Court Opinion

ID: 2978454
Source: CourtListenerOpinion
Date Created: 2015-09-22 18:26:00.307774+00
Date Added: 2024-06-11T15:02:20.706827
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                           Pursuant to Sixth Circuit Rule 206
                                  File Name: 09a0389p.06

               UNITED STATES COURT OF APPEALS
                              FOR THE SIXTH CIRCUIT
                                _________________

                                                    X
                                                     -
 PLAYA MAREL, P.M., S.A.; ELDEN J. HEINZ,
                                                     -
 Individually; ELDEN J. HEINZ REVOCABLE
 LIVING TRUST; ALVERO MARTIN,                        -
                                                     -
                                                         No. 08-3072
 Individually,
                                                     ,
                                                      >
                                                     -
                          Plaintiffs-Appellees,

                                                     -
                                                     -
           v.
                                                     -
                                                     -
                                                     -
 LKS ACQUISITIONS, INC.; LEONARD K.

                        Defendants-Appellants. -
 SNELL, Individually,
                                                     -
                                                    N
                     Appeal from the United States District Court
                      for the Southern District of Ohio at Dayton.
                  No. 06-00366—Thomas M. Rose, District Judge.
                               Argued: October 16, 2009
                        Decided and Filed: November 9, 2009
               Before: MARTIN, ROGERS, and COOK, Circuit Judges.

                                  _________________

                                      COUNSEL
ARGUED: Jeffrey Joseph Harmon, CORS & BASSETT, LLP, Cincinnati, Ohio, for
Appellants. Walter Reynolds, PORTER WRIGHT MORRIS & ARTHUR LLP, Dayton,
Ohio, for Appellees. ON BRIEF: Robert Joseph Hollingsworth, Jesse Romuald Lipcius,
CORS & BASSETT, LLP, Cincinnati, Ohio, for Appellants. Walter Reynolds, Tami Hart
Kirby, PORTER WRIGHT MORRIS & ARTHUR LLP, Dayton, Ohio, for Appellees.
                                  _________________

                                       OPINION
                                  _________________

       ROGERS, Circuit Judge. In this declaratory judgment action, plaintiffs sought a
declaration that defendants were not entitled to compensation under an alleged contract
involving real estate development. Plaintiffs asserted a number of grounds for the lack of

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No. 08-3072          Playa Marel, et al. v. LKS Acquisitions, et al.                     Page 2

entitlement to compensation, one of which was that the defendants had violated federal
securities law. Because this federal securities law claim—the only federal issue in the
case—would arise only as a claimed defense to a state law cause of action, the district court
lacked federal subject matter jurisdiction.

        Plaintiffs own approximately 256 hectares of unimproved real property in Costa
Rica. They engaged defendants, self-described builder-developers, to create a strategic plan
to develop their property in a series of five alleged agreements.              Under disputed
circumstances, defendants introduced plaintiffs to a third party. Plaintiffs and this third party
eventually formed a joint venture to develop the property, an event that defendants argue
entitled them to compensation. Plaintiffs originally filed this action in Ohio state court,
requesting a declaratory judgment that defendants were not entitled to compensation because
defendants had violated federal and Ohio securities laws and Ohio real estate licensing laws.
Defendants removed to federal court, invoking federal question jurisdiction on the basis of
the federal securities-related allegations. The district court granted summary judgment to
plaintiffs, declaring that defendants were not entitled to any compensation because they
lacked a required Ohio real estate licence. See Playa Marel, P.M., S.A. v. LKS Acquisitions,
Inc., No. C-3-06-366, 2007 WL 3342450, at *3 (S.D. Ohio Nov. 6, 2007). Defendants
timely appealed.

        There is no federal subject matter jurisdiction over this case because, looking behind
the declaratory judgment form of this action, the only federal issue in this case arises as a
possible defense to a state law claim. The federal Declaratory Judgment Act did not expand
the scope of federal subject matter jurisdiction. Skelly Oil Co. v. Phillips Petroleum Co., 339
U.S. 667, 671 (1950). Thus, an action seeking a declaratory judgment that no compensation
is owed on a contract is only within federal question jurisdiction if the action could have
been filed in federal court by the party seeking compensation. Id. at 672. Here, such a suit
would have merely been a state law contract or implied contract action. Thus, in this case
as in Skelly Oil, “[w]hatever federal claim [plaintiffs] may be able to urge would in any event
be injected into the case only in anticipation of a defense to be asserted by [defendants].”
Id. This is insufficient to grant federal jurisdiction. See id. (citing Louisville & Nashville
R.R. Co. v. Mottley, 211 U.S. 149, 152 (1908)).
No. 08-3072          Playa Marel, et al. v. LKS Acquisitions, et al.                       Page 3

        This conclusion is not altered by the fact that the statute at issue here is the Securities
Exchange Act. That Act provides for exclusive federal jurisdiction only for “suits in equity
and actions at law brought to enforce any liability or duty created by this chapter or the rules
and regulations thereunder.” 15 U.S.C. § 78aa. As the controversy in this case—looking
through the declaratory judgment—was one to enforce a state law claim, this grant of
exclusive jurisdiction does not apply. See Barbara v. N.Y. Stock Exch., Inc., 99 F.3d 49, 55
(2d Cir. 1996).

        This is also not a case where a “state-law claim necessarily raise[s] a stated federal
issue, actually disputed and substantial, which a federal forum may entertain without
disturbing any congressionally approved balance of federal and state judicial
responsibilities.” Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308,
314 (2005). Instead, federal law was merely one of a number of bases on which the
plaintiffs sought a declaration that they owed the defendants no compensation. The simple
fact that the district court did not decide any federal question in this case disproves any
argument that the state law claim here necessarily raised a federal issue. Rather, this case
turned on a number of complicated state law questions, including the scope of Ohio’s real
estate licencing laws, Ohio’s choice-of-law rules, and the question of the relative importance
of real estate licencing laws to the public policy of Ohio. This is precisely the type of case
where the rules from Mottley and Skelly Oil apply.

        For these reasons, we VACATE the district court’s judgment and REMAND with
instructions to remand the matter to the state court.