Court Opinion

ID: 2967312
Source: CourtListenerOpinion
Date Created: 2015-09-22 02:19:44.926281+00
Date Added: 2024-06-11T12:26:28.883059
License: Public Domain

Rehearing en banc granted by order filed 11/9/00;
opinion issued 9/8/00 is vacated.
PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

INTERSTATE PETROLEUM CORPORATION,
Plaintiff-Appellee,

v.

ROBERT C. MORGAN, d/b/a Green
                                                                No. 97-1409
Acres Gas and Grocery; VICKIE L.
MORGAN, d/b/a Green Acres Gas
and Grocery,
Defendants-Appellants.

INTERSTATE PETROLEUM CORPORATION,
Plaintiff-Appellant,

v.

ROBERT C. MORGAN, d/b/a Green
                                                                No. 97-1481
Acres Gas and Grocery; VICKIE L.
MORGAN, d/b/a Green Acres Gas
and Grocery,
Defendants-Appellees.

Appeals from the United States District Court
for the Northern District of West Virginia, at Wheeling.
Frederick P. Stamp, Jr., Chief District Judge.
(CA-95-2-5)

Argued: May 5, 1998

Decided: September 8, 2000

Before WIDENER and WILKINS, Circuit Judges, and
James H. MICHAEL, Jr., Senior United States District Judge
for the Western District of Virginia, sitting by designation.

_________________________________________________________________
Vacated and remanded with instructions. Judge Widener wrote the
opinion, in which Senior Judge Michael joined. Judge Wilkins wrote
a dissenting opinion.

_________________________________________________________________

COUNSEL

ARGUED: Alan Gordon McGonigal, BAILEY, RILEY, BUCH &
HARMAN, L.C., Wheeling, West Virginia, for Appellants. Steven
William Zoffer, DICKIE, MCCAMEY & CHILCOTE, Wheeling,
West Virginia, for Appellee. ON BRIEF: Arch W. Riley, Sr., BAI-
LEY, RILEY, BUCH & HARMAN, L.C., Wheeling, West Virginia,
for Appellants.

_________________________________________________________________

OPINION

WIDENER, Circuit Judge:

This appeal arises from judgment on a jury verdict in favor of
Interstate Petroleum Corporation (Interstate). Robert C. Morgan and
Vickie L. Morgan appeal, asserting that the district court lacked sub-
ject matter jurisdiction over the case. In addition, the Morgans con-
tend that Interstate's claim for money damages should not have been
presented to the jury. Interstate cross-appeals the district court's
denial of its motion for attorneys' fees. We are of opinion that the dis-
trict court did not have subject matter jurisdiction over this case.
Accordingly, its judgment is vacated and the case remanded for dis-
missal for that reason. We do not address the Morgans' damages
argument or Interstate's cross-appeal for attorneys' fees.

I.

On April 29, 1993, Interstate and the Morgans d/b/a Green Acres
Gas and Grocery entered a franchise agreement whereby Interstate, as
franchisor, agreed to sell BP brand gasoline and petroleum products
to the Morgans, as franchisees. The terms of the agreement also
allowed the Morgans to operate their service station under the BP
logo and required the Morgans to obtain a $31,500 irrevocable letter

                     2
of credit from which Interstate could draw amounts due and unpaid
under the contract. The Morgans failed to obtain the required letter of
credit, and on December 5, 1994, following a series of negotiations,
Interstate notified the Morgans of its intent to terminate the franchise
agreement based on their nonperformance. Then, on December 12,
1994, the Morgans signed a mutual consent to a method of termina-
tion, providing that the Morgans would deliver a $20,000 letter of
credit to Interstate by January 4, 1995, and would make monthly pay-
ments to Interstate in satisfaction of an earlier note.

After the Morgans failed to comply with the termination agree-
ment, Interstate brought suit in federal court, claiming breach of con-
tract. Interstate's complaint claimed subject matter jurisdiction based
on federal question jurisdiction, 28 U.S.C. § 1331, and the Petroleum
Marketing Practices Act (Petroleum Act), 15 U.S.C.§§ 2801-2841.1
Interstate sought injunctive relief and other relief, including damages,
attorneys' fees, and costs. The Morgans then filed a motion to dismiss
under Federal Rule of Civil Procedure 12(h)(3), 2 asserting that the
district court lacked subject matter jurisdiction because the Petroleum
Act did not authorize actions brought by a franchisor against a
franchisee. The district court denied the Morgans' motion, and the
case proceeded to trial. Following trial, the jury awarded Interstate
$42,901.50 in damages. The Morgans then made several post-trial
motions, including another motion to dismiss under Rule 12(h)(3). In
their post-trial motion to dismiss, the Morgans again asserted that the
district court lacked jurisdiction, but relied on a new theory. In this
motion, the Morgans asserted that the district court did not have juris-
diction because Interstate's complaint did not include a request for
_________________________________________________________________
1 The complaint alleged only state law questions on account of the busi-
ness agreements between the parties. Under Franchise Tax Board v.
Construction Laborers Vacation Trust, 463 U.S. 1 (1983), arising under
jurisdiction must allege "a right or immunity created by the Constitution
or laws of the United States [which] must be an element, and an essential
one, of the plaintiff's cause of action." 463 U.S. at 11. There is no such
allegation in the complaint in this case.
2 Federal Rule of Civil Procedure 12(h)(3) provides that: "[w]henever
it appears by suggestion of the parties or otherwise that the court lacks
jurisdiction of the subject matter, the court shall dismiss the action." Fed.
R. Civ. Proc. 12(h)(3).

                    3
declaratory relief. The district court denied the motion to dismiss, and
the Morgans appealed. We have jurisdiction pursuant to 28 U.S.C.
§ 1291.

II.

In the Morgans' pre-trial motion to dismiss, they argued that the
district court had no federal question jurisdiction over Interstate's suit
because the Petroleum Act does not authorize a cause of action for
claims brought by franchisors against franchisees. 15 U.S.C. § 2805(a).3
On appeal, the Morgans, however wisely, seek to de-emphasize the
initial jurisdictional argument and instead contend that federal courts
have jurisdiction over franchisors' suits, but only if the franchisor
seeks declaratory relief.

Regardless of the nature of the Morgans' argument, the Supreme
Court has stated that it is the "special obligation" of appellate courts
to evaluate their own subject matter jurisdiction and the jurisdiction
of the district court under review. Bender v. Williamsport Area School
Dist., 475 U.S. 534, 541 (1986). In fact, we must consider questions
regarding jurisdiction whenever they are raised and even sua sponte.
Plyler v. Moore, 129 F.3d 728, 731 n.6 (4th Cir. 1997), cert. denied,
524 U.S. 945 (1998). Accordingly, this case must be dismissed if we
conclude that the district court lacked subject matter jurisdiction, even
if for reasons other than those now emphasized by the Morgans on
appeal.

Neither party contends that the facts of this case support an exer-
cise of the court's diversity jurisdiction. Therefore, the district court
had subject matter jurisdiction only if the action arose "under the
Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331.
Under the well-pleaded complaint rule, federal question jurisdiction
exists only when a federal question appears on the face of plaintiff's
properly pleaded complaint. Louisville & Nashville Railroad Co. v.
Mottley, 211 U.S. 149, 153 (1908).
_________________________________________________________________
3 In relevant part, Section 2805(a) of the Petroleum Act provides: "[i]f
a franchisor fails to comply with the requirements of section 2802 or
2803 of this title, the franchisee may maintain a civil action against such
franchisor." 15 U.S.C. § 2805(a) (emphasis added).

                    4
Interstate's complaint asserts that federal question jurisdiction
exists based on the Petroleum Act. 15 U.S.C. § 2801 et seq. This
claim of jurisdiction is not well taken. The provision of the Petroleum
Act depended on provides that "[a] franchisee may maintain a civil
action against [a] franchisor." 15 U.S.C.§ 2805(a) (emphasis added).
However, the Petroleum Act does not provide a similar cause of
action for franchisors. Accordingly, Interstate's claims do not fall
within the jurisdictional grant of the Act, and the district court had no
jurisdiction over Interstate's action against the Morgans. As we
recently stated in a case brought under ERISA, "[f]ederal jurisdiction
is limited `to the suits by the entities specified in the statute.'" Coyne
& Delany Co. v. Blue Cross & Blue Shield of Virginia, Inc., 102 F.3d
712, 714 (4th Cir. 1996) (quoting Provident Life & Accident Ins. Co.
v. Waller, 906 F.2d 985, 987 (4th Cir.), cert. denied, 498 U.S. 982
(1990)) (holding that an employer could not pursue a claim for bene-
fits under an ERISA health insurance plan when the statute authorized
suits only by participants, beneficiaries, or fiduciaries).

Even if we were to accept Interstate's assertion that its complaint
included a request for declaratory relief pursuant to the Declaratory
Judgment Act, 28 U.S.C. § 2201(a), our conclusion that the district
court should have dismissed Interstate's suit for want of jurisdiction
does not change. It is well-settled law that the Declaratory Judgment
Act does not create or expand the jurisdiction of district courts. Skelly
Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72 (1950). See
also Concerned Citizens of Cohocton Valley, Inc. v. New York State
Dep't of Envtl. Conservation, 127 F.3d 201, 206 (2d Cir. 1997) (stat-
ing that the Declaratory Judgment Act "does not enlarge the jurisdic-
tion of the federal courts" and that "a declaratory judgment action
must therefore have an independent basis for subject matter jurisdic-
tion"); Gibraltar, P.R., Inc. v. Otoki Group, Inc., 104 F.3d 616, 619
(4th Cir. 1997) (explaining that the Declaratory Judgment Act "does
not provide a source of jurisdiction which is independent of substan-
tive federal law") (citing Franchise Tax Board v. Construction Labor-
ers Vacation Trust, 463 U.S. 1, 16-17 n.14 (1983)). Therefore, the
Declaratory Judgement Act cannot be used to create jurisdiction when
the federal statute at issue does not provide an independent basis for
jurisdiction.

We think the Supreme Court's opinion in Franchise Tax Board is
so nearly on all fours with the case at hand that it requires us to hold

                     5
that the district court lacked jurisdiction over Interstate's suit. In
Franchise Tax Board, the California Franchise Tax Board (Board)
brought suit against the Construction Laborers Vacation Trust (Trust),
a trust established to administer a collective bargaining agreement
granting construction workers annual paid vacation. 463 U.S. at 4.
The Board sought collection of unpaid tax levies and a declaratory
judgment that the Trust was obligated to honor levies imposed by the
Board. 463 U.S. at 6-7. Because the Trust was an"employee welfare
benefit plan," it was governed by ERISA. The Trust's agreement did
not permit any assignment, pledge, or encumbrance of trust funds.
Thus, the Trust claimed that ERISA preempted state law such that it
had no power to honor the Board's tax levies. 463 U.S. at 6. In deter-
mining whether there was federal question jurisdiction over the
Board's action, the Court acknowledged that the Board could not
obtain the requested declaratory relief without the construction of fed-
eral law, ERISA, as a defense in the case. 463 U.S. at 14. However,
the Court concluded that jurisdiction was lacking because the Board
was not enumerated in the relevant provision of ERISA as an entity
with the right to pursue a cause of action under the federal statute. 463
U.S. at 21. The Court stated that "[a] suit for similar relief by some
other party does not `arise under' that provision." 463 U.S. at 27
(emphasis added). Applying this holding to the facts of the case at
hand, we are of opinion that the Petroleum Act does not authorize
franchisors to bring suit in federal court, and thus, federal courts are
without jurisdiction over such actions as this brought by franchisors,
even if brought for declaratory relief.

In its brief, Interstate points to a number of cases in which franchi-
sors have maintained actions under the Petroleum Act. However,
none of the appellate court cases cited discussed the jurisdictional issue.4
_________________________________________________________________
4 Two of the cases cited do not mention any question of jurisdiction.
See Mobile Oil Corp. v. Karbowski, 879 F.2d 1052 (2d Cir. 1989); Chev-
ron U.S.A., Inc. v. Finn, 851 F.2d 1227 (9th Cir. 1988), cert. denied, 489
U.S. 1054 (1989). The third appellate case cited, Amoco Oil Co. v. John-
stone, 856 F.2d 967, 968 n.1 (7th Cir. 1988), cert. denied, 490 U.S. 1046
(1989), states only that "[t]he district court found ample jurisdiction to
hear the case under the Petroleum Marketing Practices Act, 15 U.S.C.
§ 2801-2841 (PMPA); the Declaratory Judgment Act, 28 U.S.C. § 2201;
and by reason of diversity, 28 U.S.C. § 1332." Based on this statement,
we cannot conclude that the court would have found jurisdiction without
the existence of diversity.

                    6
Neither has there come to our attention an appellate court opinion
specifically addressing the jurisdictional issue. 5 Similarly, many dis-
trict courts have proceeded either without mentioning jurisdiction or
when diversity jurisdiction existed. Although some district courts
have addressed the jurisdictional issue, no consistent position has
emerged. Compare, e.g., State Oil Co. v. Khan , 839 F. Supp. 543, 547
(N.D. Ill. 1993) (concluding that the Petroleum Act"does not confer
federal question jurisdiction in the district courts unless a franchisee
brings the action originally"); Winks v. Feeney Oil Co., 731 F. Supp.
322, 326-27 (C.D. Ill. 1990) (holding that there is no jurisdiction for
franchisors' suits under Petroleum Act, with or without declaratory
judgment claims); CIA. Petrolera Caribe, Inc. v. Isla Petroleum
Corp., 671 F. Supp. 884, 885 (D.P.R. 1987) (explaining that the court
lacked jurisdiction because there is no remedy for franchisors under
the Petroleum Act, and thus their claims do not arise under federal
law), with Texaco Refining and Marketing Inc. v. Davis, 835 F. Supp.
1223, 1231 (D. Or. 1993), affirmed, 45 F.3d 437 (9th Cir. 1994)
(table), cert. denied, 514 U.S. 1127 (1995) (finding jurisdiction over
a franchisor's declaratory judgment action against a franchisee); Shell
Oil Co. v. Kozub, 574 F. Supp. 114, 115 (N.D. Ohio 1983) (assuming,
without discussion, federal question jurisdiction in action brought by
franchisor); Exxon Corp. v. Miro, 555 F. Supp. 234, 237 (C.D. Cal.
1983) (invoking without discussion jurisdiction under the Petroleum
Act and 28 U.S.C. § 1331). Thus, we find nothing in the case law
which would alter our conclusion on this matter.

In all events, the very question of the binding effect as to jurisdic-
tion of the past decision of a court on the merits of the question when
jurisdiction was either assumed, or stated without analysis, or was
passed on sub silentio, was decided in Hagans v. Levine, 415 U.S.
528 (1974), n.5, p. 533-35 of that decision. The Court held that it had
never considered itself bound in such circumstances when a subse-
_________________________________________________________________
5 Although not deciding the issue, the Third Circuit has acknowledged
that the Petroleum Act is silent as to a franchisor's right to bring suit. See
Sun Refining and Marketing Co. v. Rago, 741 F.2d 670, 671-72 & n.3
(3d Cir. 1984) (explaining that the district court originally assumed juris-
diction under the Petroleum Act, 15 U.S.C. § 2805, but subsequently
allowed the franchisor to amend its complaint and assert diversity juris-
diction, "thus curing any jurisdictional defect in the original complaint").

                    7
quent case finally brought the jurisdictional issue before it. (Citing
among other cases King Mfg. Co. v. Augusta, 277 U.S. 100, 134-35,
n.21 (1928) (Justice Brandeis dissenting), and Florida Lime and Avo-
cado Growers v. Jacobsen, 362 U.S. 73, 78 (1960) (Justice Frank-
furter dissenting).) And we note that Monell v. New York City Dept.
of Social Services, 436 U.S. 658, 663 (1978), is consistent with this
ruling. Thus, there is no decision of a court of appeals, of which we
are aware, which is contrary to our decision here, and we think that
Franchise Tax Board and Coyne & Delany Co. are so nearly on all
fours that they are persuasive and are dispositive of this appeal.

III.

We are thus of opinion that the district court was without subject
matter jurisdiction in Interstate's action against the Morgans. Accord-
ingly, the judgment of the district court must be vacated, and the case
remanded to the district court with directions to dismiss the case with-
out prejudice for lack of subject matter jurisdiction.

VACATED AND REMANDED WITH INSTRUCTIONS

WILKINS, Circuit Judge, dissenting:

The majority vacates the judgment in favor of Interstate Petroleum
Corporation (Interstate) and against Robert C. Morgan and Vickie L.
Morgan, holding that the district court lacked subject matter jurisdic-
tion. Because the declaratory judgment defendants here, the Morgans,
could have initiated a coercive action to determine the federal rights
at issue, I would hold that the district court properly concluded that
it possessed subject matter jurisdiction. Accordingly, I would affirm.

I.

Interstate brought this action against the Morgans, alleging that
they breached a franchise agreement under which Interstate, the
franchisor, was to sell gasoline and related products to the Morgans.
Interstate sought damages, injunctive relief, and any other relief that
the district court deemed appropriate, including an award of attor-
neys' fees and costs. Interstate's complaint asserted that subject mat-

                     8
ter jurisdiction existed based on the existence of a federal question,
see 28 U.S.C.A. § 1331 (West 1993), under the Petroleum Marketing
Practices Act (PMPA), see 15 U.S.C.A. §§ 2801-2841 (West 1998).1

The Morgans moved to dismiss the case, asserting that the district
court lacked subject matter jurisdiction because the PMPA does not
permit a franchisor to sue a franchisee in federal court under any cir-
cumstances. The court rejected this argument and denied the motion
to dismiss. Subsequently, the Morgans moved unsuccessfully for par-
tial dismissal of Interstate's complaint on the basis that the Declara-
tory Judgment Act, see 28 U.S.C.A. § 2201 (West 1994), did not
permit Interstate to recover money damages. Importantly, in this
motion the Morgans acknowledged that Interstate was seeking a
declaratory judgment concerning whether its termination of the fran-
chise agreement violated the PMPA. At trial, the Morgans moved for
judgment as a matter of law regarding Interstate's claim for money
damages, reiterating their position that while the district court prop-
erly had jurisdiction to hear the case because Interstate sought a dec-
laration of its rights under the PMPA, Interstate was not entitled to
recover damages. The district court agreed that the declaratory judg-
ment sought by Interstate provided the basis for federal jurisdiction
but denied the Morgans' motion.

A jury subsequently found that the Morgans had violated the fran-
chise contract and awarded Interstate damages of $42,901.50. The
Morgans again moved for judgment as a matter of law on the basis
of lack of subject matter jurisdiction, alleging for the first time that
Interstate's complaint did not seek a declaratory judgment. Finding
that this allegation conflicted with the Morgans' repeated recognition
of the existence of the declaratory judgment action, the district court
denied the motion. The district court also denied a motion by Inter-
_________________________________________________________________
1 As is pertinent here, the PMPA specifies the conditions under which
a franchisor may terminate or refuse to renew a franchise agreement and
provides the franchisee with a private cause of action for violations of the
Act. See 15 U.S.C.A. §§ 2804-2805. The primary purpose of the PMPA
"is to protect petroleum franchisees from arbitrary or discriminatory ter-
minations and nonrenewals." Mobil Oil Corp. v. Virginia Gasoline Mar-
keters & Automotive Repair Ass'n, Inc., 34 F.3d 220, 223 (4th Cir.
1994).

                    9
state for reconsideration of an earlier ruling denying Interstate the
right to recover attorneys' fees under the PMPA.

II.

The Morgans argue that the district court lacked jurisdiction to hear
this action because Interstate could establish federal question jurisdic-
tion under the PMPA only by asserting a claim for declaratory relief
and no such claim was ever asserted. I disagree. Notwithstanding
Interstate's failure to specifically request declaratory relief of the
Morgans' rights under the PMPA in its complaint, it is abundantly
clear from the record that both parties recognized that Interstate's
entitlement to such relief was an issue before the court, and accord-
ingly that the complaint had been constructively amended.2 See Fed.
R. Civ. P. 15(b) ("When issues not raised by the pleadings are tried
by express . . . consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings.").

Having determined that the case at bar included a request by Inter-
state for the adjudication of the Morgans' rights against Interstate
under the PMPA, the only question remaining is whether the district
court had jurisdiction over such an action. The district court correctly
determined that it did. Section 1331 of Title 28 provides, "The district
courts shall have original jurisdiction of all civil actions arising under
the Constitution, laws, or treaties of the United States." 28 U.S.C.A.
§ 1331. When federal law creates the cause of action, the action
"arises under" federal law. See Merrell Dow Pharm. Inc. v. Thomp-
son, 478 U.S. 804, 808 (1986).
_________________________________________________________________
2 For example, the Morgans' memorandum in support of their motion
for partial dismissal stated that "in this case where there is a complaint
to construe a party's rights under a federal statute, i.e., [the PMPA], there
is jurisdiction for declaratory judgment under 28 U.S.C. § 1331 because
the declaration of rights under the federal statute is involved in the
Declaratory Judgment sought by the plaintiff." J.A. 61 (internal quotation
marks & emphasis omitted). Moreover, in arguing their motion for judg-
ment as a matter of law during the trial, the Morgans' counsel further
stated, "[T]here is no question in my mind that the Declaratory Judgment
Act . . . allows the construction of a federal statute, which the [PMPA]
is; so as far as termination [of the contract] is concerned, the plaintiff was
properly before this Court." J.A. 30-31.

                     10
When declaratory relief is sought, the jurisdictional inquiry is com-
plicated somewhat. Although the Declaratory Judgment Act does not
broaden federal jurisdiction, see Skelly Oil Co. v. Phillips Petroleum
Co., 339 U.S. 667, 671 (1950), it does "allow parties to precipitate
suits that otherwise might need to wait for the declaratory relief
defendant to bring a coercive action," Gulf States Paper Corp. v.
Ingram, 811 F.2d 1464, 1467 (11th Cir. 1987); see Franchise Tax Bd.
v. Construction Laborers Vacation Trust, 463 U.S. 1, 19 & n.19
(1983). That the federal right actually litigated when declaratory relief
is sought may belong to the declaratory judgment defendant rather
than the declaratory judgment plaintiff does not change the fact that
the action arises under federal law. See Lowe v. Ingalls Shipbuilding,
a Div. of Litton Sys., Inc., 723 F.2d 1173, 1179 (5th Cir. 1984). See
also Ingram, 811 F.2d at 1467 (explaining that the declaratory judg-
ment remedy "allows a party to bootstrap its way into federal court"
(internal quotation marks omitted)). Accordingly,"[a] person may
seek declaratory relief in federal court if the one against whom he
brings his action could have asserted his own rights there." Standard
Ins. Co. v. Saklad, 127 F.3d 1179, 1181 (9th Cir. 1997); see, e.g.,
Public Serv. Comm'n v. Wycoff Co., 344 U.S. 237, 248 (1952)
(explaining that "[w]here the complaint in an action for declaratory
judgment seeks in essence to assert a defense to an impending or
threatened . . . action, it is the character of the threatened action . . .
which will determine whether there is federal question jurisdiction");
TTEA v. Ysleta del Sur Pueblo, 181 F.3d 676, 681 (5th Cir. 1999)
(holding that to establish an independent basis for jurisdiction, a
declaratory judgment plaintiff "may show that there would be juris-
diction over a claim against it"); 12 James Wm. Moore et al., Moore's
Federal Practice § 57.21[2], at 57-34 (3d ed. 2000) (describing the
appropriate inquiry as "whether the issue of federal law would have
appeared on the face of a hypothetical complaint seeking affirmative
relief filed by the defendant in the declaratory judgment action"); 10B
Charles Alan Wright et al., Federal Practice and Procedure § 2767,
at 650-51 (1998) (explaining that if the declaratory judgment defen-
dant could bring a coercive action under a federal statute, the federal
court has subject matter jurisdiction over the plaintiff's declaratory
judgment action).

Here, it is undisputed that the district court would have had juris-
diction over an action initiated by the Morgans to enforce their rights

                     11
under the PMPA. Accordingly, it follows that the district court also
had jurisdiction to hear an action seeking a declaration that Interstate
did not violate the Morgans' rights under the PMPA. See Franchise
Tax Bd., 463 U.S. at 19 & n.19; Standard Ins. Co., 127 F.3d at 1181.

The majority concludes that the district court had no jurisdiction
over Interstate's declaratory judgment action, reasoning that Interstate
had no right of action under the PMPA and the Declaratory Judgment
Act does not enlarge federal court jurisdiction. See ante, at 5. For the
reasons already discussed, this conclusion is squarely at odds with
federal jurisdictional principles relating to the Declaratory Judgment
Act.

The majority also asserts that Franchise Tax Board dictates that the
district court lacked jurisdiction here. I disagree. In Franchise Tax
Board, the California Franchise Tax Board (Board) filed a complaint
in state court against the Construction Laborers Vacation Trust
(Trust), a trust established to administer a collective-bargaining agree-
ment granting annual paid leave to construction workers. See Fran-
chise Tax Bd., 463 U.S. at 4-5. The Board's complaint sought
collection of unpaid tax levies as well as a state-law declaratory judg-
ment that the Trust must honor the Board's levies. See id. at 6-7. The
Trust was governed by the Employee Retirement Income Security Act
(ERISA) of 1974, see 29 U.S.C.A. §§ 1001-1461 (West 1999 & Supp.
2000), because it was an "employee welfare benefit plan." See Fed-
eral Tax Board, 463 U.S. at 5. The Trust claimed that ERISA pre-
empted state law, depriving the Trust of authority to honor the
Board's tax levies. See id. at 6. The Trust removed the case to federal
court, and the district court denied the Board's motion to remand back
to state court. See id. at 7.

In analyzing whether removal was proper, the Court began by
holding that to support federal jurisdiction in a state-law declaratory
judgment action, a federal question must appear on the face of the
well-pleaded complaint. See id. at 16-18. The Court then observed
with approval that federal courts "have regularly taken original juris-
diction over declaratory judgment suits in which, if the declaratory
judgment defendant brought a coercive action to enforce its rights,
that suit would necessarily present a federal question." Id. at 19. The
Court assumed without deciding that the Trust could have sought to

                     12
adjudicate the issue of whether the state regulations were preempted
by bringing a coercive action under ERISA seeking to enjoin applica-
tion of the regulations. See id. at 20 & n.21. The Court, however, also
observed that it interprets federal court jurisdictional statutes "with an
eye to practicality and necessity" and that "[t]here are good reasons
why federal courts should not entertain suits by the States to declare
the validity of their regulations despite possibly conflicting federal
law." Id. at 20-21. In particular, the Court noted that states have a
variety of methods by which they may enforce their own laws in state
courts and are therefore not significantly prejudiced by the unavaila-
bility of the federal court forum. See id. at 21. The Court explained
that "[t]he situation presented by a State's suit for a declaration of the
validity of state law is sufficiently removed from the spirit of neces-
sity and careful limitation of district court jurisdiction" that informed
prior Court decisions. Id. at 21-22. The Court therefore held that such
suits are not within the original jurisdiction of the district courts. See
id. at 19-22.

In addition to examining whether federal court jurisdiction could
exist if the declaratory judgment defendant, the Trust, could have
adjudicated the preemption issue in federal court in a coercive action,
the Court also considered whether jurisdiction existed because the
Board's causes of action for enforcement of the tax levy and for a
declaration of its rights were, "in substance," federal claims. Id. at 22;
see id. at 22-27. As is relevant here, the Court held that, although res-
olution of the declaratory judgment action would have required the
adjudication of ERISA issues, the action could not properly be con-
sidered an ERISA claim "in substance" because only a participant,
beneficiary, or fiduciary could sue under ERISA and the Board was
not one of the enumerated parties. See id. at 25-27. Having rejected
both possible bases for federal jurisdiction, the Court held that
removal was improper. See id. at 28.

I strongly disagree with the conclusion of the majority that Fran-
chise Tax Board is "nearly on all fours" with the present case, and that
it mandates a determination of no jurisdiction here. Ante, at 5-6.
Indeed, it is apparent that the holding in Franchise Tax Board was
decided on the narrow basis that district courts do not have original
jurisdiction over suits brought by a state for a declaration that federal
law does not preempt its regulations. See Franchise Tax Bd., 463 U.S.
13
at 19-22; see TTEA, 181 F.3d at 681-82 (explaining that Franchise
Tax Board was decided on the narrow ground that there is no federal
jurisdiction over a suit brought by a state for a declaration that federal
law did not preempt its regulations and concluding that the Franchise
Tax Board Court approved of the general rule that a party can seek
declaratory relief in federal court if the declaratory judgment defen-
dant could have asserted his own rights there). The declaratory judg-
ment plaintiff in the present case is not a state seeking a declaration
that its own regulations are valid, and therefore the narrow holding of
Franchise Tax Board does not control here.

In defending its determination of no jurisdiction, the majority also
relies on the discussion in Franchise Tax Board concluding that the
Board's declaratory judgment action was not "in substance" an
ERISA action, and therefore could not be said to arise under federal
law in that manner. See ante, at 6 ("The Court stated that `[a] suit for
similar relief by some other party does not"arise under" that provi-
sion.' 463 U.S. at 27."). To the extent that the majority concludes that
Interstate's declaratory judgment action is not"in substance" a PMPA
action, and therefore does not arise under federal law in that manner,
I most certainly agree. That question is wholly separate, however,
from the question of whether the declaratory judgment action arises
under federal law because the Morgans' coercive PMPA action
against Interstate would have arisen under federal law. Compare
Franchise Tax Bd., 463 U.S. at 19-22, with id. at 22-27.

Finally, I would note that the Morgans maintain that because the
PMPA provides a remedy of money damages only for franchisees and
because the PMPA is the sole basis for federal jurisdiction, the district
court erred in allowing the jury to consider Interstate's damages
claim. I disagree. Once the court had jurisdiction over the question of
whether Interstate violated the PMPA in terminating the contract, it
gained supplemental jurisdiction over Interstate's state-law claim for
breach of contract. See 28 U.S.C.A. § 1367(a) (West 1993). Accord-
ingly, I would affirm the judgment in Interstate's favor.

In sum, because the Morgans could have sued Interstate in federal
court alleging that Interstate violated the PMPA, I would hold that the
district court correctly determined that it had jurisdiction over Inter-

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state's action for a declaration that it did not violate the PMPA, and
would affirm the judgment of the district court. 3
_________________________________________________________________
3 The district court ruled that Interstate could not recover attorneys'
fees under the PMPA, and Interstate argues in its cross-appeal that the
district court erred in this ruling. I would find no error. A successful
party in a declaratory judgment action may recover attorneys' fees only
when the fees "are recoverable under non-declaratory judgment circum-
stances," such as when the substantive law permits an award of attor-
neys' fees. Mercantile Nat'l Bank v. Bradford Trust Co., 850 F.2d 215,
216 (5th Cir. 1988). Under the PMPA, a franchisor is entitled to attor-
neys' fees only when a frivolous action is brought against it. See 15
U.S.C.A. § 2805(d)(3). Because Interstate filed this action, I would hold
that it is not entitled to recover attorneys' fees.

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