Court Opinion

ID: 8974080
Source: CourtListenerOpinion
Date Created: 2022-11-27 10:47:51.930548+00
Date Added: 2024-06-11T17:10:30.809523
License: Public Domain

MCQUADE, District Judge,
dissenting.
The plaintiffs filed this case in federal court seeking a declaratory judgment that they are entitled to recover as obligees under surety bonds upon which the defendants stand as sureties.1 The plaintiffs’ cause of action is essentially an action on a surety bond, an action which has its genesis in state law, not federal law. Because federal law does not create the plaintiffs’ cause of action, and because a right created by federal law is not essential to the plaintiffs’ cause of action, I conclude that the district court correctly dismissed this suit for lack of jurisdiction. Therefore, I respectfully dissent.
The majority concludes that federal jurisdiction in this ease is properly premised on 28 U.S.C. § 1337(a), which provides, in part; “The district courts shall have original jurisdiction of any civil action or proceeding arising under any Act of Congress regulating commerce.... ” In construing the meaning of “arising under,” the Supreme Court has not distinguished between § 1337(a) and 28 U.S.C. § 1331 (general federal-question jurisdiction). Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 8 n. 7, 103 S.Ct. 2841, 2845 n. 7, 77 L.Ed.2d 420 (1983). It is *790proper, therefore, to apply the principles of general federal-question jurisdiction to determine whether this suit arises under an act of Congress regulating commerce.
The paradigm of cases coming within “arising under” jurisdiction is one covered by Justice Holmes’ statement that a “suit arises under the law that creates the cause of action.” American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260, 36 S.Ct. 585, 586, 60 L.Ed. 987 (1916). Most cases that arise under federal law are those in which federal law creates the cause of action. The majority opinion concedes that the plaintiffs’ suit is not such a case.
Federal jurisdiction may nonetheless be found in a suit where state law creates the cause of action “if a well-pleaded complaint established] that its right to relief under state law requires resolution of a substantial question of federal law in dispute between the parties.” Franchise Tax Bd., 463 U.S. at 13, 103 S.Ct. at 2848; see also Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 41 S.Ct. 243, 65 L.Ed. 577 (1921); Ford Motor Co. v. Transport Indent. Co., 795 F.2d 538, 543-44 (6th Cir.1986)(“An action will arise under a statute regulating commerce ... if a federal right created by the statute is essential to the cause of action.”). This is not to say, however, that the presence of a federal issue in a state-created cause of action is sufficient to confer federal jurisdiction over the suit. “[Determinations about federal jurisdiction require sensitive judgments about congressional intent, judicial power, and the federal system.” Merrell Dow Pharmaceuticals Inc. v. Thompson, 478 U.S. 804, 810, 106 S.Ct. 3229, 3233, 92 L.Ed.2d 650 (1986); see also Textile Workers v. Lincoln Mills, 353 U.S. 448, 470, 77 S.Ct. 912, 928, 1 L.Ed.2d 972 (1957) (Frankfurter, J., dissenting) (proper inquiry is “the degree to which federal law [is] ... in the forefront of the case and not collateral, peripheral or remote”); Gully v. First Natl Bank, 299 U.S. 109, 117-18, 57 S.Ct. 96, 99-100, 81 L.Ed. 70 (1936) (“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[,] ... a selective process which picks the substantial causes out of the web and lays the other ones aside.”).
In Franchise Tax Board, for example, the Supreme Court held that
a suit by state tax authorities both to enforce its levies against funds held in trust pursuant to an ERISA-covered employee benefit plan, and to declare the validity of the levies notwithstanding ERISA, is neither a creature of ERISA itself nor a suit of which the federal courts will take jurisdiction because it turns on a question of federal law.
463 U.S. at 28, 103 S.Ct. at 2856. The Court reasoned that despite the presence of a substantial issue of federal law (whether ERISA prevented the state’s levying a tax on funds held in trust pursuant to an employee benefit plan), the state’s suit was not created by federal law: ERISA does not provide anyone other than participants, beneficiaries or fiduciaries with an express cause of action for a declaratory judgment on the issues in the case. A suit for similar relief by some other party, namely the state of California, does not arise under that provision of ERISA.
The majority opinion finds that the district court should exercise jurisdiction in this case because resolution of the plaintiffs’ claim involves the application of a federal statute and related regulations. In reaching this conclusion, the court relies on the Interstate Commerce Act, 49 U.S.C. § 10101 et seq. [“the Act”], the forms, rules, regulations and decisions of the Interstate Commerce Commission [“ICC”], and the decision of this court in Ford Motor Co. v. Transport Indem. Co., 795 F.2d 538 (6th Cir.1986). None of these factors, alone or in tandem, is sufficient to support the majority’s conclusion.
The Act, at 49 U.S.C. § 10927(b), provides:
The [Interstate Commerce] Commission may issue a broker’s license to a person under section 10924 of this title only if the person files with the Commission a bond, insurance policy, or other type of security approved by the Commission to *791ensure that the transportation for which a broker arranges is provided. The license remains in effect only as long as the broker complies with this subsection.
The ICC has promulgated a single regulation pursuant to the Act concerning the “bond, insurance policy, or other type of security” prescribed by § 10927(b):
Evidence of a surety bond must be filed using the Commission’s prescribed Form BMC-84. Other security may be evidenced by the filing of an agreement with a financial institution, licensed or qualified to do business in a state or the District of Columbia, establishing a trust fund in the amount of $10,000. The surety bond or the trust fund shall ensure the financial responsibility of the broker by providing for payment to shippers or motor carriers if the broker fails to carry out its contracts, agreements, or arrangements for the supplying of transportation by authorized motor carriers.
49 C.F.R. § 1043.4(b).
I do not dispute that the posting of a bond using form BMC-84 is required by the statute and ICC regulation. Furthermore, resolution of the plaintiffs’ claims will involve the application of the federal statute and regulation. Neither of these factors, however, is sufficient to confer federal jurisdiction. What is lacking is clear congressional intent to create a federal cause of action on the surety bond. See Jackson Transit Auth. v. Local Division 1285, Amalgamated Transit Union, 457 U.S. 15, 22, 102 S.Ct. 2202, 2206-07, 72 L.Ed.2d 639 (1982) (“Whenever we determine the scope of rights and remedies under a federal statute, the critical factor is the congressional intent behind the particular provision at issue.”).
In Merrell Dow, 478 U.S. at 810-12, 106 S.Ct. at 3233-34, the Supreme Court reviewed a claim of federal-question jurisdiction in light of the framework enunciated in Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 2088, 45 L.Ed.2d 26 (1975), for evaluating whether a federal cause of action should be implied from a federal statute. The Cort framework consists of four factors that are relevant to the inquiry into whether a federal cause of action should be implied: (1) Is the plaintiff a member of the class for whose special benefit the statute was passed? (2) Is there any indication of legislative intent to provide or deny such a cause of action? (3) Would a federal cause of action further the underlying purposes of the legislative scheme? and (4) Is the cause of action one traditionally relegated to state law? While continuing to cite the four-factor analysis of Cort, see Thompson v. Thompson, 484 U.S. 174, 108 S.Ct. 513, 516, 98 L.Ed.2d 512 (1988), the Supreme Court has emphasized the second factor (congressional intent) as the determinative factor. See id. 108 S.Ct. at 521 (Scalia, J., concurring in the judgment); Jackson Transit Auth., 457 U.S. at 22-23, 102 S.Ct. at 2206-07; Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 15-16, 100 S.Ct. 242, 245, 62 L.Ed.2d 146 (1979).
The Court stated in Merrell Dow that an assumption that there is no federal cause of action is significant in determining whether a cause of action arises under federal law. “[I]t would ... flout, or at least undermine, congressional intent to conclude that the federal courts might nevertheless exercise federal-question jurisdiction” where Congress has not provided a federal cause of action under the federal statute. Merrell Dow, 478 U.S. at 812, 106 S.Ct. at 3234.
Applying the four factors of Cort to this case reveals that a federal cause of action could not be implied under § 10927(b). As emphasized by the Supreme Court, the most important question is whether Congress intended to create a federal remedy. The plain language of the statute does not evince such an intent. This section addresses a requirement for licensing of brokers by the ICC. One would be hard pressed to maintain that such a licensing requirement is evidence of Congress’ intent to provide motor carriers with a federal cause of action to recover delinquent shipping charges. There is a similar paucity of evidence in the legislative history of congressional intent to create a federal remedy under § 10927(b). Two of the remaining three Cort factors buttress the conclu*792sion that Congress did not intend to create a federal remedy in § 10927(b). First, common carriers, such as the plaintiff, are not members of a class for whose special benefit the statute was passed. Second, the construction of surety contracts is an area of law traditionally relegated to state law.
The only Cort factor that might weigh in favor of finding a federal remedy in this case is whether such a remedy would further the underlying purpose of the legislative scheme. The underlying purpose of § 10927(b) is “to ensure that the transportation for which a broker arranges is provided.” 49 U.S.C. § 10927(b). The majority takes a decidedly broader view of the scope of the underlying purpose of § 10927(b), relying on “[t]he historical federal interest in the regulation of interstate commerce,” Majority Opinion at 787, to support the finding of federal jurisdiction in this case. A narrower view of the underlying statutory purpose, however, one that focuses on the specific purpose of § 10927(b), is justified. In Franchise Tax Board, the Supreme Court declined to find federal jurisdiction where the underlying purposes of ERISA were implicated by the plaintiffs cause of action. Despite the broad scope and importance of the underlying purposes of ERISA, the Court focused on the narrower provision of ERISA that provides for suits by participants, beneficiaries and fiduciaries, to determine whether the plaintiffs cause of action arose under the statute. In so doing, the Court avoided the error of finding a federal interest at stake in every ERISA-related case. Our inquiry into underlying statutory purpose should be similarly narrowly focused.
The underlying purpose of § 10927(b) will not be compromised if we fail to find federal jurisdiction in this case. If a broker fails to arrange the transportation, or, as in this case, fails to pay a carrier who has provided the transportation, the shipper may bring an action in state court to recover damages for the broker’s failure to provide transportation, or the carrier may bring an action in state court to recover its unpaid fee. In either case, such plaintiffs will rely on the relevant language of the surety bond, the statute that prescribes its posting and the pertinent ICC regulation. I do not share the majority’s concern that to decline to find federal jurisdiction in this case would lead to fifty different determinations of rights and liabilities under the bonds in question. First, all of the bonds contain identical language because the form is prescribed by the ICC. Second, the protections allegedly afforded by federal regulation will be applied by the state courts. Even if instances of local protectionism defeat an otherwise valid construction of the bonds, the plaintiffs have recourse to state appellate courts and, if necessary, review by the United States Supreme Court. I accept for the sake of argument that Congress intended to protect shippers and motor carriers from the vicissitudes of contracting with property brokers. But that is not what matters in this case; the relevant question is whether Congress intended to create for motor carriers a federal cause of action to recover as obligees under surety bonds prescribed by § 10927(b). The answer to that question is, in my opinion, no.
Absent a clear statement of congressional intent, it would be improper to conclude that Congress meant to federalize the law of surety bonds related to the shipment of goods in interstate commerce. Congress has adequately provided, through the forms and regulation promulgated by the ICC, for the protection of shippers and motor carriers who fall prey to financially unstable property brokers. The benefit of federal protection may be asserted in state court. It is not necessary to further the statutory policy to find an implied federal cause of action based on the surety bonds or to find that the plaintiffs’ cause of action “arises under” an act of Congress regulating commerce: the plaintiffs may file suit in state court without losing the benefit of federal regulation designed to protect shippers and motor carriers.
The majority believes that the finding of federal jurisdiction in Ford Motor Co. v. Transport Indem. Co., 795 F.2d 538 (6th Cir.1986), controls the outcome of this case, but Ford is distinguishable. The statute at issue in Ford, § 10927(a)(3), states:
*793The Commission may require a motor common carrier providing transportation under a certificate to file with the Commission a type of security sufficient to pay a shipper or consignee for damage to property of the shipper or consignee placed in the possession of the motor common carrier as the result of transportation provided under this subtitle.
49 U.S.C. § 10927(a)(3) (emphasis added). The language “to pay a shipper or consignee for damage to property of the shipper or consignee” is the language that creates for shippers a federal right to recover under the security required by the statute. There is no similar language in § 10927(b). One might argue that this reflects congressional oversight rather than congressional intent. That argument, however, ignores the clear import of cases such as Cort v. Ash, Franchise Tax Board, and Merrell Dow, where the Supreme Court has declined to find implied federal causes of action absent express congressional intent.
By enforcing contract rights not within the jurisdictional grant conferred by Congress, as much as by improperly “inferring” a right of action, “a court of limited jurisdiction necessarily extends its authority to embrace a dispute Congress has not assigned it to resolve.... This runs contrary to the established principle that ‘[t]he jurisdiction of the federal courts is carefully guarded against expansion by judicial interpretation ...,' and conflicts with the authority of Congress under Art. Ill to set the limits of federal jurisdiction.”
Jackson Transit Auth., 457 U.S. at 30, 102 S.Ct. at 2211 (Powell, J., concurring) (citations omitted).
The majority opinion states that “the ICC regulations define the rights and responsibilities of both the defendant .insurer in Ford and the defendant surety companies in the present case.” Majority Opinion at 787-788. A comparison of the regulations, however, reveals that the rights and responsibilities of the parties under the surety bond at issue in this case are not set forth in the regulations. The single regulation governing the surety bond merely states that the bond shall provide “for payments to shippers or motor carriers if the broker fails to carry out its contracts, agreements, or arrangements for the supplying of transportation by authorized motor carriers.” 49 C.F.R. 1043.4(b). In contrast, the regulations governing the insurance policy that was at issue in Ford are extensive. The regulations dictate the method and timing of filing of claims, id. § 1005.2(a), minimum filing requirements, id. § 1005.2(b), acknowledgment of claims, id. § 1005.3, investigation of claims, id. § 1005.4, disposition of claims, id. § 1005.5, processing of salvage, id. § 1005.6, and the use of weight as a measure of loss, id. § 1005.7.
In Ford, therefore, resolution of the plaintiffs’ claim required the court to construe federal regulations governing the content of the insurance policy and the rights and responsibilities of the parties thereunder. In order to establish its entitlement to recover under the insurance policy, Ford relied on a showing of its own and the insured carrier's compliance with federal regulations to create a prima facie case of liability against the insurance company. There are no similar requirements in the relevant regulation governing the rights and responsibilities of the parties or the content of the surety bond at issue in this case. The plaintiffs could not make a prima facie case against the sureties because the regulations do not set forth the responsibilities of the parties as to recovery on the surety bonds.
The Ninth Circuit recently decided that a case between two insurance companies for coverage of an accident involving a motor carrier did not arise under federal law simply because the truck involved in the accident was regulated under the Interstate Commerce Act. Millers Nat’l Ins. Co. v. Axel’s Express, Inc., 851 F.2d 267 (9th Cir.1988), cert. denied, — U.S.-, 109 S.Ct. 1123, 103 L.Ed.2d 185 (1989). Relying on Merrell Dow, the court held that the plaintiffs claim was essentially a state law claim for indemnity, and the application of federal regulations did not convert that claim into a federal claim. The majority opinion’s reasons for not following Millers *794National are not persuasive. Majority Opinion at 788 n. 2. First, the majority states, but does not explain, that the federal claim in Millers National was “ancillary, contingent or collateral.” Id. I would say, however, that the federal claim in this case is identical to that of the plaintiff’s in Millers National: in both cases, the plaintiffs base federal jurisdiction on the presence of forms required by federal statutes and regulations. If Millers National Insurance Company’s federal claim was ancillary to its state law claim, so is the plaintiffs’ in this case. Second, the question presented by the plaintiff in Millers National (whether federal law determines liability) is identical to the question presented by plaintiffs in this case (whether federal law determines who may recover on the surety bonds). Third, the underlying substantive issue in this case is indeed a question of state law: whether a surety bond covers motor carriers as obligees. Fourth, I do not see the grounds or wisdom of restricting Merrell Dow to actions raising claims under the Federal Food, Drug and Cosmetic Act. Merrell Dow is part of a line of cases affirming the bedrock principle of our federal system that federal courts are courts of limited jurisdiction. In cases restricting the implication of federal causes of action, e.g., Transamerica Mortgage Advisors, Inc., 444 U.S. at 15-16, 100 S.Ct. at 245, and in cases declining to find federal question jurisdiction unless Congress has clearly intended to extend such jurisdiction, e.g., Franchise Tax Bd., 463 U.S. at 28, 103 S.Ct. at 2856, the Supreme Court has refused to chip away at that principle.
This court in Ford stated that a suit arises under an act of Congress regulating commerce “if a federal right created by the statute is essential to the cause of action.” 795 F.2d at 543-44 (emphasis added). The right created by § 10927(b) is the right of the ICC to revoke a broker’s license for failure to file the required surety bond, insurance policy or other security. The statute does not create, either expressly or impliedly, a federal right of motor carriers to recover as obligees under the surety bonds. The plaintiffs’ suit was correctly dismissed for lack of jurisdiction.

. It is well settled that the Declaratory Judgment Act, 28 U.S.C. § 2201, "enlarged the range of remedies available in the federal courts, but did not extend their jurisdiction.” Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671, 70 S.Ct. 876, 879, 94 L.Ed. 1194 (1949); see also Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240, 57 S.Ct. 461, 463, 81 L.Ed. 617 (1937) (”[T]he operation of the Declaratory Judgment Act is procedural only.’’).