Amicus Curiae Brief — Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg.

MOTION FILED (5)

FEB 2? 200 No. 04-603

IN THE

Supreme Court of the Gnited States

GRABLE & SONS METAL PRODUCTS, INC..,

Petitioner,

Vv.

DARUE ENGINEERING & MANUFACTURING, INC.,

Respondent.

On Writ of Certiorari to the

United States Court of Appeals

for the Sixth Circuit

MOTION FOR LEAVE TO FILE BRIEF AMICI

CURIAE AND BRIEF OF AMICI CURIAE JEROME R.

MIKULSKI ET UX. IN SUPPORT OF PETITIONER

ERIC H. ZAGRANS *

WOMBLE CARLYLE SANDRIDGE

& RICE PLLC

1401 Eye Street, N.W., 7th Floor

Washington, D.C. 20005-2225

(202) 857-4516

* Counsel of Record : Counsel for Amici Curiae

Additional counsel listed on inside cover

a oe a

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 — WASHINGTON, D.C. 20001

THOMAS R. THEADO

GARY, NAEGELE & THEADO

446 Broadway

Lorain, Ohio 44052-1797

(440) 244-4809

DENNIS P. BARRON

P.O. Box 8190

Cincinnati, Ohio 45208

(513) 871-2369

EBEN O. MCNAIR IV

DANIEL S. WHITE

SCHWARZWALD & MCNAIR

616 Penton Media Building

1300 East Ninth Street

Cleveland, Ohio 44114-1503

(216) 566-1600

Counsel for Amici Curiae

MOTION OF JEROME R. MILUSKI ET UX.

FOR LEAVE TO FILE A BRIEF AS AMICI CURIAE

IN SUPPORT OF PETITIONER

Jerome R. Mikulski and Elzetta C. Mikulski hereby move

the Court, pursuant to Rule 37.2 of the Rules of this Court,

for leave to file the attached brief as amici curiae in support

of Petitioner. Petitioner has consented to the filing of this

brief; a copy of the written consent of its counsel has been

lodged with the Clerk of the Court. Respondent has failed to

grant consent, thereby necessitating this motion.

The resolution of this case is of great importance to the

Mikulskis who (as is more fully set forth in the section of the

proposed amici brief headed “Interest of Amici Curiae”) are

the named plaintiffs and class representatives in four consoli-

dated shareholder class action suits in which the proper scope

of the removal jurisdiction of the federal courts with respect

to claims seeking relief exclusively under state law, but for

which the violation of a federal statute is an important factual

element, has been placed squarely at issue. In their cases, as

in this case, Congress did not establish a federal cause of

action for violations of the relevant provision of the Internal

Revenue Code, nor does the federal statute itself create any

rights that corporations or corporate shareholders can enforce.

The lower courts’ refiisals to remand in this case and in

the Mikulskis’ cases (which are now pending on consolidated

appeal before the Sixth Circuit, Case No. 03-4486, and on

petition for writ of certiorari before judgment in this Court,

Case No. 04-1058) operate to expand significantly the limited

removal jurisdiction of the federal district courts in the

absence of diversity in ways contrary to the decisions of this

Court and the overwhelming majority of the Circuits, and that

usurp the authority of Congress to decide the contours of

federal question jurisdiction within constitutional limits. __

Specifically, Mr. and Mrs. Mikulski believe that their brief

as amici curiae will aid the Court by (i) illustrating the struc-

tural and conceptual framework and import of the last twenty

years of this Court's federe] question and removal jurispru-

dence from Merrell Dow Pharmaceuticals, Inc. v. Thompson

to Beneficial National Bank v. Anderson, establishing the

proposition that the presence of even a “substantial” federal

question in a state law cause of action ‘s not a sufficient basis

for federal removal jurisdiction absent a feders! pvivate right

of action, (ii) explaining why the decision beiow cannot be

reconciled with this Court’s “substantial federal question”

jurisprudence, and (iii) describing the errors committed by the

court below in misunderstanding the import and near unanim-

ity of the decisions in the other Circuits on this issue.

In order to provide the Court with such relevant informa-

tion not already brought to the Court's attention by the par-

ties, movants respectfully request the Court to grant them

leave to file their amici curiae brief submitted herewith.

Respectfully submitted,

ERIC H. ZAGRANS *

WOMBLE CARLYLE SANDRIDGE

& RICE PLLC

1401 Eye Street, N.W., 7th Floor

Washington, D.C. 20005-2225

(202) 857-4516

* Counsel of Record Counsel for Amici Curiae

TABLE OF CONTENTS

SUMMARY OF ARGUMENT ................cececsecerseseseseeses

FETUS cxsersssrsssseseneementeneimnmemnmnnmatts

THE FEDERAL DISTRICT COURTS MAY

NOT EXERCISE REMOVAL JURISDIC-

TION BASED SOLELY ON THE PRES-

ENCE OF A SUBSTANTIAL FEDERAL

QUESTION ASSERTED IN THE STATE

LAW CLAIM FOR RELIEF UNLESS

CONGRESS HAS CONFERRED A FED-

ERAL PRIVATE RIGHT OF ACTION.............

A. This Court’s Decision in Merrell Dow

Undermined the Continued Vitality of the

B. The Lower Federal Courts, Including the

Sixth Circuit in Other Cases, Have Con-

sistently Applied Merrell Dow to Require a

Federal Private Right of Action for Federal

Question Jurisdiction

C. This Cuinte Deatiten ta Benetiahdt the

tional Bank v. Anderson Removed Any

Doubt about the Elimination of the Sub-

stantial Federal Question Doctrine as a

Basis for Removal Jurisdiction by Holding

that, Absent Diversity, There Are Only

Two Ways a State Claim Can be Removed

to Federal Court—Where Congress Ex-

pressly Provides or Where Complete Pre-

emption is Present

(i)

TABLE OF CONTENTS—Continued

D. Grable’s Three-Part Analysis Contains

Two

CONCLUSION

More Fundamental Flaws ..................-.

EEE E EEE EEE EEE EEE SESE SEES OSES ESTEE THEE EOE ES

Page

TABLE OF AUTHORITIES

CASES Page

Amsouth Bank v. Dale, 386 F.3d 763 (6th Cir.

EE 6,7

Barbara v. New York Stock Exchange, Inc., 99

Fae Sy GI Ga Fei scnssrenasessunnsecssrsenmeennees 8

Bellsouth Telecomm., Inc. v. MCImetro Access

Transmission Serv., Inc., 278 F.3d 1223 (11th

RR, SED cnnnsccsnssnsrenenseccnsnmnemesentetmmmemenmnnens 8

Beneficial National Bank v. Andersen, 539 U.S

9 Gee renemsssenensnmmenemmtennanunn 3, 4, 8, 11-15

Bhagwanani v. Howard University, 2005 U.S.

Dist. LEXIS 775 (D.D.C. 1-17-05)...........cccceeeee 8,9

Board of Trustees of Painesville Township v. City

of Painesville, 200 F.3d 396 (6th Cir. 1999)......6, 7, 14

Bourke v. Carnahan, 2003 U.S. Dist. LEXIS

133599 (S.D. OR60 7-1-3) ....ccccccccccecscccesecessceses 8, 12, 13

Burton v. Southwood Door Company, 305 F.

Supp.2d 629 (S.D. Miss. 2003)............cccccceeeeees 13

Butts v. Guardian Industries Corp., 981 F. Supp.

SE GG GERD FD ccnnnecnsssnsessenenienssscnsesemnes 8

Campbell v. SmithKline Beecham, 919 F. Supp.

Ue 9

Care Choices HMO y. Engstrom, 330 F.3d 786

Oe —— 6,7

Casey v. Goulian, 273 F. Supp.2d 136 (D. Mass.

nn 9

Caterpillar Inc. v. Williams, 482 U.S. 386

(a 4

City of Huntsville v. City of Madison, 24 F.3d

169 (11th Cir. 1994)....... . - 8

City of Rome, N.Y. v. Verizon Communications,

Inc., 362 F.3d 168 (2nd Cir. 2004) — 7, 12

Dixon v. Coburg Dairy, Inc., 369 F.3d 811 (4th

Cir. 2004) (en banc).......... - . 7,11

iV

TABLE OF AUTHORITIES—Continued

Page

Dunlap v. G&L Holdings Group, Inc., 38\ F.3d

1285 (1 lth Cir. 2004)............csssrssesrsssseesseeeees 8

Franchise Tax Board of Calif. v. Construction

Laborers Vacation Trust for Southern Calif,

4B3 UZ. 1 (9DG 5) ncccccccccccccsesscsssescsssssesesessssossssess 5, 6

Grable & Sons Metal Products, Inc. v. Darue

Engineering & Manufacturing, Inc., 377 F.3d

592 (6th Cir. 2004).....cccccceceeeeeeeeenes 5, 6,7, 13, 14, 15

Handyman Network, Inc. v. Westinghouse

Savannah River Co., 868 F. Supp. 151 (D.S.C.

9

Heydon v. MediaOne of Southeast Michigan,

Inc., 327 F.3d 466 (6th Cir. 2003) ......cccccceceeeees 5,7

Horowitz v. Marlton, 116 F. Supp.2d 551 (D.N.J.

DIP D nccccssnccssssersssnsenssssnssnnsscnssesssntocssscssessessnanesats 9

Hoskins v. Bekins Van Lines, 343 F.3d 769 (Sth

Clie. BBGB) .cccscccccscscsssccscesssccssssssssssssssssnessssonssssoses 14

Howery v. Allstate Insurance Co., 243 F.3d 912

Le Ry) 8, 13, 14

Hunter v. Ohio Veterans Home, 272 F. Supp.2d

692 (N.D. Ohi0 2003) .......cccccccecseereseresenresensenees 8

In re Wireless Telephone Federal Cost Recovery

Fees Litig., 343 F. Supp.2d 838 (W.D. Mo.

TID) cccccscscecsesssenscssssscsssnssnsnpecssssenesscossusnsssnoseosene 9

In re Wireless Telephone Radio Frequency Emis-

sions Products Liab. Litig., 327 F. Supp.2d

554 (D. Md. 2004) ........ccccccsecssssersssersseerssserssenes 9

Jackson v. Purdue Pharma. Co., 2003 U.S. Dist.

LEXIS 6998 (M.D. Fla. 4-11-03) ......ccccccccceeseees 9

Jacoboni v. KPMG LLP, 314 F. Supp.2d 1172

(WD. Pla. 2OD6) .nccccccoccccccccscocscsssscscsssssssosssoceses 10

Jairath v. Dyer, 154 F.3d 1280 (11th Cir. 1998)... 8, 11

Vv

TABLE OF AUTHORITIES—Continued

Page

Long v. Bando Manufacturing of America, Inc.,

201 F.3d 754 (6th Cir. 2000) ...........:000000 5, 6,7, 12, 13

Loussides v. America Online, Inc., 175 F. Supp.

26 SEE GD. Camm, BEBE) nccccccccccccscsssscscecsscssensecses 9

Meinders v. Refco Securities, Inc., 865 F. Supp.

Fare Gs GI Fae ccrecnnsrenenasenssiereennraminneneess 8

Merrell Dow Pharmaceuticals, Inc. v. Thompson,

SOD es Gi erenrevenemesesturctntensesnenteenenen passim

Mulcahy v. Columbia Organic Chem. Co., Inc.,

29 F.3d 148 (4th Cir. 1994) ooo ccccesseeseeeeennees 7,11

Musson Theatrical, Inc. v. Federal Express

Corp., 89-F.3d 1244 (6th Cir. 1996) ...........00000 14

Neel v. Pippy, 247 F. Supp.2d 707 (E.D. Pa.

SIE casnsnscnenaseesensnsenenapuneeniensansenpantensntecmntnmseties 9

Nicodemus v. Union Pacific Corp., 318 F.3d

Cae Cea Ga, Bit Pessenesscscccccesscsnsestesenssscsneenees 7,14

PCS 2000 LP v. Romulus Telecomms., Inc., 148

Fee Ges CRUE Ge Diep ccnsecssecsccssencenscsessnessecssenses 7

Quintal v. New England Regional Council of

Carpenters, 2003 U.S. Dist. LEXIS 16386 (D.

SERIA, GGT cccnenemnersnensencensscsemenspocusenneunenatentes 10

Rogers v. Platt, 814 F.2d 683 (D.C. Cir. 1987)..... 8

Savalle v. Nestle Waters North America, Inc.,

289 F. Supp.2d 31 (D. Conn. 2003).........cc0s0e0 9

Seinfeld v. Austen, 39 F.3d 761 (7th Cir. 1994),

cert. denied sub nom. Abbott Lab. v. Seinfeld,

FOO Gili DUE cnnensrescccscesmsecssenemenmenentann 7, 11, 13, 14

Smith v. Industrial Valley Title Insurance Co.,

957 F.2d 90 (31d Cir. 1992) ........cecccecerserssesserees 10

State of Montana v. Abbot Laboratories, 266 F.

Supp.2d 250 (D. Mass. 2003) ..........cccceeseeseeeeees 9

TCG Detroit v. City of Dearborn, 206 F.3d 618

vi

TABLE OF AUTHORITIES—Continued

Page

Tempelman vy. Colsia, 2002 U.S. Dist. LEXIS

IGG T CIEE. DoF GB) cccccocsccscccensssscssmssnsessvecs 10

Terrebonne Homecare, Inc. v. SMA Health Plan,

Inc., 271 F.3d 186 (Sth Cir. 2001) ........ccccceeeeeees 14

Utley v. Varian Assoc., Inc., 811 F.2d 1279 (9th

Cite SEF cccescaresenteseneececenssnsanssinesinmninniannieninnin 7

Wagner vy. Regent Inv., Inc., 903 F. Supp. 966

GBD. Veo, CGT D eccccccscerescsssnsccsnsstensnnscemmmsemesssrsn 9

Wander v. Kaus, 304 F.3d 856 (9th Cir. 2002)...... 7

Waste Control Specialists, LLC v. Envirocare of

Texas, Inc., 199 F.3d 781 (Sth Cir. 2000).......... 14

Willy v. Coastal Corp., 855 F.2d 1160 (Sth Cir.

DED cccsccnsscsnenisesnepsstanmacinesianeatinnintiiiaeeniiecmeeets 7

Zubi v. AT&T Corp., 219 F.3d 220 (3rd Cir.

IED cxcccsnscenssnseensnsnesnsnssansseneannenasossninninnsieniansinien 7

JUDICIAL CODE

Be UK. © CSB G cccecessscenssccsesesecsmnsemsenincsssnenanmanets 1]

rE a 4

INTERNAL REVENUE CODE

BO USL. § SIDES) ccccccccsssecccssscssssscessvsnsssesseseese 2

2B USL. § GOESO NS) cccccccceccccsecscccccsscessccsssssssssoees 1~)

SUPREME COURT RULES

Bf ee Se |

OTHER AUTHORITIES

E. Chemerinsky, FEDERAL JURISDICTION 284-85

CBB 6B. FOB BP ccreccccssccqesescscscccsesssnsenmmnansnevesseessene 9

IN THE

Supreme Court of the Anited States

No. 04-603

GRABLE & SONS METAL PRODUCTS, INC.,

Petitioner,

Vv.

DARUE ENGINEERING & MANUFACTURING, INC.,

Respondent.

On Writ of Certiorari to the

United States Court of Appeals

for the Sixth Circuit

BRIEF OF AMICI CURIAE JEROME R. MIKULSKI

ET UX. IN SUPPORT OF PETITIONER

INTEREST OF AMICI CURIAE'

Jerome R. Mikulski and Elzetta C. Mikulski are California

taxpayers who have been shareholders of Centerior Energy

Corp. and its successor, FirstEnergy Corporation (collectively

“Centerior’”), continuously since 1985. They are plaintiffs

and named class representatives in four consolidated share-

holder class action suits against Centerior arising from its

fraudulent accounting practices which misinformed share-

holders over the course of many years that they had received

taxable dividends instead of tax-free returns of capital and

' Pursuant to Rule 37.6, no counsel for either party authored this brief

in whole or in part, nor did any party make a monetary contribution to the

preparation or submission of this brief.

2

improperly instructed them to overpay their respective federal

and state income taxes, thereby passing off approximately

$500 million of Centerior’s own tax liability onto its share-

holders. The Mikulskis’ state law claims for fraud and breach

of contract on behalf of the shareholder class allege that this

fraud had its origins in Centerior’s violation of the effective

date provisions of Section 312(n)(1) of the Internal Revenue

Code, 26 U.S.C. § 312(n)(1). However, Congress did not

provide a federal cause of action for violations of Section

312(n)(1), nor does the federal statute itself create any rights

that corporate shareholders can enforce. Centerior removed

the cases to federal district court which ruled that it had valid

removal jurisdiction due to the presence of a substantial

federal question based on the federal tax laws. The

Mikulskis’ appeal is pending before the Sixth Circuit, Case

No. 03-4486, and their petition for writ of certiorari before

judgment is pending before this Court, Case No. 04-1058.

Similarly, in this case, the Sixth Circuit held that Grable’s

state law claim to quiet title was deemed to be a federal

question because it required the interpretation of a provision

of the Internal Revenue Code. These refusals to remand in

Grable and Mikulski significantly expand the limited

jurisdiction of the federal district courts in removal situations

and transform a simple violation of federal law as an element

of a state law cause of action into a substantial federal

question, contrary to the holdings of this Court and in conflict

with the decisions of several other Circuits. Allowing these

decisions to stand constitutes an open invitation for all

litigants to remove a state law claim that includes a federal

question, or merely alleges a violation of federal law, without

having to show original jurisdiction in the district court. Such

an open invitation will clog an already overburdened federal

judicial system and is contrary to the guidance given by this

Court's earlier decisions.

3

Mr. and Mis. Mikulski have a strong interest in seeking

reversal of the erroneous decision of the Court of Appeals for

the Sixth Circuit in this case and asking the Court to

announce explicitly that the conceptual framework and

import of its prior holdings in Merrell Dow Pharmaceuticals,

Inc. v. Thompson and Beneficial National Bank v. Anderson

mean that the presence of a substantial federal question in a

state law cause of action is not a sufficient basis for federal

removal jurisdiction absent a federal private right of action.

Their amici brief is submitted in the hope that it will be of

assistance to the Court in analyzing the issues presented.

SUMMARY OF THE ARGUMENT

In Beneficial National Bank v. Anderson, 539 U.S. |

(2003), this Court reaffirmed the principle that the mere

presence of_a federal statute in an action that seeks relief

solely under state law (i.e., where a violation or interpretation

of federal law is asserted as a factual or legal element of a

state claim), even one that “preempts” state law, will not

automatically provide a basis for removal jurisdiction, thus

completing the structural framework for federal question

jurisdiction that it began in Merrell Dow Pharmaceuticals,

Inc. v. Thompson, 478 U.S. 804 (1986). The Court eliminated

the “substantial federal question” doctrine as a sufficient basis

for removal jurisdiction in Beneficial National Bank, just as it

had for original jurisdiction in Merrell Dow, where Congress

has not provided a federal private right of action for violation

of the particular federal statute.

\

4

ARGUMENT

I. THE FEDERAL DISTRICT COURTS MAY NOT

EXERCISE REMOVAL JURISDICTION BASED

SOLELY ON THE PRESENCE OF A _ SUB-

STANTIAL FEDERAL QUESTION ASSERTED

IN THE STATE LAW CLAIM FOR RELIEF

UNLESS CONGRESS HAS CONFERRED A

FEDERAL PRIVATE RIGHT OF ACTION.

In the absence of diversity, a civil action filed in a state

court may be removed to federal court only if the claim is one

“arising under” federal law. Beneficial National Bank v.

Anderson, 539 U.S. 1 (2003), citing 28 U.S.C. § 1441(b).

Whether a claim arising under federal law must be deter-

mined by applying the “well-pleaded complaint” rule.

Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). Thus,

a claim “arises under” federal law for jurisdictional purposes

only if the plaintiff's statement of his own cause of action on

the face of his properly pleaded complaint affirmatively

shows that it is based upon federal law. Beneficial National

Bank, supra, at 7; Caterpillar, supra, at 392. As this Court

has recently reaffirmed:

As a general rule, absent diversity jurisdiction, a case

will not be removable if the complaint does not affirm-

atively allege a federal claim.

Beneficial National Bank, supra, at 7.

A. This Court’s Decision in Merrell Dow Under-

mined the Continued Vitality of the “Sub-

stantial Federal Question” Doctrine.

This Court began the erosion of the “substantial federal

question” doctrine as a valid exception to the well-pleaded

complaint rule in Merrell Dow Pharmaceuticals, Inc. v.

Thompson, 478 U.S. 804 (1986). In the context of a district

court’s original jurisdiction, this Court held in Merrell Dow

5

that, absent a federal private right of action or remedy, federal

courts could not exercise “arising under” jurisdiction where

violation of a federal statute was an element of a state law

claim. The linchpin of the Merrell Dow holding is the

absence of a private federal cause of action for the violation

of the federal law involved; in such circumstances, the

violation of a federal statute, pleaded as an element of a state

law cause of action, does not state a claim “arising under”

federal law—“|[t}]he mere presence of a federal issue in a state

cause of action does not automatically confer federal-question

jurisdiction.” /d. at 813. This Court noted that the con-

gressional determination not to provide a private federal

remedy for violation of a federal statute is “tantamount to a

congressional conclusion that the presence of a claimed

violation of the statute as an element of a state cause of action

is insufficiently ‘substantial’ to confer federal question juris-

diction.” /d. at 814.

B. The Lower Federal Courts, Including the Sixth

Circuit in Other Cases, Have Consistently

Applied Merrell Dow to Require a Federal

Private Right of Action for Federal Question

Jurisdiction.

Although the Sixth Circuit’s decision below significantly

relies on its previous ruling in Long v. Bando Manufacturing

of America, Inc., 201 F.3d 754 (6th Cir. 2000), five other

contrary decisions by the Sixth Circuit (three of them

subsequent to Long and before Grable) indicate that the Sixth

Circuit properly understands Merrell Dow to limii this

Court’s prior decision in Franchise Tax Board of Calif. v.

Construction Laborers Vacation Trust for Southern Calif.,

463 U.S. 1 (1983), by requiring a federal private right of

action to confer federal question jurisdiction.

In Heydon v. MediaOne of Southeast Michigan, Inc., 327

F.3d 466, 471-72 (6th Cir. 2003), the Sixth Circuit explicitly

6

concluded that Merrell Dow had limited the application of

the substantial federal question exception announced in Fran-

chise Tax Board, and held that “[b]ecause the Cable [Commu-

nications Policy] Act does not provide the »ain-tiffs] with a

private cause of action, no federal question jurisdiction exists.”

In TCG Detroit v. City of Dearborn, 206 F.3d 618, 622-24 (6th

Cir. 2000), the Sixth Circuit affirmed the existence of valid

federal question jurisdiction over the plaintiff's claim only

because it held that 47 U.S.C. § 253(c) authorizes a private right

of action in federal court for claims by telecommunications

providers of “barrier-to-entry” injuries:

the Supreme Court held in Merrill [sic] Dow . . . that

“when Congress has determined that there should be no

private federal cause of action . . . [a claimed] violation

does not state a [federal question].”

TCG Detroit, 206 F.3d at 622 n.2, quoting Merrell Dow,

supra, 478 U.S. at 817. Similarly, in Care Choices HMO y.

Engstrom, 330 F.3d 786, 791 (6th Cir. 2003), federal juris-

diction was found to be lacking explicitly because Section

1395mm(e)(4) of the Medicare Act did not contain a private

right of action.”

In a fifth case decided after Grable, Amsouth Bank v. Dale,

386 F.3d 763 (6th Cir. 2004), the Sixth Circuit confirmed its

correct understanding that Merrell Dow limits the prior

holding of Franchise Tax Board by requiring a federal private

right of action to support removal jurisdiction:

Because the Bank Secrecy Act does not create a private

right of action, the Receivers’ incorporation of its standards

* The fourth case was decided by the Sixth Circuit prior to Long. In

Board of Trustees of Painesville Township v. City of Painesville, 200 F.3d

396, 399-400 (6th Cir. 1999), the Sixth Circuit affirmed the district

court's dismissal, in part, for lack of federal question jurisdiction because

Sections 1255, 1282 and 1284 of the Clean Water Act did not provide

plaintiffs with a private right of action.

7

into a state-law cause of action cannot transform their

complaint into one that raises a federal question.

Id. at 777.

Thus, in five cases decided since 1999—Amsouth Bank,

Heydon, Engstrom, TCG Detroit and City of Painesville—the

Sixth Circuit has clearly recognized the- requirement of a

private right of action as a prerequisite to the existence of

federal question jurisdiction. To the extent that Long and

Grable did not require a federal private right of action, they

constitute departures from established law and ignore the

limitations imposed by Merrell Dow.

The Courts of Appeals in ten other circuits’ have joined the

Sixth Circuit in holding that, where violation of a federal

statute is a necessary element of a state law claim, the federal

statute must provide a private remedy for its violation in order

for federal question jurisdiction to exist.

* See, e.g., PCS 2000 LP v. Romulus Telecomms., Inc., 148 F.3d 32, 35

(Ist Cir. 1998) (“{uJnless a federal statute bestows a private right of

action, courts ought to presume that Congress did not intend the statute to

confer federal jurisdiction”); City of Rome, N.Y. v. Verizon Commu-

nications, Inc., 362 F.3d 168, 176 (2nd Cir. 2004); Zubi v. AT&T Corp.,

219 F.3d 220, 223 n.5 (3rd Cir. 2000); Dixon v. Coburg Dairy, Inc., 369

F.3d 811 (4th Cir. 2004) (en banc); Mulcahy v. Columbia Organic Chem.

Co., Inc., 29 F.3d 148, 152 (4th Cir. 1994) (“[ujnder Merrell Dow, if a

federal law does not provide a private right of action, a state law action

based on its violation does not raise a ‘substantial’ federal question’);

Willy v. Coastal Corp., 855 F.2d 1160, 1168 (Sth Cir. 1988) (“Merrell

Dow held that a private federal remedy was a necessary predicate to

determining whether the presence of a federal element in a state-created

cause of action resulted in that cause of action being one which arose

under federal law”); Seinfeld v. Austen, 39 F.3d 761, 764 (7th Cir.

1994)(“[uJnder Merrell Dow, therefore, ‘if federal law does not provide a

private right of action, then a state law action based on its violation

perforce does not raise a “substantial” federal question’”), quoting Utley v.

Varian Assoc., Inc., 811 F.2d 1279, 1283 (9th Cir. 1987); Wander v. Kaus,

304 F.3d 856, 859 (9th Cir. 2002); Nicodemus v. Union Pacific Corp.,

318 F.3d 1231, 1238 (10th Cir. 2003) (since Congress did not intend to

Furthermore, numerous district court decisions within the

Sixth Circuit’ and around the country’ have similarly held

confer federal question jurisdiction over the construction of federal land

grants, “[ujnder Merrell Dow, this absence is fatal”); Dunlap v. G&L

Holdings Group, Inc., 381 F.3d 1285, 1292 (Lith Cir. 2004) (“it is now

well established that federal jurisdiction is not created by the mere fact

that proof of violation of a federal statute is an element of a plaintiff's

state-law cause of action”), citing Merrell Dow, 478 U.S. at 814; Jairath

v. Dver, 154 F.3d 1280, 1284 (11th Cir. 1998); Rogers v. Platt, 814

F.2d 683, 688 (D.C. Cir. 1987). But see Bellsouth Telecomm., Inc. v.

MCI metro Access Transmission Serv., Inc., 278 F.3d 1223, 1234 (11th

Cir. 2002) (interpreting Merre/l Dow to allow for the possibility that there

could be an “exceptional federal statute that does not provide for a private

remedy but still raises a federal question substantial enough to confer

federal jurisdiction when it is an element of a state cause of action”),

quoting City of Huntsville v. City of Madison, 24 F.3d 169, 174 (11th Cir.

1994), Barbara v. New York Stock Exchange, Inc., 99 F.3d 49, 54 (2nd

Cir. 1996) (“the existence vel non of such a private right of action is the

Starting point for our inquiry into the substantiality of the federal

questions involved in a lawsuit”); Howery v. Allstate Insurance Co., 243

F.3d 912, 918 (Sth Cir. 2001).

* See. e.g., Bourke v. Carnahan, 2003 U.S. Dist. LEXIS 13399 at *16

(S.D. Ohio 7-1-03) (if the substantial federal question exception to the

well-pleaded complaint rule survives after Merrell Dow and Beneficial

National Bank v. Anderson, the mere construction of federal statutes as

part of a state law claim, as opposed to an inquiry into the constitu-

tionality of such statutes, “is of insufficient substances to create arising

under, or federal question, jurisdiction warranting removal”); Hunter v.

Ohio Veterans Home, 272 F. Supp.2d 692, 695 (N.D. Ohio 2003) (state

cause of action for breach of contract should be handled by the state

courts of Ohio because the “mere presence of a federal issue in a state

cause of action does not automatically confer federal-question juris-

diction”), quoting Merrell Dow, supra, 478 U.S. at 813; Butts v.

Guardian Industries Corp., 98\ F. Supp. 1062, 1064-65 (N.D. Ohio 1997)

(mere reference to federal statutes in state law claims for relief does not

create federal question jurisdiction).

* Meinders v. Refco Securities, Inc., 865 F. Supp. 721, 723 (D. Colo.

1994) (“Merrell Dow simply stands for the proposition that in the absence

of a federal private right of action, the presence of federal law in a state

law claim is insufficient to establish federal jurisdiction”); Bhagwanani v.

9

that violations of federal law may underlie many state law

causes of action, but will not confer federal jurisdiction if

there is no federal private right of action under the federal

statute at issue. .

Expert commentators have also recognized the vital

importance of a private federal cause of action follow-

ing Merrell Dow. See, e.g., E. Chemerinsky, FEDERAL

JURISDICTION 284-85 (3d ed. 1999) (“without a federal cause

of action, a federal law cannot be the basis for federal

question jurisdiction. ... A great many federal laws do not

create private causes of action.... After Merrell Dow, none

of these statutes can be the basis for federal question

jurisdiction”).

Where defendants have attempted to remove state law

claims arguing that violations of federal tax statutes trans-

formed plaintiffs’ claims into federal ones, courts have

consistently held that no substantial federal question existed

to support removal jurisdiction and have remanded such cases

Howard University, 2005 U.S. Dist. LEXIS 775 at *14 (D.D.C. 1-17-05)

(“{uJnder Merrell Dow, a complaint alleging a violation of federal law as

an element of a state cause of action does not raise a substantial question

of federal law when ‘Congress has determined that there should be no

private, federal cause of action for the violation”), quoting Merrell Dow,

478 U.S. at 818; Loussides v. America Online, Inc., 175 F. Supp.2d 211,

214 (D. Conn. 2001); Neel v. Pippy, 247 F. Supp.2d 707 (E.D. Pa. 2003);

State of Montana v. Abbot Laboratories, 266 F. Supp.2d 250 (D. Mass.

2003); Horowitz v. Marlton, 116 F. Supp.2d 551, 554-55 (D.N.J. 1999),

Savalle v. Nestle Waters North America, Inc., 289 F. Supp.2d 31 (D.

Conn. 2003); Campbell v. SmithKline Beecham, 919 F. Supp. 173, 176

(E.D. Pa. 1996); Jackson v. Purdue Pharma. Co., 2003 U.S. Dist. LEXIS

6998 at 19-20 (M.D. Fla.); Wagner v. Regent Inv., Inc., 903 F. Supp. 966,

969-70 (E.D. Va. 1995); Handyman Network, Inc. v. Westinghouse

Savannah River Co., 868 F. Supp. 151, 154 (D.S.C. 1994); Casey v.

Goulian, 273 F. Supp.2d 136, 138 (D. Mass. 2003); In re Wireless

Telephone Radio Frequency Emissions Products Liab. Litig., 327 F.

Supp.2d 554, 558-59 (D. Md. 2004); In re Wireless Telephone Federal

Cost Recovery Fees Litig.; 343 F. Supp.2d 838, 854 (W.D. Mo. 2004).

10

to state court. For example, in Smith v. Industrial Valley Title

Insurance Co., 957 F.2d 90, 93-94 (3 Cir. 1992), the

plaintiffs filed state law claims alleging violations of Section

6045(e)(3) of the Code. Following Merrell Dow, the Third

Circuit remanded the case to state court because there was no

federal private right of action for a violation of Section

6045(e)(3). Similarly, in Quintal v. New England Regional

Council of Carpenters, 2003 U.S. Dist. LEXIS 16386 (D.

Mass. 9-18-03), the plaintiff sued his former employer in

state court for over-withholding his federal and state income

taxes, and the defendant removed the action to federal district

court. Following Merrell Dow, the district court remanded

the case to state court because the relevant federal tax statutes

did not provide a private right of action against an employer

for wrongfully withholding too much tax. /d. at *4.

In Tempelman vy. Colsia, 2002 U.S. Dist. LEXIS 19037

(D.N.H. 9-26-02), the defendant even attempted to re-

characterize plaintiff's state law quiet title claim as really

being a tax refund suit. The district court disagreed and

remanded the case to state court for lack of federal question

jurisdiction.

Finally, in another recent decision, the Middle District of

Florida likewise held it did not have valid original federal

question jurisdiction where the plaintiff's state law claims

implicated federal tax issues. Jacoboni v. KPMG LLP, 314 F.

Supp.2d 1172, 1181 n.11 (M.D. Fla. 2004) (“[{t}he Court is

unpersuaded that it should allow the state law claims to

remain here [under supplemental jurisdiction] on the asserted

basis that they involve some issues of federal tax law. This

Court is no tax.court. Any such issues can be handled equally

well by a judge of the state court bench. In any event, any

marginally greater familiarity this Court might have with tax

issues is overbalanced by a state court judge’s familiarity

with predominant issues of state law’’).

Therefore, after Merrell Dow as properly understood and

applied, where Congress has not provided a federal private

right of action for the violation of a federal statute, a

complaint alleging such a violation as an element of a state

law cause of action no longer states a claim “arising under”

federal law pursuant to 28 U.S.C. § 1331.°

C. This Court’s Decision in Beneficial National

Bank v. Anderson Removed Any Doubt about

the Elimination of the Substantial Federal

Question Doctrine as a Basis for Removal

Jurisdiction by Holding that, Absent Diversity,

There Are Only Two Ways a State Claim Can

be Removed to Federal Court—Where Con-

gress Expressly Provides or Where Complete

Preemption is Present.

In Beneficial National Bank, this Court reaffirmed the

principle that the mere presence of a federal statute in an

action that seeks relief solely under state law, even one that

“preempts” state law, will mot provide a basis for removal

jurisdiction. 539 U.S. at 7. This Court explicitly held that “a

° Indeed, even when Congress does create a private cause of action for

the violation of a federal law, the lower courts have consistently held that,

“(if a] particular plaintiff is barred from bringing the private, federal cause

of action, either substantively or procedurally, no federal subject matter

jurisdiction exists over that plaintiff's state cause of action predicated on

the violation of the same federal law.” Dixon v. Coburg Dairy, 369 F.3d

at 818; see also Jairath v. Dyer, 154 F.3d at 1283 & n.9 (finding no

federal removal jurisdiction where “a private cause of action under the

|federal statute] is available as an abstract matter,” but “this particular

plaintiff . . . has no standing to pursue the only federal private cause of

action available”); Seinfeld v. Austen, 39 F.3d at 764 n.3 (rejecting

defendant's argument “that federal law need not specifically grant these

plaintiffs a private right of action as long as someone has been granted

such a right in the statute”); Mulcahy v. Columbia Organic Chem. Co., 29

F.3d at 152 (“because the [federal] remedy sought is unavailable here, a

private cause of action under Merrell Dow does not, in truth, exist”).

12

State claim may be removed to federal court in only two

circumstances—when Congress expressly so provides, as in

the Price-Anderson Act, or when a federal statute wholly

displaces the state-law cause of action through complete

preemption.” /d. at 8 (citation and footnote omitted) (em-

phasis supplied).

By emphasizing that, in the absence of diversity, a state

claim may be removed to federal court in only two cir-

cumstances, Beneficial National Bank does for removal

jurisdiction what Merrell Dow effectively accomplished for

original jurisdiction—it eliminates the use of a substantial

federal question, without more, as a basis for federal removal

jurisdiction of a state law claim.

A number of lower courts have similarly understood this

Court’s decision in Beneficial National Bank, but are

obviously seeking explicit guidance from this Court on the

issue. For instance, in the wake of the Beneficial National

Bank decision, the Second Circuit has refused to apply the

substantial federal question doctrine to support removal

jurisdiction. See City of Rome, N.Y. v. Verizon Communi-

cations, Inc., 362 F.3d 168, 176 (2nd Cir. 2004). In Bourke vy.

Carnahan, supra, after canvassing the pre-Beneficial Na-

tional Bank case law and trying to reconcile the Sixth

Circuit’s application of the “uncertain” substantial federal

question exception in Long v. Bando with Merrell Dow and

cases decided by other federal courts, District Judge Frost

concluded that:

Beneficial National Bank apparently resolves much of

the [former] uncertainty that has surrounded the validity

of the substantial federal question exception. Although

only the dissent targeted this point, the Beneficial

National Bank majority effectively reconsidered removal

jurisprudence. By recognizing removal only in cases

13

involving a congressional mandate or complete pre-

emption, the Court arguably eliminated the substantial

federal question exception.

Bourke v. Carnahan, 2003 U.S. Dist. LEXIS 13399 at *10

(S.D. Ohio) (first emphasis in original; second emphasis

supplied). See also Burton v. Southwood Door Company, 305

F. Supp.2d 629, 633 n.4 (S.D. Miss. 2003) (“[wJhether the

presence of a ‘substantial federal question’ in a given case

remains a proper basis for removal would seem somewhat in

doubt in light of the Supreme Court’s declaration in

Beneficial National Bank v. Anderson that ‘a state claim may

be removed to federal court in only two circumstances —

when Congress expressly so provides . . . [or] through

complete preemption’”) (citation omitted).

D. Grable’s Three-Part Analysis Contains Two

More Fundamental Flaws.

Grable sets forth a unique tripartite analysis for federal

question jurisdiction over state law claims: “a federal ques-

tion may arise out of a state law case or controversy if the

plaintiff asserts a federal right that 1) involves a substantial

question of federal law; 2) is framed in terms of state law;

and 3) requires interpretation of federal law to resolve the

case.” Grable, 377 F.3d at 595, citing Long v. Bando, 201

F.3d 754, 759 (6th Cir. 2000); Howery v. Allstate Insurance

Co., 243 F.3d 912, 918 (Sth Cir.), cert. denied, 534 U.S. 993

(2001); and Seinfeld v. Austen, 39 F.3d 761, 763 (7th Cir.

1994), cert. denied sub nom. Abbott Lab. v. Seinfeld, 514 U.S.

1126. The Court in Grable proceeded to conclude that

whether a “substantial question of federal law” is presented in

a state law claim functionally turns on identifying a “sub-

stantial federal interest.” 377 F.3d at 596. As the Sixth

Circuit concluded: “In sum, Grable’s quiet title action

presents a federal question because it is rooted in the Internal

Revenue Code, the correct interpretation of which represents

a substantial federal interest.” /d.

14

There are two additional errors in the Sixth Circuit's

flawed three-part analysis. First, the Seventh Circuit in

Seinfeld v. Austen does not support the holding in Grable; in

fact, on the page following the page cited by the Sixth Circuit

in Grable, the Seventh Circuit in Seinfeld requires, consistent

with the analytical framewerk for which amici argue, the

presence of a federal private right of action in order to find

federal question jurisdiction. See 39 F.3d at 764. Further-

more, although the Howery case is cited correctly, it has been

contradicted by three other Fifth Circuit decisions, two of

which were decided since Howery. See Hoskins v. Bekins

Van Lines, 343 F.3d 769, 772-73 (Sth Cir. 2003); Terrebonne

Homecare, Inc. v. SMA Health Plan, Inc., 271 F.3d 186, 188-

89 (Sth Cir. 2001); Waste Control Specialists, LLC vy.

Envirocare of Texas, Inc., 199 F.3d 781, 784 (Sth Cir. 2000).

All three recent Fifth Circuit decisions hold, consistent with

Beneficial National Bank, that the complete preemption

doctrine is the only exception to the well-pleaded complaint

rule. In Grable, however, the Sixth Circuit apparently labors

under the mistaken belief that the Fifth Circuit accords

continuing vitality to a “substaritial federal question” ex-

ception to the well-pleaded complaint rule.

Second, Grable’s holding that a “substantial federal inter-

est” is sufficient to trigger federal question jurisdiction even

in the absence of a private right cf action has been explicitly

rejected by both the Tenth Circuit and, significantly, an

earlier Sixth Circuit decision. See Nicodemus v. Union

Pacific Corp., 318 F.3d 123i, 1236-38 (10th Cir. 2003)

(although there is substantial federal interest in railroad

rights-of-way, there is no federal jurisdiction without federal

private right of action); Board of Trustees of Painesville

Township v. City of Painesville, 200 F.3d 396, 400 (6th Cir.

1999), citing Musson Theatrical, Inc. v. Federal Express

Corp., 89 F.3d 1244, 1250 (6th Cir. 1996).

15

Inasmuch as the Sixth Circuit in Grable has apparently

misunderstood the import of this Court’s decisions in Merrell

Dow and Beneficial National Bank and stands in conflict with

the overwhelming majority of decisions in eleven federal

appellate circuits, including the Sixth Circuit, further

guidance from this Court as to the correct interpretation and

proper scope of federal “arising under” jurisdiction would be

beneficial, particularly as it relates to removal jurisdiction. If

this Court finds the decision by the Sixth Circuit in this case

to misapprehend or misapply the teachings of Merrell Dow

and Beneficial National Bank undermining the continuing

vitality of the substantial federal question doctrine, and if this

Court concludes that the violation of a federal statute as an

element of a state law cause of action does not support federal

question jurisdiction where Congress has not created a

corresponding federal private right of action, amici respect-

fully submit that the lower courts would benefit from this

Court's further elucidation of the subject.

16

CONCLUSION

The judgment of the Court of Appeals for the Sixth Circuit —

should be reversed.

' Respectfully submitted,

ERIC H. ZAGRANS *

WOMBLE CARLYLE SANDRIDGE

& RICE PLLC

1401 Eye Street, N.W.

Washington, D.C. 20005-2225

(202) 857-4400

THOMAS R. THEADO

GARY, NAEGELE & THEADO

ag 446 Broadway

Lorain, Ohio 44052-1797

(440) 244-4809

DENNIS P. BARRON

P.O. Box 8190

Cincinnati, Ohio 45208

(513) 871-2369

EBEN O. MCNAIR IV

DANIEL S. WHITE

SCHWARZWALD & MCNAIR

616 Penton Media Building

1300 East Ninth Street

Cleveland, Ohio 44114-1503

(216) 566-1600

* Counsel of Record Counsel for Amici Curiae