Amicus Curiae Brief — Lightfoot v. Cendant Mortg. Corp., 136 S. Ct. 289 (2015) (No. 14-1055)

NO oe

. AUG 23 20%

No. 14-1055 OFFICE OF THE CLEFSS

IN THE

Supreme Court of the United States

CRYSTAL MONIQUE LIGHTFOOT, et al.,

Petitioners,

U.

CENDANT MORTGAGE CORPORATION,

D/B/A/ PHH MORTGAGE, et al.,

Respondents.

On Writ of Certiorari to the

United States Courts of Appeals

for the Ninth Circuit

AMICUS CURIAE BRIEF OF THE

AMERICAN ASSOCIATION FOR JUSTICE

IN SUPPORT OF PETITIONERS

Julie Braman Kane Jeffrey R. White

AMERICAN ASSOCIATION Counsel of Record

FOR JUSTICE AMERICAN ASSOCIATION

777 6% Street, N.W. FOR JUSTICE

Suite 200 777 & Street, N.W.

Washington, DC 20001 Suite 200

(202) 965-3500 Washington, DC 20001

(202) 944-2839

jeffrey.white@justice.org

Attorney for Amicus

TABLE OF CONTENTS

TABLE OF AUTHORITIES

TABLE OF CONTENTS

IDENTITY AND INTEREST OF AMICUS

I. The Lower Court’s Inference of Subject

Matter Jurisdiction in a Civil Action

Involving a Congressionally Chartered

Corporation Based Entirely on Congress’

Ambiguous Reference to Federal Courts

Exceeds the Limited Role of Federal

A.

Bare reference in the charter to

federal courts is ambiguous as to

congressional intent to create

subject matter jurisdiction and

does not indicate federal interests

warrenting the availability of a

EL

Congressionally chartered

corporations vary greatly in the

federal interests involved in their

SOCCER EERE HO „„ „„ „ „„ eee eee

2 22 „%%% „%% %„„„ „„ „„ „ „

% — R F R ——fFmPꝙͥ — — FuFnFnW,num e EEE EH HEHEHE HR Hee ee

% e

e PL SONGS SAS TR Oe 10

Congress has reacted to this

Court’s prior expansive view of

federal jurisdiction in cases

involving federally chartered

corporations by limiting

jurisdiction to cases where federal

interests are truly at stake 13

D. Conservation of federal judicial

resources counsels caution in

opening the doors to federal courts

to cases based solely on state law. ...... 19

II. The Lower Court’s Inference of Subject

Matter Jurisdiction in a Civil Action

Involving a Congressionally Chartered

Corporation Based Entirely on Congress’

Ambiguous Reference to Federal Courts

Erodes the Vitally Important Role of

State Courts in Our Federalist System 20

III. This Court Should Extend Its “Clear

Statement” Doctrine to the Purported

Creation of Federal Subject Matter

Jurisdiction in Cases Otherwise

Governed by State Law 24

ee eae — ͤ 27

TABLE OF AUTHORITIES

Cases

Altria Group, Inc. u. Good, 555 U.S. 70 (2008) ........ 26

American National Red Cross v. S.G., 505 U.S.

a 2, 8, 9

Atascadero State Hospital v. Scanlon, 473 U.S.

r — 21. 24

Bank of the United States v. Deveaux, 9 U.S. (5

e a 8,9

Bankers’ Trust Co. v. Texas & Pacific Railway,

EN ER 9

Briglia v. Mondrian Mortgage Corp.,698 A.2d

28 (N. J. Super. Ct. App. Div. 1997)............... 12

Colarte vu. Federal National Mortgage

Assication, 689 A. 2d 869 (N. J. Super. Ct.

D 5 Ee a ee 12,14

Collins v. American Red Cross, 724 F. Supp.

e .. 19

Crum v. Veterans for Foreign Wars, 502 F.

Z EE PI cisececccesccnscenesensseneces 16

CSX Transportation Inc. v. Easterwood, 507

SEES 5 AES 26

iv

Federal Reserve Bank of Atlanta v. Thomas, 220

F. zd 1235 (11th Cir. 2000) . . . .. 18

Garcia v. San Antonio Metropolitan Transit

Authority, 469 U.S. 528 (1985) . 25

Government National Mortgage Association v.

Terry, 608 F.2d 614 (5th Cir. 1979) 16

Gregory v. Ashcroft, 501 U.S. 452 (1991)......20, 21, 25

Gully v. First National Bank, 299 U.S. 109

——T—TTTTT—T—T—T———— 18

Gunn v. Minton, 133 S. Ct. 1059 (2013 11

Healy v Ratta, 292 U.S. 263 (1934)⸗⸗)⸗)⸗)⸗ 17

Kokkonen v. Guardian Life Insurance Co. of

America, 511 U.S. 375 (1994) 11,12

Latch v. Tennessee Valley Authority, 312 F.

Supp. 1069 (N. D. Miss. 1970) ꝗ 16, 20

Lebron v. National Railroad Passenger Corp.,

i ALN 10

Lightfoot u. Cendant Mortgage Corp., 769 F.3d

e 8, 9, 13

Luckett v. Harris Hospital-Fort Worth, 764 F.

2 Se 19

M’Culloch v. Maryland, 17 U.S. (1 Wheat.) 316

UII etch diltedilecapndsensitentanniedisatialslacinmdacsieecuiues 13

Mansfield, C. & L.M.R. Co. v. Swan, 111 U.S.

Dr I I a a Yr eno ee 7

Murdock v. Memphis, 87 U.S. (20 Wall.) 590

TT 24

Murphy v. Colonial Federal Savings & Loan

Association, 388 F.2d 609 (2nd Cir. 1967)

OE RNA TT 16

National League of Cities v. Usery, 426 U.S. 833

%0TT—T———— 24

New State Ice Co. v. Liebmann, 285 U.S. 262

reren 23

New York v. United States, 505 U.S. 144 (1992)

„„FFPPCCGTPTTTPPPPPPTTTT0T0T0T—G—V—T—T—T—T—T—————— 26

Osborn v. Bank of the United States, 22 U.S. (9

JJ... acecccncsceccsscsssccesccossens 3, 13, 14

Pacific Railroad Removal Cases, 115 US. 1

reer 15, 16

Puerto Rico u. Russell & Co., 288 U.S. 476

TTT —— 18

Rice v. Santa Fe Elevator Corp., 331 U.S. 218

r 26

Romero v. Internatioal Terminal Operating Co.,

Z...... 18

Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574

r 7

Shamrock Oil & Gas Corp. v. Sheets, 313 U.S.

rene 17

Steel Co. v. Citizens for Better Environment, 523

EAE RS Re an 7

vi

Turner v. Bank of North America, 4 U.S. (4

Ne icine. ̃ —— —ů ů—ů ů 12

United States v. Bass, 404 U.S. 336 (1971).............. 26

United States v. Lopez, 514 U.S. 549 (1995) 21, 23

Verlinden B.V. v. Central Bank of Nigeria, 461

0 — ͤ— ê 13

Will v. Michigan Department of State Police,

„ bb 24

Statutes

. 17

TTT 8

12 U.S. C. § 18196b 2 Diii) . . 26

. 18

JJ. e 11

TTT 14

„ cc 17

c 16

. —« 17

t 10

? 26

L Oe occsccscncccccnccsessncssscsnsccescesen 11

Act of Jan. 28, 1915, ch. 22, § 5, 38 Stat. 803. 15

Vil

Act of July 12, 1882, ch. 290, § 4, 22 Stat. 162. 15

Judges’ Bill of 1925, 43 Stat. 936 (codified at 28

D ̃ ̃ͤ A2 cpusbnennene 15

Other Authorities

Abrahamson, Shirley S., Reincarnation of State

Courts, 36 Sw. L. J. 951 (1982) 23

Elrod, Jennifer Walker, Don't Mess with Texas

Judges: In Praise of the State Judiciary,

37 Harv. J.L. & Pub. Pol'y 629 (2014) .....22, 23

Elrod, Jennifer Walker, Js the Jury Still Out?:

A Case for the Continued Viability of the

American Jury, 44 Tex. Tech L. Rev. 303

EEE EE 22

Federalist No. 17 (Dec. 5, 1787) 21

Friendly, Henry J., Federal Jurisdiction: A

r 19, 20

Froomkin, A. Michael, Reinventing the

Government Corporation, 1995 U. III. L.

ET AO 10

Kaye, Judith S., Dual Constitutionalism in

Practice and Principle, 61 St. John’s L.

— 23

Service, Congressional or Federal

Charters: Overview and Enduring Issues

F 10

Kosar, Kevin R., Congressional Research

Service, Congressionally Chartered

Vill

Nonprofit Organizations (“Title 36

Corporations”): What They Are and How

Congress Treats Them (July 14, 2008)........... 11

Linde, Hans A., First Things First:

Rediscovering the States’ Bills of Rights,

9 U. Balt. L. Rev. 379 (1980) 23

Lund, Paul E., Federally Chartered

Corporations and Federal Jurisdiction,

36 Fla. St. U. L. Rev. 317 (2009).................... 11

Maloan, Michael T., Federal Jurisdiction and

Practice: The American National Red

Cross and the Interpretation of “Sue and

Be Sued” Clauses, 45 Okla. L. Rev. 739

Manning, John F., Clear Statement Rules and

the Constitution, 110 Colum. L. Rev. 399

e. ee 26

Mosk, Stanley, State Constitutionalism: Both

Liberal and Conservative, 63 Tex. L.

F . s.. 23

O Connor, Sandra Day, Trends in the

Relationship Between the Federal and

State Courts from the Perspective of a

State Court Judge, 22 Wm. & Mary L.

F crceniseennaiacabibiianinmemens 23

Pollock, Stewart G., Adequate and Independent

State Grounds as a Means of Balancing

the Relationship Between State and

Federal Courts, 63 Tex. L. Rev. 977

RSL ESET: EA sD, Ce ae 23

ix

Shaw, Lorretta, A Comprehensive Theory of

Protective Jurisdiction: The Missing

“Ingredient” of “Arising Under”

Jurisdiction, 61 Fordham L. Rev. 1235

Shepard, Randall T., The Maturing Nature of

State Constitution Jurisprudence, 30

. 4:8 4 EES Ce 23

Shulman, Harry & Edward C. Jaegerman,

Some Jurisdictional Limitations on

Federal Procedure, 45 Yale L.J. 393

Sloviter, Dolores K., A Federal Judge Views

Diversity Jurisdiction Through the Lens

of Federalism, 78 Va. L. Rev. 1671 (1992)

„TTT 22

Tribe, Laurence H., American Constitutional

e 25, 27

Utter, Robert F., The Practice of Principled

Decision- mahing in State

Constitutionalism: Washington's

Experience, 65 Temp. L. Rev. 1153 (1992)

„ 23

Wright, C., A. Miller & E. Cooper, Federal

Practice & Procedure (Rev. ed. 1971). 22

Wright, J. Skelly, In Praise of State Courts:

Confessions of a Federal Judge, 11

Hastings C~nst. L. Q. 165 (1984)................... 21

Young, Ernest A., State Sovereign Immunity

and the Future of Federalism, 1999 Sup.

a 25

Rules

e 7

e EE ee ae 1

IDENTITY AND INTEREST OF AMICUS

CURIAE

The American Association for Justice (“AAJ”)

respectfully submits this brief as amicus curiae in

support of the Petition for Certiorari in this case.! AAJ

is a voluntary national bar association whose

members primarily represent plaintiffs in personal

injury and property rights cases, as well as plaintiffs

in civil rights, employment rights, and consumer

rights actions.

Some clients of AAJ members have state law

causes of action against federally chartered

corporations and seek to pursue those claims in state

courts. AAJ is concerned that lower court’s decision in

this case will allow federally chartered defendants to

override the plaintiff's choice of the state court forum

based on the federal charter with little or no evidence

that Congress actually intended that result. Removal

of such actions by federally chartered corporations

and the attendant litigation regarding subject matter

jurisdiction makes representation of clients more

difficult and adds unnecessary complexity and

expense to the vindication of state law rights.

SUMMARY OF ARGUMENT

1. The lower court's bright-line rule

inferring subject matter jurisdiction in a case

All parties have consented to the filing of this amicus

curiae brief, and copies of the emails granting consent have been

filed with the Clerk. The undersigned counsel for amicus curiae

affirms, pursuant to Supreme Court Rule 37.6, that no counsel

for a party authored this brief in whole or in part and no person

or entity other than AAJ, its members, and its counsel

contributed monetarily to the preparation or submission of this

brief.

involving a congressionally chartered corporation,

based entirely on a reference to federal courts in the

charter, is inconsistent with the role of federal courts.

Federal courts are courts of limited jurisdiction. The

requirement that a federal court be certain of its own

subject matter jurisdiction is of fundamental

importance. Plaintiffs in this case assert claims

against Fannie Mae that are based entirely on state

statutory and common-law causes of action. The court

of appeals below held that the district court had

subject matter jurisdiction in this case based on a

provision in Fannie Mae’s congressional charter that

authorizes Fannie Mae “to sue and be sued in any

court of competent jurisdiction, State or Federal.”

That provision expressly addresses no more

than Fannie Mae’s authority capacity to sue and is, at

best, ambiguous as to whether Congress meant also to

expand the original jurisdiction of district courts to

actions that otherwise belong in state courts. The

Ninth Circuit below, however, discerned in American

National Red Cross v. S.G., 505 U.S. 247 (1992), a

bright line rule that the bare mention of federal courts

in the sue-and-be-sued provision suffices to create

federal subject matter jurisdiction. However, Red

Cross stated that such a reference maybe read to

confer federal court jurisdiction, not that it was alone

sufficient. The mere mention of federal courts—

without clarifying indicators such statutory text,

legislative history, or a meaningful federal interest—

is too opaque to show congressional intent to expand

jurisdiction.

Nor is it plausible that Congress would use

such an ambiguous and indirect means to expand

federal court jurisdiction. The many federally

chartered corporations engage in widely diverse

activities that may or may not implicate federal

interests. Some are owned in whole or in part by the

United States. Government Sponsored Enterprises,

including Fannie Mae and Freddie Mac, are privately

owned but perform quasi-governmental functions.

Finally, Congress has chartered over 100 charitable

and nonprofit organizations, most of which do not

engage in governmental or quasi-governmental

activities at all. A court must not grasp at a reference

to federal courts in the federal charter to infer that

Congress intended to guarantee easy access to federal

court in any case involving such a corporation.

The court below relied on Osborn v. Bank of the

United States, 22 U.S. (9 Wheat.) 738 (1824). But that

case involved a direct attack on the national bank by

a hostile state government where state courts could

not be relied on to protect federal interests. In the case

before this Court, a private corporation faces state law

claims by private individuals, a dispute in which state

courts can be counted on to administer justice fairly.

Indeed, when this Court extended Osborn to purely

private state-law disputes, Congress intervened by

limiting automatic jurisdiction over congressionally

chartered corporations to cases where the United

States owns more than halt the corporation’s capital

stock. Congress has clearly eresed any presumption

favoring federal jurisdiction in cases involving federal

corporations. It is instead the responsibility of the

federal judicial branch to avoid intrusion into state

authority except where clearly authorized by

Congress.

Additionally, Congress has by now

demonstrated that it is fully capable of expressly

conferring jurisdiction when it deems the federal

interest so requires. In fact, Congress has done so in

the charter for Freddie Mac. That Congress did not

similarly extend federal court jurisdiction in favor of

Fannie Mae strongly indicates congressional

intention to preclude federal court involvement in

such actions where federal law does not provide the

rule of decision.

As a practical matter as well, courts should

avoid inviting an influx of state law cases into federal

court unless Congress clearly so intended. Federal

courts possess no particular expertise in matters of

state law and their resources are required to attend to

matters that only federal courts can handle or that

they handle better thet state courts.

2. Implying federal subject matter

jurisdiction over cases that would otherwise be

decided by state courts undermines the vital role of

state courts in our federalist system. The Founders

designed our system of dual sovereigns to afford the

greatest protections to the rights end freedoms of the

American people. State government can be more

responsive to local needs, more accessible to citizen

participation, and can serve as “laboratories” in social

policy.

State courts play an essential role. They are the

primary administrators of criminal and civil justice,

the immediate and visible guardians of life and

property, and defenders of civil liberties. Indeed, state

courts have made significant advances in the securing

of state constitutional protections that are different

from or broader than those guaranteed by the United

States Constitution. State courts are also more

reflective of and responsive to the concerns of ordinary

citizens due to their broader reliance on trial by jury.

The decision below, however, has the effect of

ousting state courts from their responsibility to

administer justice in a significant class of cases based

entirely on state law, with no showing that

meaningful federal interests warrant such an

intrusion. Even assuming that the federal court

correctly applies state law, the outcome is one decided

by judges not selected under the state’s system, who

are not accountable to the state court’s constituency,

and who do not speak with the authority of the

sovereign state on a matter of state law.

To the extent that state courts are deprived of

opportunities to develop state-law protections of

personal rights and property rights, the advantages of

federalism are thwarted.

3. This Court has already crafted a tool

that protects the role and responsibility of state courts

in the federal system. The clear statement rule

requires simply that if Congress intends to alter the

usual constitutional balance between the states and

the federal government, it must make its intent clear.

Obviously, the actions of Congress may impact

the integral functions of state government, including

state courts. This Court has retreated from judicially

enforced textual protection of state sovereignty under

the Tenth Amendment. Rather, the Court has relied

on the structural safeguards inherent in the

constitutional design: The states can protect their

interests through their representation in Congress.

The necessary corollary is that when Congress

takes an action that intrudes upon state functions,

Congress must speak plainly and unambiguously. In

this way, the states are provided fair notice that

legislation affecting their interests is before the

Congress, affording them the opportunity to oppose or

alter unwanted intrusion into state sovereignty. It

also ensures that congressional representatives

consider the proposed legislation’s impact on the

states. And it allows the judicial branch, in

interpreting legislation, to avoid unintended

encroachments on the authority of the States.

The decision below found an implied expansion

of federal subject matter jurisdiction based on an

ambiguous statutory reference to federal courts in

Fannie Mae’s congressional charter. The court’s rule

evades the very structural protections that this Court

has relied upon to safeguard federalism. Congress has

shown it can speak clearly when creating original

jurisdiction over federally chartered corporations.

This Court should require such a clear statement.

ARGUMENT

I. The Lower Court’s Inference of Subject

Matter Jurisdiction in a Civil Action

Involving a Congressionally Chartered

Corporation Based Entirely on Congress’

Ambiguous Reference to Federal Courts

Exceeds the Limited Role of Federal

Courts.

A. Bare reference in the charter to

federal courts is ambiguous as to

congressional intent to create

subject matter jurisdiction and does

not indicate federal interests

warranting the availability of a

federal forum.

The requirement that a federal court be certain

as to its own subject matter jurisdiction is a matter of

fundamental importance. “Jurisdiction is power to

declare the law,” and without it, “the court cannot

proceed at all in any cause.” Steel Co. v. Citizens for

Better Environment, 523 U.S. 83, 94 (1998) (quoting

Ex parte McCardle, 7 Wall. 506, 514 (1868)). Subject

matter jurisdiction and personal jurisdiction “keep

the federal courts within the bounds the Constitution

and Congress have prescribed.” Ruhrgas AG v.

Marathon Oil Co., 526 U.S. 574, 583 (1999).

Therefore, the requirement that jurisdiction be

established as a threshold matter “is inflexible and

without exception.” 523 U.S. at 95 (quoting Mansfield,

C. & L.M.R. Co. v. Swan, 111 U.S. 379, 382 (1884)).

See also Fed. R. Civ. P. 12(hX3) (“If the court

determines at any time that it lacks subject-matter

jurisdiction, the court must dismiss the action.”).

Plaintiffs in this case assert claims against the

Federal National Mortgage Association (“Fannie

Mae”), that are based entirely on state statutory and

common-law causes of action. See Compl., “Fraud and

Deceit,” 11 33-40; “Racial Discrimination” in violation

of Cal. Civ. Code § 51 (“Unruh Act”), Compl. 11 41-47;

“Fraud and Quiet Title,” in violation of Cal. Civ. Code

2294, Compl. 11 48-59; “Slander of Title,” Compl. 11

60-64; “Negligent Misrepresentation,” Compl. 11 65-

71; “Civil Conspiracy,” Compl. 11 72-75; and

“Intentional Infliction of Emotional Distress,” Compl.

11 76-82. The court of appeals below nevertheless

held that the district court had subject matter

jurisdiction in this case based on a provision in Fannie

Mae’s charter that authorizes Fannie Mae “to sue and

be sued, and to complain and to defend, in any court

of competent jurisdiction, State or Federal.” Lightfoot

v. Cendant Mortgage Corp., 769 F.3d 681, 683 (9th

Cir. 2014) (quoting 12 U.S.C. § 1723a(a)).

That charter provision expressly addresses no

more than Fannie Mae’s capacity to sue and “no right

is conferred on the [corporation] by the act of

incorporation, to sue in the federal courts.” Bank of the

United States v. Deveaux, 9 U.S. (5 Cranch) 61, 86

(1809). The Ninth Circuit, however, discerned ix this

Court’s decision in American National Red Cross v.

S.G., 505 U.S. 247 (1992), a bright line rule:

In Red Cross, the Supreme Court gave us

a clear rule for construing sue-and-be-

sued clauses for federally chartered

corporations. The Court held that “a

congressional charter’s ‘sue and be sued’

provision may be read to confer federal

court jurisdiction if, but only if, it

specifically mentions the federal courts.”

769 F.3d at 683 (quoting Red Cross, 505 U.S. at 255).

InRed Cross,this Court concluded from its

comparison of the charters in Deveaux, 9 U.S. at 85;

Bankers’ Trust Co. v. Texas & Pacific Railway, 241

U.S. 295, 304-05 (1916); and D’Oench, Duhme & Co. v.

FDIC, 315 U.S. 447, 455 (1942), that “a congressiona!

charter’s ‘sue and be sued’ provision may be read to

confer federal court jurisdiction if, but only if, it

specifically mentions the federal courts.” 505 U.S. at

255 (emphasis added). This Court did not state that a

bare reference to federal courts was itself sufficient to

confer new subject matter jurisdiction on federal

courts. Indeed, Justice Souter, writing for the Red

Cross majority, proceeded to inquire from the

legislative history of the Red Cross charter whether

Congress had in fact intended to create federal

jurisdiction. The Court ultimately rejected

respondents’ more limited view. Jd. at 260-63. Justice

Souter’s exercise would have been wholly superfluous

and unnecessary if the Court had in fact established a

bright line rule.

The court below, by contrast, undertook no

inquiry into the intent of Congress regarding Fannie

Mae’s charter. Indeed, the court’s only reference to

legislative intent was to state that there was “no

indication that Congress intended to eliminate federal

question jurisdiction in 1954. Instead, there was

silence.” 769 F.3d at 685.

The lower court determined that Red Cross

established a “rule” that “suffices to confer federal

jurisdiction” simply by use of the term “federal” court.

Lightfoot, 769 F.3d at 684. See also id. at 690 (Stein,

J., dissenting) (stating that the majority applied a rule

of “automatic federal subject matter jurisdiction”).

10

The Solicitor General has ably demonstrated that the

text and legislative history of Fannie Mae’s charter do

not support such a bright-line rule and do not support

subject matter jurisdiction in this case. Br. for the

United States as Amicus Curiae on Pet. for Certiorari

11-17.

Such a bright-line rule is opaque as to

congressional intent to expand the subject matter

jurisdiction of federal courts, and it is also opaque as

to any federal interests that might be at stake which

might have persuaded Congress to make a federal

forum available.

B. Congressionally chartered

corporations vary greatly in the

federal interests involved in their

activities.

This Court in Lebron v. Nat'l R.R. Passenger

Corp., 513 U.S. 374 (1995), reviewed in detail “the

long history of corporations created and participated

in by the United States for the achievement of

governmental objectives.” Jd. at 386 & 387-91. Well

over 100 federally chartered corporations are tasked

with widely diverse activities. See generally Kevin R.

Kosar, Congressional Research Service,

Congressional or Federal Charters: Overview and

Enduring Issues (Apr. 19, 2013), available at

https://www.fas.org/sgp/crs/misc/RS22230. pdf; A.

Michael Froomkin, Reinventing the Government

Corporation, 1995 U. III. L. Rev. 543, 555-57 (1995).

Some are owned in whole or in part by the

federal government. See 31 U.S.C. § 9101 (listing 28

such “government corporations”). In addition, seven

Government Sponsored Enterprises (“GSEs”),

11

including Fannie Mae and Freddie Mac, are privately

owned but perform quasi-governmental functions.”

Paul E. Lund, Federally Chartered Corporations and

Federal Jurisdiction, 36 Fla. St. U. L. Rev. 317, 324

(2009); see 12 U.S.C. §§ 4501-4642 (detailing the

powers of GSE’s). Finally, Congress has chartered

over 100 charitable and nonprofit organizations,

including the American Red Cross and the Little

League, that do not engage in governmental or quasi-

governmental activities at all. See 36 U.S.C. §§ 10101-

240112; Kevin R. Kosar, Congressional Research

Service, Congressionally Chartered Nonprofit

Organizations (“Title 36 Corporations”): What They

Are and How Congress Treats Them (July 14, 2008).

The number and types of federally chartered

corporations will likely expand. Proposals to federally

charter insurance companies, securities firms, and

financial services companies have been discussed in

Congress. Lund, supra, at 325.

It is simply implausible that Congress would

use a charter provision that expressly authorizes a

corporation to sue or be sued to implicitly expand the

jurisdiction of the federal courts. It is doubly

implausible that Congress would telegraph such a

fundamentally important change by the oddly indirect

reference to federal courts in a provision that

addresses the authority of the corporation, not the

authority of the federal courts.

Federal district courts are “courts of limited

jurisdiction,’ possessing ‘only that power authorized

by Constitution and statute.” Gunn v. Minton, 133 S.

Ct. 1059, 1064 (2013) (quoting Kokkonen v. Guardian

Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)). An

action is presumed to lie outside this limited

jurisdiction. Kokkonen, 511 U.S. at 377 (citing Turner

12

v. Bank of N. Am., 4 U.S. (4 Dall.) 8, 11 (1799)), and

the “burden of establishing the contrary rests upon

the party asserting jurisdiction.” Id.

Amicus submits that courts may not infer

federal jurisdiction over a congressionally chartered

corporation based on a bare reference to federal courts

“unless [the] case implicates a meaningful federal

interest.” Lorretta Shaw, A Comprehensive Theory of

Protective Jurisdiction: The Missing “Ingredient” of

“Arising Under” Jurisdiction, 61 Fordham L. Rev.

1235, 1237 (1993). The fact that Congress referred to

federal courts in the sue-or-be-sued provision in

Fannie Mae’s charter by Congress does not establish

such a federal interest that a federal forum must be

available for any state-law dispute to which Fannie

Mae is a party. Indeed, there are many such cases that

do not implicate federal interests at all. See,

e.g.,Colarte v. Fed. Natl Mortg. Ass’n, 689 A.2d 869

(N.J. Super. Ct. Law Div. 1996), overruled on other

grounds, Briglia v. Mondrian Mortg. Corp.,698 A.2d

28 (N.J. Super. Ct. App. Div. 1997) (negligence action

under state law by injured pedestrian who fell on a

snow-covered sidewalk adjacent to property owned by

Fannie Mae). It should be the corporation’s burden on

removal to show either that Congress expressly

granted original jurisdiction in district court over

actions to which the corporation is a party, or that a

“meaningful federal interest” is at stake in the case,

supporting a finding that Congress intended to make

the federal forum available.

13

C. Congress has reacted to this Court’s prior

expansive view of federal jurisdiction in

cases involving federally chartered

corporations by limiting jurisdiction to

cases where federal interests are truly at

stake.

The court below viewed Osborn v. Bank of the

United States, 22 U.S. (9 Wheat.) 738 (1824), as the

seminal decision that “made clear that a sue-and-be-

sued clause for a federally chartered corporation

confers federal question jurisdiction if it specifically

mentions federal courts.” Lightfoot, 769 F.3d at 683.

In Osborn, Chief Justice John Marshall broadly

declared that, because the Bank of the United States

could only sue as authorized by its congressionally-

enacted charter, any such suit “literally, as well as

substantially” arises under the laws of the United

States for purposes of Article III. Osborn, 22 U.S. at

823. This Court has noted that Osborn “reflects a

broad conception of ‘arising under’ jurisdiction” that

has since been questioned. Verlinden B.V. v. Cent.

Bank of Nigeria, 461 U.S. 480, 492-93 (1983). Amicus

suggests that the context of the controversy facing

Chief Justice Marshall in Osbornindicates that

Osborn should not dictate the proper scope of federal

jurisdiction in this case.

In Osborn,the state of Ohio, defying this

Court’s decision in M’Culloch v. Maryland, 17 U.S. (1

Wheat.) 316 (1819), levied a ruinous annual tax on the

second National Bank. State officials seized some

$100,000 from the Bank’s office in Chillicothe, Ohio.

Osborn, 22 U.S. at 832-36. The Bank sued the state

officials in federal court, seeking to recover the seized

funds and enjoin the collection of the tax, alleging that

14

the seizure violated the federal Constitution. Id. at

859-60.

At that time there was no general authorization

for federal courts to hear cases arising under federal

law. Congress first authorized general federal

question jurisdiction in the Judiciary Act of 1875, now

codified as amended at 28 U.S.C. § 1331. Yet, the

Bank of the United States “was sadly in need of a

federal haven for its litigation.” Harry Shulman &

Edward C. Jaegerman, Some _ Jurisdictional

Limitations on Federal Procedure, 45 Yale L.J. 393,

405 (1936). “The Government was interested as an

owner in the Bank and the Bank was performing

governmental service [but] the Bank was the object of

great popular hatred and of measures of reprisal by

many state legislatures. Id. See also Michael T.

Maloan, Federal Jurisdiction and Practice: The

American National Red Cross and the Interpretation

of “Sue and Be Sued” Clauses, 45 Okla. L. Rev. 739,

759 (1992) (The Bank “was the subject of much hatred

from local populations and state legislatures . . land]

needed the security of a federal forum.”). As Daniel

Webster argued to the Court, the “constitution itself

supposes that [state judicial systems] may not always

be worthy of confidence, where the rights and

interests of the national government are drawn in

question.” 22 U.S. (9 Wheat.) at 811.

Fannie Mae does not face those historical

exigencies. The corporation is not facing hostile state

governments eager to use state courts to block the

federal government’s actions and drain its funds.

Fannie Mae faces private citizens asserting causes of

action under state law. There is no good reason why a

case stemming from a fall on a snowy sidewalk, see

Colarte, supra, or a foreclosure of real property in

15

violation of state law, should require a federal forum.

What Chief Justice Marshall deemed essential to

preserve the federal government's interest from

covetous state governments should not be wrenched

out of context to accomplish an unnecessary

expansion of federal subject matter jurisdiction in a

state-law cause of action between private parties.

In fact, Congress itself acted to correct what it

perceived as judicial overreaching regarding federal

jurisdiction. In Pacific Railroad Removal Cases, 115

U.S. 1 (1885), this Court, relying on Osborn’s broad

view of “arising under” jurisdiction, held that any

claim against a federally chartered corporation

necessarily arose under federal law and could

therefore be removed to federal court. Jd. at 14.

The ensuing years witnessed a flood of cases

involving federally chartered corporations asserting

ordinary state-law claims in the federal courts or

removing such claims from state courts. Alarmed,

Congress took steps to relieve the federal courts’

workload by restricting subject matter jurisdiction

over such cases. In 1882, Congress eliminated

automatic federal question jurisdiction in cases

involving national banks. Act of July 12, 1882, ch. 290,

§ 4, 22 Stat. 162, 163. In 1915, Congress eliminated

automatic federal question jurisdiction over suits

involving federally chartered railroads. Act of Jan. 28,

1915, ch. 22, § 5, 38 Stat. 803, 805. Finally, Congress

enacted the Judges’ Bill of 1925, 43 Stat. 936, 941,

now codified at 28 U.S.C. § 1349, which eliminated

automatic federal question jurisdiction for all other

federally chartered corporations, except those in

which the federal government owns a controlling

16

interest.? See Gov't Nat'l Mortgage Ass’n v. Terry, 608

F.2d 614, 620-21 n.10 (5th Cir. 1979) (“[Sjection 1349

was passed to diminish the flood of federal litigation

that resulted from the Pacific Railroad Removal

Cases.”); Murphy v. Colonial Fed. Savings & Loan

Ass'n, 388 F.2d 609, 611-12 (2nd Cir. 1967) (purpose

of § 1319 was to stem “the flood of litigation to which

the federal courts were . . . subjected” as a result of the

decision in Pacific Railroad Removal Cases); Crum v.

Veterans for Foreign Wars, 502 F. Supp. 1377 (D. Del.

1980) (the purpose of § 1319 was to lighten the case

load of the federal courts); Latch v. Tenn. Valley Auth.,

312 F Supp. 1069, 1073 (N.D. Miss. 1970) (same).

Thus, in the case of government-chartered

corporations that are wholly or partially owned by the

federal government, where the federal interest in

litigating in a federal forum would be clear, Congress

has limited original jurisdiction of federal courts to

those cases where the interest of the United States is

strongest. Expanding federal jurisdiction by

implication could no longer be deemed consistent with

congressional intent. Chief Justice Stone observed,

that it is instead the responsibility of the federal

judicial branch to avoid intrusion into state authority

except where clearly authorized by Congress:

The power reserved to the states under

the Constitution to provide for the

2 28 U.S.C. § 1349 provides:

The district courts shall not have jurisdiction of

any civil action by or against any corporation

upon the ground that it was incorporated by or

under an Act of Congress. unless the United

States is the owner of more than one-half of its

capital stock.

17

determination of controversies in their

courts, may be restricted only by the

action of Congress in conformity to the

Judiciary Articles of the Constitution.

Due regard for the rightful

independence of state governments,

which should actuate federal courts,

requires that they scrupulously confine

their own jurisdiction to the precise

limits which the statute has defined.”

Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100,

108-09 (1941) (quoting Healy v Ratta, 292 U.S. 263,

270 (1934)).

A second reason against implying a grant of

subject matter jurisdiction in Congress’ oblique

reference to federal courts is one that was not

available to Chief Justice Marshall: Congress has

already demonstrated that it is fully capable of

expressly conferring jurisdiction when it deems the

federal interest so requires.

For example, 28 U.S.C. § 1345 expressly

provides for original jurisdiction in the district courts

for suits by federal agencies, and 28 U.S.C. §

1442(aX1) authorizes such agencies to remove state

court actions to U.S. district court. Congress has also

provided that certain federally created entities shall

be deemed federal agencies for purposes of original

jurisdiction and removal under those statutes. One

such agency is the Federal Home Loan Mortgage

Corporation (“Freddie Mac”), a GSE like Fannie Mae.

See 12 U.S.C. § 1452(f) (Actions against Freddie Mac

“shall be deemed to arise under the laws of the United

States, and the district courts of the United States

18

shall have original jurisdiction of all such actions.)

The fact that Congress did not extend similar federal

court jurisdiction in favor of Fannie Mae strongly

indicates congressional intention to preclude federal

court involvement in such actions where federal law

does not provide the rule of decision.

Justice Cardozo has stated, based on Congress’

reaction, that Osborn’s broad pronouncement

regarding federal jurisdiction was no longer a guiding

principle. Gully v. First Nat'l Bank, 299 U.S. 109, 113

(1936). Indeed, this Court has come to regard the

Pacific Railroad Removal Cases as

“unfortunate.” Romero v. Int'l Terminal Operating

Co., 358 U.S. 354, 379 n.50 (1959).

Instead, this Court stated that in ascertaining

federal jurisdiction in such cases “the federal nature

of the right to be established is decisive—-not the

source of the authority to establish it.” Gully, 299 U.S.

at 114 (quoting Puerto Rico uv. Russell & Co., 288 U.S.

476, 483 (1933)). The proper inquiry for a federal court

The congressional authorization for the Federal

Reserve similarly provides:

[Alll suits of a civil nature at common law or in

equity to which any Federal Reserve bank shall

be a party shall be deemed to arise under the

laws of the United States, and the district courts

of the United States shall have original

jurisdiction of all such suits.

12 U.S.C. § 632. That provision expressly extends the district

court’s jurisdiction to state law causes of action. Fed. Reserve

Bank of Atlanta v. Thomas, 220 F.3d 1235, 1244 (11th Cir. 2000).

Creating federal jurisdiction by implication from an ambiguous

reference in the charter is unwarranted where Congress has

shown it can speak explicitly and directly.

19

on the question of subject matter jurisdiction is not

simply whether Congress mentioned federal courts in

the “sue or be sued clause,” but whether the statutory

text or legislative history indicate that Congress

recognized that meaningful federal interests

warranted the availability of a federal forum for state-

law causes of action.

D. Conservation of federal judicial resources

counsels caution in opening the doors t.

federal courts to cases based solely on

state law.

This principle also serves very pragmatic

concerns.As one commentator explained, “Federal

dockets are overcrowded, and the last thing federal

judges need is to be further saddled with cases

grounded entirely on state law.” Maloan, supra, at

760. See also Luckett v. Harris Hosp.-Fort Worth, 764

F. Supp. 436, 441 (N.D. Tex. 1991) (expressing

concerns that broader federal jurisdiction for

congressionally chartered corporations would open a

“floodgate” of state law cases); Collins v. Am. Red

Cross, 724 F. Supp. 353, 358 (E.D. Pa. 1989) (similar).

The influx of such cases diverts federal judicial

resources needed for federal law issues to preside over

actions based purely on state law in which district

courts possess no particular expertise. As Judge

Friendly warned, the federal judicial branch must

guard against “diversion of judge-power urgently

needed for tasks which only federal courts can handle

or which, because of their expertise, they can handle

significantly better than the courts of a state.” Henry

J. Friendly, Federal Jurisdiction: A General View 141

(1973). As one district judge has stated:

20

This court is not convinced, however,

that federal district courts should

automatically hear all cases in which

federal law is remotely, if at all, involved.

Such a rule would convert the federal

district court from a court of limited

jurisdiction, carefully defined by

Congress, to a court of general

jurisdiction hearing many cases in which

state law would predominate.

Latch, 312 F. Supp. at 1076.

Perhaps more important for the interests of

justice is the obvious fact that federal courts are not

experts in state law. As aptly stated by Judge

Friendly, “All such cases [in which state law is

unclear] are pregnant with the

injustice.” Friendly, supra, at 143.

II.

The Lower Court’s Inference of Subject

Matter Jurisdiction in a Civil Action

Involving a Congressionally Chartered

Corporation Based Entirely on Congress’

Ambiguous Reference to Federal Courts

Erodes the Vitally Important Role of State

Courts in Our Federalist System.

In Gregory v. Ashcroft, 501 U.S. 452 (1991),

Justice O’Connor’s majority opinion featured a

compelling essay on the on the importance of

preserving the states’ role:

This federalist structure of joint

sovereigns preserves to the people

numerous advantages. It assures a

decentralized government that will be

more sensitive to the diverse needs of a

possibility of

21

heterogeneous society; it increases

opportunity for citizen involvement in

democratic processes; it allows for more

innovation and experimentation in

government; and it makes government

more responsive by putting the States in

competition for a mobile citizenry.

Id. at 458. She added that the “constitutionally

mandated balance of power’ between the States and

the Federal Government was adopted by the Framers

to ensure the protection of ‘our fundamental

liberties,” Jd. (quoting Atascadero State Hosp. v.

Scanlon, 473 U.S. 234, 242 (1985)). Thus, “a healthy

balance of power between the States and the Federal

Government will reduce the risk of tyranny and abuse

from either front.” Id. See United States v. Lopez, 514

U.S. 549, 552 (1995) (citing Gregory as setting forth

the “first principles” of federalism).

State courts play an essential role in this plan.

The Founders gave to the states “the one transcendent

advantage [of] the ordinary administration of criminal

and civil justice.” Federalist No. 17 (Dec. 5, 1787)

(Alexander Hamilton). A state court is “the immediate

and visible guardian of life and property.” Jd. Indeed,

state courts have served the “historic role as the

primary defenders of civil liberties and equal rights.”

J. Skelly Wright, In Praise of State Courts:

Confessions of a Federal Judge, 11 Hastings Const. L.

Q. 165, 188 (1984).

The decision below, however, has the effect of

ousting state courts from their responsibility to

administer justice in causes of action based entirely

on state law, with no showing that meaningful federal

interests warrant such an intrusion. The Chief Judge

of the Third Circuit has pointed out that federal court

adjudication of state law claims results in

“unavoidable intrusion of the federal courts in the

lawgiving function of state courts.” Dolores K.

Sloviter, A Federal Judge Views Diversity Jurisdiction

Through the Lens of Federalism, 78 Va. L. Rev. 1671,

1675 (1992). She stated convincingly,

When federal judges make state law—

and we do, . . judges who are not

selected under the state’s system and

who are not answerable to its

constituency are undertaking an

inherent state court function.

Id. at 1687. Seealso 13 C. Wright, A. Miller & E.

Cooper, Federal Practice & Procedure § 3502 (Rev. ed.

1971) (“{E]xpansion of the jurisdiction of the federal

courts diminishes the power of the states.”).

Former Colorado Supreme Court Justice

Rebecca Love Kourlis wisely observed: “For most

Americans, Lady Justice lives in the halls of state

courts,” quoted in Jennifer Walker Elrod, Don’t Mess

with Texas Judges: In Praise of the State Judiciary, 37

Harv. J.L. & Pub. Pol’y 629, 635 (2014).

One reason state courts are more reflective of

and responsive to the concerns of ordinary citizens is

their broader reliance on the jury, which John Adams

called “the heart and lungs of liberty.” Jennifer

Walker Elrod, Is the Jury Still Out? A Case for the

Continued Viability of the American Jury, 44 Tex.

Tech L. Rev. 303, 308 (2012). “(Sjtate courts

conduct[Jabout 46,200 civil jury trials per year. By

contrast, the federal courts conduct [only] about 2,100

23

civil jury trials per year.” Elrod, Don’t Mess with Texas

Judges, supra, at 638.

State courts are fully capable of protecting the

rights of their citizens. Indeed, one of the most

significant advances in the past half century in the

securing of individual protections has been the

rejuvenation of state constitutional rights that are

different from or broader than those guaranteed by

the Constitution of the United States, a development

that many state supreme court justices have

celebrated. See, eg., Shirley S. Abrahamson,

Reincarnation of State Courts, 36 Sw. L.J. 951 (1982);

Judith S. Kaye, Dual Constitutionalism in Practice

and Principle, 61 St. John’s L. Rev. 399 (1987); Hans

A. Linde, First Things First: Rediscovering the States’

Bills of Rights, 9 U. Balt. L. Rev. 379 (1980); Stanley

Mosk, State Constitutionalism: Both Liberal and

Conservative, 63 Tex. L. Rev. 1081 (1985); Sandra Day

O'Connor, Trends in the Relationship Between the

Federal and State Courts from the Perspective of a

State Court Judge, 22 Wm. & Mary L. Rev. 801 (1981);

Stewart G. Pollock, Adequate and Independent State

Grounds as a Means of Balancing the Relationship

Between State and Federal Courts, 63 Tex. L. Rev. 977

(1985); Randall T. Shepard, The Maturing Nature of

State Constitution Jurisprudence, 30 Val. U. L. Rev.

421 (1996); Robert F. Utter, The Practice of Principled

Decision-making in State Constitutionalism:

Washington’s Experience, 65 Temp. L. Rev. 1153

(1992).

Additionally, a celebrated value of federalism is

the ability of states to serve as “laboratories” in social

policy. See Lopez, 514 U.S. at 581 (Kennedy, J.,

concurring) (quoting New State Ice Co. v. Liebmann,

285 U.S. 262, 311 (1932) (Brandeis, J., dissenting)). To

24

the extent that courts are deprived of opportunities to

develop state-law protections of personal rights and

property rights, this aim of federalism is thwarted.

III. This Court Should Extend Its “Clear

Statement” Doctrine to the Purported

Creation of Federal Subject Matter

Jurisdiction in Cases Otherwise

Governed by State Law.

This Court has already crafted a tool that

protects the role and responsibility of state courts in

the federal system. The clear statement rule provides

that “if Congress intends to alter the ‘usual

constitutional balance between the States and the

Federal Government,’ it must make its intention to do

so ‘unmistakably clear in the language of the statute.”

Will v. Mich. Dep’t of State Police, 491 U.S. 58, 65

(1989) (quoting Scanlon, 473 U.S. at 242).

The Court gave substantive content to the

Tenth Amendment protection of the states in Nat’

League of Cities v. Usery, 426 U.S. 833 (1976), holding

that certain essential functions of a state are so

“integral” to statehood that they may not be

supplanted by federal law. “This Court has never

doubted that there are limits upon the power of

Congress to override state sovereignty, even when

exercising its otherwise plenary powers to tax or to

regulate commerce.” Id. at 842.4

This Court suggested in Murdock uv. Memphis, 87 U.S. (20

Wall.) 590, 633 (1874), that, even if the commerce clause allowed

it, “Congress may not have the power to authorize the Supreme

Court to supplant state courts as the authoritative declarers of

law within their jurisdictions by functioning as a court of last

resort with respect to state common law and statutory law.”

Ernest A. Young, State Sovereign Immunity and the Future of

25

The Court overruled National League of Cities

a decade later in Garcia v. San Antonio Metropolitan

Transit Authority, 469 U.S. 528 (1985). The Garcia

Court did not dismantle federalism. Rather the

majority concluded that the states can fully protect

their interests through their representation in

Congress. Garcia reasoned that the states “are more

properly protected by procedural safeguards inherent

in the structure of the federal system than by

judicially created limitations on federal power.” Id. at

552.

The necessary corollary to that principle,

Justice O Connor subsequently pointed out, is that

Congress must speak plainly when intruding on state

authority:

Application of the plain statement rule

thus may avoid a potential constitutional

problem. Indeed, inasmuch as this Court

in Garcia has left primarily to the

political process the protection of the

States against intrusive exercises of

Congress’ Commerce Clause powers, we

must be absolutely certain that Congress

intended such an exercise.

Gregory, 501 U.S. at 464. This Court has long insisted

that when Congress legislates “in a field which the

States have traditionally occupied . we start with

the assumption that the historic police powers of the

States were not to be superseded by the Federal Act

unless that was the clear and manifest purpose of

Congress.” Rice v. Santa Fe Elevator Corp., 331 U.S.

Federalism, 1999 Sup. Ct. Rev. 1, 79 n.120 (1999) (quoting

Laurence H. Tribe, American Constitutional Law § 5-20, at 380

(2d ed. 1988)).

26

218, 230 (1947). See also Altria Group, Inc. v. Good,

555 U.S. 70, 77 (2008) (quoting Rice, 331 U.S. 218);

United States v. Bass, 404 U.S. 336, 349 (1971)

(“(U]nless Congress conveys its purpose clearly, it will

not be deemed to have significantly changed the

federal-state balance.”).

The clear statement rule provides fair notice to

the states that legislation affecting their interests is

before the Congress, affording them the opportunity

to oppose or alter the intrusion into state sovereignty.

It also ensures that congressional representatives

consider the proposed legislation’s impact on the

states. By this means, the judicial branch avoids

“unintended encroachment on the authority of the

States.” CSX Transp. Inc. v. Easterwood, 507 US.

658, 664 (1993); see also New York v. United States,

505 U.S. 144, 181 (1992) (Al] healthy balance of

power between the States and the Federal

Government will reduce the risk of tyranny and abuse

from either front.”); see generally John F. Manning,

Clear Statement Rules and the Constitution, 110

Colum. L. Rev. 399 (2010).

Additionally, requiring that Congress spell out

its intent to alter or enlarge federal jurisdiction

invites Congress to tailor the scope of federal

jurisdiction to closely conform to the federal interests

at stake with far greater precision. For example,

Congress has provided that all civil suits to which the

Federal Deposit Insurance Corporation is a party

shall be deemed to arise under the laws of the United

States, except that certain actions “in which only the

interpretation of the law of such State is necessary,

shall not be deemed to arise under the laws of the

United States.” 12 US.C. § 1819%bX2XD)iii).

Similarly, 36 U.S.C. § 220505(bX9) confers original

27

jurisdiction over any civil action against the U.S.

Olympic Committee solely relating to the

corporation’s responsibilities under this chapter.”

Such carefully tailored grants of subject matter

jurisdiction should be encouraged by this Court.

To allow federal subject matter jurisdiction to

supersede the ordinary responsibility of state courts

to decide matters of state law based on an ambiguous

statutory reference by Congress evades the very

protections of states that Garcia relied upon. It

deprives the states of the opportunity to contest

intrusion by the federal government into a central

facet of state sovereignty. At the same time, it allows

Congress to use ambiguity “as a cloak for its failure to

accommodate the competing interests [in] the federal-

state balance.” Tribe, supra, at § 5-8, p. 317. Congress

has shown it can speak clearly when creating original

jurisdiction over federally chartered corporations.

This Court should require such a clear statement.

CONCLUSION

For the foregoing reasons, the judgment of the

lower court should be reversed.

Date: August 23,2016 Respectfully submitted,

Jeffrey R. White

Counsel of Record

AMERICAN ASSOCIATION

FOR JUSTICE

777 & Street, N.W.

Suite 200

Washington, DC 20001

(202) 944-2839

jeffrey. white justice org

Attorney for Amicus Curiae