctrine —— based on Moitie’s federal res judicata grounds —— on the other hand simply suggests that “any potential impact on federalism from removal [in Moitie] was not significant.”44 In thus clearly setting forth the rule for this circuit, the Carpenter panel concluded by stating that: [w]e hold that Moitie should apply only where a plaintiff files a state cause of action completely precluded by a prior federal judgment on a question of federal law.45 Returning to the case now before us, we conclude that the district court properly reasoned that Carpenter’s holding provides the sole framework for analyzing the jurisdictional issues raised by the Mirannes’ thinly veiled collateral attack on the bankruptcy court’s prior orders. The fact that in Carpenter the federal res judicata artful pleading rationale did not, in the end, support removal under the specific circumstances of that case —— there was no prior federal case and no prior federal judgment, just two simultaneously filed suits, one based on federal law and one scrupulously —— “artfully” —— based solely on state law —— does not, as the Mirannes now contend, render Judge Garwood’s carefully articulated holding in Carpenter dicta. To the contrary, and just 44 Id. 45 Id. (emphasis added). 16 as the district court here found, Carpenter controls. Accordingly, if the defendants can show that the Mirannes’ state court suit, purportedly brought to enforce their erstwhile second mortgage, is in fact barred by the claim preclusive effects of the bankruptcy court’s 1986 orders that authorized and approved the sale of the leasehold estate free and clear of that mortgage and mandated its cancellation, then the district court’s denial of the Mirannes’ motion to remand, and its dismissal of their suit for essentially the same reason, must be affirmed.