Rivet v. Regions Bank of Louisiana, F.S.B.

EDITH H. JONES, Circuit Judge,

dissenting:

My brethren, conscientiously attempting to follow the guidance of dicta in a Fifth Circuit case 1 and a mystifying footnote by the Supreme Court, 2 have concluded that the federal district court possessed removal jurisdiction over a state court claim principally seeking foreclosure of a second mortgage. Were it not for the ambiguities in the two preceding cases, Carpenter and Moitie, this result would fly in the face of the well-pleaded complaint limit on removal jurisdiction. I respectfully dissent because I believe the majority’s unusual result is not compelled by the authorities. Briefly, Moitie means less than the majority asserts, and the Carpenter dicta explaining Moitie do not require the result here reached. I fear that the majority’s result further confuses an already complex byway of federal jurisdiction.

Without repeating the majority’s analysis, I agree in part with their holding that — until the Supreme Court clarifies Moitie — 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.” Critically, I would add that the prior judgment should have involved a claim made under federal law. Ultramar America Limited v. Dwelle, 900 F.2d 1412 , 1415 (9th Cir.1990). 3 I would also emphasize that Moitie permitted removal only where the claim being removed represented a plaintiffs attempt to seek relief in *594 state court by recharacterizing an “essentially federal” claim that they had unsuccessfully pursued first in federal court. Moitie thus is a species of the artful pleading doctrine, a doctrine that permits a federal court to pierce the pleadings of a complaint which, although cloaked in terms of state law, actually falls within federal jurisdiction because of the applicability of federal principles. Moitie, 452 U.S. at 398, n. 2,101 S.Ct. at 2427, n. 2. While the circuit courts have split in interpreting Moit ie, 4 this narrow understanding is accepted by the majority here and the Fifth Circuit and is well-grounded. 5

But accepting this explanation of Moitie, that case cannot confer federal jurisdiction here, because the plaintiffs have no “essentially federal” claim to recharacterize. Their claim rests on purported rights under a second mortgage and on transfers of property interests that allegedly abrogated those rights. This is a state law claim. The only federal element that plaintiffs could have pleaded is an anticipatory defense based upon the prior bankruptcy proceeding. To fall within footnote 2 of Moitie, the subsequent state claim must be “merely the same ... claim in disguise.” Salveson v. Western States Bankcard Ass’n., 731 F.2d 1423 , 1427 (9th Cir.1984) (characterizing lower court’s finding in Moitie). The plaintiffs here are not recharacterizing any federal claim. Instead, the second mortgage they seek to enforce was never expunged from the local deed records after a bankruptcy court judgment commanded sale free and clear of all liens and encumbrances. Moreover, the plaintiffs are suing a successor in interest to the bankruptcy sale, not simply the original party to the proceeding in bankruptcy court. Also unlike Moitie, the plaintiffs here were not unsuccessful plaintiffs in the prior bankruptcy proceeding, but were defendants there. In every respect, these characteristics represent a more complex procedural scenario than did the Moitie plaintiffs copycat pleadings in federal and then state court.

Given my druthers, I would hold that the instant case is distinguishable from a narrow reading of Moitie. If, however, Moitie compels the result reached by the majority, then it appears significantly to have intruded into previously well-settled removal jurisprudence, whose anchor is the well-pleaded complaint rule. Consider this hypothetical: A sues B in federal court on a federal securities claim and wins a judgment. B then sues A in state court on a contract claim that was arguably a compulsory counterclaim in the preceding litigation. Following Moitie as interpreted by Rivet, does the federal court have removal jurisdiction? If so, hasn’t Rivet moved the boundaries of removal jurisdiction far away from Moitie’s self-description as an “artful pleading” case?

The majority relies heavily on Judge Garwood’s description of Moitie in the Carpenter decision. Notwithstanding Carpenter’s statement that “we 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,” 44 F.3d at 370 (emphasis added), Carpenter’s statement is more dicta *595 than holding. Carpenter was a very different case from Moitie. The defendants in Carpenter sought to rely on Moitie to prevent simultaneous litigation by a plaintiff in federal and state courts over the same grievance. Judge Garwood’s extended, scholarly discussion of Moitie refused to adopt the proffered broad interpretation of Moitie that arguably would have prevented parallel litigation. As Judge Garwood put it, “whatever Moitie does mean, we are confident it does not mean so much.” 44 F.3d at 368. The bulk of Carpenter’s discussion explains why some circuit court eases have incorrectly construed Moitie to govern parallel litigation. 6 The Carpenter panel was not faced with anything like a plaintiff whose suit was in fact “completely precluded by a prior federal judgment on a question of federal law.” This “holding” was merely a way to distinguish the cryptic Moitie footnote without “emptying] footnote 2 of all substantive content,” and was surely not meant to broaden the Moitie decision’s fleeting reference to the “federal character” of the plaintiff’s claims into a completely new exception to the well-pleaded complaint rule. See id. at 370, n. 11.

In attempting to demonstrate that the factors relied upon by Judge Garwood in Carpenter to allow remand are not present here, the majority contends that “in this case we do have a prior federal judgment, we do have federal preclusion law to apply, and we have plaintiffs who have not taken any preclusion risks ... but ... are clearly seeking by collateral attack to avoid the preclusive effect of a prior federal judgment____” Maj. Op. at 591. I would hasten to add to that list what we also do not have in this case, but was essential in Moitie and obviously present in Carpenter: a conceivable federal claim that could be asserted by the plaintiff. The majority essentially holds that a conceivable federal claim is not necessary for removal, as long as there is a federal defense of res judicata based on a federal judgment. To say that a plaintiffs claim can be removed to federal court when he has alleged no conceivable federal claim is true mockery of the well-pleaded complaint' rule and the artful pleading doctrine. How can the artful pleading doctrine apply if the plaintiffs claims can not be recharacterized into an essentially federal claim that has been omitted by artful pleading? See Ultramar, 900 F.2d at 1415 (“... recharacterization of purported state-law claims into federal claims was essential before removal could occur.”).

Moreover, Carpenter expresses a fear of extending federal court removal jurisdiction that is realized in this ease. Referring to the fact that plaintiff Carpenter could pursue litigation under theories of both federal and state constitutional law, Judge Garwood pithily observes, “we cannot say that the failure to make a state claim pendent makes it federal.” Id. at 369. Here, whether we like it or not, and whether the plaintiffs proceeded in good faith or not, they have filed a claim that is based purely and solely on state law. It is not amenable to recharacterization as an “artful pleading” of a federal claim. In my view, Carpenter expressly decries the implication that this state-law claim must be removed to federal court according to a broad interpretation of Moitie.

Any reader who has followed the majority opinion and this dissent thus far ought to appreciate that our dispute, while technical, is not trivial. 7 The principles of limited federal court jurisdiction and the relative clarity of jurisdictional rules are at issue. Moitie and Carpenter can be read to authorize removal of this state-law-based case simply because it is subject to a federal preclusion defense. But to do so, as I have shown, intrudes on the scope of the well-pleaded complaint rule, expanding federal removal *596 jurisdiction while engendering complexity and uncertainty in the future. I do not believe such results were intended by the Supreme Court in Moitie or by the Carpenter panel; the best way to effectuate those decisions’ narrowly tailored goals is to apply them narrowly and specifically. Because the majority opinion does not do so, I respectfully dissent.

. Federated Dept. Stores, Inc. v. Moitie, 452 U.S. 394 , 101 S.Ct. 2424 , 69 L.Ed.2d 103 (1981).

. The majority argues that the Ultramar decision does not "purport to constrain Moitie removal to instances in which the prior federal judgment arose out of a case that a plaintiff himself had first brought in federal court." Maj. Op. at 591 (emphasis in original). However, Ultramar did involve a plaintiff who had asserted a prior claim, and the majority has cited no case where Moitie removal has been allowed where the plaintiff had not brought a prior suit grounded in federal law. The majority implicitly acknowledges that while it is not "constrain[ed]” from allowing Moitie removal where the plaintiff has not brought a prior claim, it is broadening the scope of Moitie removal beyond what has been allowed in other circuits.

. Compare Travelers Indemnity Co. v. Sarkisian, 794 F.2d 754 (2d Cir.1986) (using plaintiff's choice of forum analysis to apply Moitie) and. Sullivan v. First Affiliated Securities, Inc., 813 F.2d 1368 (9th Cir.1987) (using res judicata analysis).

. The Supreme Court's statement in Moitie that "at least some of the claims had a sufficient character to support removal” should be interpreted in light of the authority and examples cited in support of that proposition. 452 U.S. at 397, n. 2 , 101 S.Ct. at 2427, n. 2 . After citing Professor Wright's treatise for the proposition that federal courts may determine the "real nature" of a plaintiff's claim, the- Court cited three cases in which courts did just that. Two were antitrust cases in which plaintiffs had pleaded antitrust claims under a South Carolina statute and the South Carolina courts had held that the statute only applied to conduct in intrastate commerce, while the defendants’ challenged conduct actually involved interstate commerce. See In re: Wiring Device Antitrust Litigation, 498 F.Supp. 79, 82-83 (E.D.N.Y.1980) and Three J Farms, Inc. v. Alton Box Board Company, 1979 — 1 Trade Cases ¶ 62,423 , 1978 WL 1459 (D.S.C.1978), rev’d on other grounds, 609 F.2d 112 (4th Cir. 1979), cert. denied, 445 U.S. 911, 100 S.Ct. 1090 , 63 L.Ed.2d 327 (1980). In the third case, the plaintiff filed only state conspiracy claims, but the district court held that the claims implicated federal antitrust laws and labor issues governed by the Labor Management Relations Act. See Prospect Dairy, Inc. v. Dellwood Dairy Co., 237 F.Supp. 176, 178-79 (N.D.N.Y.1964).

. See 44 F.3d at 368-70, n. 6, n. 12 (disagreeing with the second circuit decision in Travelers, supra, n. 4 )

. The majority's holding has another unfortunate consequence. Allowing federal jurisdiction to turn on whether the plaintiff's claims are barred by res judicata allows the defendant two bites at the apple: if upon the plaintiffs motion to remand the defendant loses the res judicata issue and the case is remanded, the defendant can relitigate the res judicata issue again in state court. The prior federal determination of the res judicata issue will not bind the state court, because, by virtue of the federal court's resolution of the res judicata issue, the federal court was not a court of proper jurisdiction. See Robert A. Ragazzo, Reconsidering the Artful Pleading Doctrine, 44 Hastings L.J. 273 , 311 (January 1993).