Amicus Curiae Brief — Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, 136 S. Ct. 1562 (2016) (No. 14-1132)

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No. 14-1132 OFMICE OF THE CLERK |

IN THE

Supreme Court of the United States

MERRILL LYNCH, PIERCE, FENNER & SMITH, INC.,

ET AL.,

Petitioners,

GREG MANNING, ET AL.,

Respondents.

On Writ of Certiorari to the United States

Court of Appeals for the Third Circuit

BRIEF OF AMICUS CURIAE

PUBLIC CITIZEN, INC.,

IN SUPPORT OF RESPONDENTS

ScoTT L. NELSON

Counsel of Record

ALLISON M. ZIEVE

PUBLIC CITIZEN

LITIGATION GROUP

1600 20th Street NW

Washington, DC 20009

(202) 588-1000

snelson@citizen.org

Attorneys for Amicus Curiae

October 2015

TABLE OF CONTENTS

ae OE REF CE EOE vervnscecimreenesseeraeninnsiccinta il

INTEREST OF AMICUS CURIAE .....000.0. eee |

SUMMARY OF ARGUMENT ...............0sscsccssesssrcesseees 2

RIES tenicnntreisiiniinnntininiiinitinpinmaiaiien 4

I. This Court has long limited statutory

grants of federal question jurisdiction to

cases in which federal law creates the

right of action and to a small category of

exceptional cases presenting claims that

necessarily rest on substantial questions

OF I WN, scincevsnsisidnisentenipnincbinsietdiediaeet iene 4

II. The Securities Exchange Act’s jurisdictional

provision and similar provisions in other

statutes do not confer jurisdiction more

broadly than the general federal-question

SERRE CII, sscicsccscictictcisietentapinenans 9

CETUS ciccescnvcisnsevipsnesenesinntisiiiansanaaatanaaaaa 19

TABLE OF AUTHORITIES

Page(s)

Cases:

Am. Well Works Co. v. Layne & Bowler Co.,

I csttatincsnn 7,11

Christianson v. Colt Indus. Operating Corp.,

EEE EEE a 16

Dart Cherokee Basin Operating Co. v. Owens,

Se 1

Deckert v. Indep. Shares Corp.,

css 13, 15

The Fair v. Kohler Die & Specialty Co.,

ET 12

Franchise Tax Bd. v. Constr. Laborers Vacation

ns cessnasuensvensons 6,7

Grable & Sons Metal Prods., Inc. v. Darue Eng’g

& Mfg., 545 U.S. 308 (2005)............ 6, 7, 8, 9, 15, 16

Gully v. First Nat’l Bank,

I a oss ccscenseccscnnsccescsose 8, 11, 12, 13

Gunn v. Minton,

133 S. Ct. 1059 (2013)......2, 3, 7, 8, 9, 15, 16, 18, 19

Kellogg Brown & Root Servs., Inc. v. United States

ex rel. Carter, 135 S. Ct. 1970 (2015) ................... 14

Kircher v. Putnam Funds Trust,

Ee l

Louisville & Nashville R.R. v. Mottley,

a seenanotonet 8

Matsushita Elec. Indus. Co. v. Epstein,

io crcescncssntsnsncsnansocscoees 12, 18

iil

Merrell Dow Pharm. Inc. v. Thompson,

ERE IS ee 6, 7

Mims v. Arrow Fin. Servs., LLC,

Ss is 1, 6, 7, 15

Miss. ex rel. Hood v. AU Optronics Corp.,

ee 1

Osborn v. Bank of the United States,

I 4

Pan Am. Petroleum Corp. v. Super. Ct.,

366 U.S. 656 (1961)...................... 2, 3, 10, 11, 13, 17

Powerex Corp. v. Reliant Energy Servs., Inc.,

I 1

Romero v. Int’l Terminal Operating Co.,

ns it incall cence 5, 11

Skelly Oil Co. v. Phillips Petroleum Co.,

SE ae aaa 8,12

Smith v. Kansas City Title & Trust Co.,

8 ER ear ne 7,11

Tafflin v. Levitt,

I i liiciciceinctnrsdittaas cnet aad 18

T.B. Harms Co. v. Eliscu,

339 F.2d S23 (2d Cir. 1964) ...............cccccccccccseesscees 7

Textile Workers Union v. Lincoln Mills,

I a 6

Transamerica Mortgage Advisors, Inc. v. Lewis,

| GE Se er eee 3, 14, 15

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

8 A ee ee 4

Will v. Hallock,

TEER ee a aE EE l

Constitutional Provisions and Statutes:

Os a I, i Od 3

il) |) FREESE 2, 5, 9, 10, 11, 13, 16, 17

Se scinieeeuneeenien 16

Connally Hot Oil Act of 1935,

RSE eee eee a 9,16

Federal Power Act of 1935,

| | nee anen 9, 16, 17

Federal Question Jurisdictional Amendments

Act of 1980, Pub. L. No. 96-486,

ETERS See Seance meen teND neem eR Ie ee 5

International Wheat Agreement Act of 1949,

£ | N —_RREE SREEESREESERERRSRERS eae oer 10, 16

Interstate Land Sales Full Disclosure Act of 1968,

ST Ui Uc is cnsseciceteetncintateicetnceliceiinibimae’ 10, 16

Investment Advisers Act of 1940,

Ie Rs, lls 10, 14, 16

Investment Company Act of 1940,

ee ie We el istninsnrsnsnncnnenseiedeisisinidiuedsisitiasiiats 10, 16

Jurisdiction & Removal Act of 1875,

i a 4

Natural Gas Act of 1938,

kre 9, 11, 12, 16, 17

Pub. L. No. 101-429,

De, BRS RE, Be Ce ccccczsccersrescsesesemnccssenees 15

Public Utility Holding Company Act of 1935,

RN Ty CN Or a ciccteeiietbielcaimndiil 9, 16

Securities Act of 1933,

ERE eee eae 9, 13, 16, 17

Securities Exchange Act,

see 2, 3, 9, 12, 15, 16, 18

ARES areca eee tee eT A 9,12

Trust Indenture Act of 1939,

a ay OF FR iivccinncsnemicscccsueesncieeseneseti 10, 16

INTEREST OF AMICUS CURIAE'

Public Citizen, Inc., is a consumer advocacy organ-

ization with members and supporters nationwide.

Since its founding in 1971, Public Citizen has ap-

peared on behalf of its members before Congress, ad-

ministrative agencies, and courts on a wide range of

issues and has worked for enactment and enforce-

ment of laws protecting consumers, workers, and the

public.

Public Citizen has a longstanding interest in the

proper construction of statutory provisions defining

and limiting the jurisdiction of the federal courts. The

resolution of such issues often has significant impacts

on the efficacy of statutory and common-law remedies

under both state and federal law, as well as on the al-

location of power in our federal system and the proper

implementation of congressional intent. Public Citi-

zen attorneys have therefore frequently represented

parties or amici before this Court in cases involving

significant issues of federal jurisdiction, including

questions of original, removal, and appellate jurisdic-

tion.”

' This brief was not authored in whole or part by counsel for

a party. No one other than amicus curiae or its counsel made a

monetary contribution to preparation or submission of this brief.

Letters of consent to filing from counsel for all parties are on file

with the Clerk.

? See, e.g., Dart Cherokee Basin Operating Co. v. Owens, 135

S. Ct. 547 (2014); Miss. ex rel. Hood v. AU Optronics Corp., 134

S. Ct. 736 (2014); Mims v. Arrow Fin. Servs., LLC, 132 S. Ct. 740

(2012); Powerex Corp. v. Reliant Energy Servs., Inc., 551 US.

224 (2007); Kircher v. Putnam Funds Trust, 547 U.S. 633 (2006);

Will v. Hallock, 546 U.S. 345 (2006).

SUMMARY OF ARGUMENT

The question posed by this case is not whether

section 27 of the Securities Exchange Act, 15 U.S.C.

§ 78aa, is a jurisdictional statute, but whether the

federal question jurisdiction it confers sweeps more

broadly than that granted by the general federal-

question jurisdiction statute, 28 U.S.C. § 1331, over

cases arising under the laws of the United States.

This Court has long construed § 1331’s broad

grant of federal question jurisdiction to comprehend

virtually all actions asserting rights of action created

by federal law. At the same time, the Court has con-

strued § 1331’s grant of jurisdiction to include only a

few exceptional cases outside those bounds. That

small category of cases encompasses only actions in

which the plaintiff's well-pleaded complaint reveals

that its affirmative claims necessarily depend on a

substantial, disputed issue of federal law that requires

a federal forum. See Gunn v. Minton, 133 S. Ct. 1059,

1065 (2013). In this case, the lower courts have held

that the claims fall outside § 1331, and Merrill Lynch

does not challenge those rulings here.

The Exchange Act’s jurisdictional provision does

not command a different result. The provision, in lan-

guage also used in a handful of other statutes, pro-

vides for jurisdiction over actions seeking to “enforce

any liability or duty created by this [Act].” Those

words, read in light of their natural meaning and this

Court’s longstanding reluctance to give overbroad

readings to jurisdictional grants, are no broader than

those of § 1331’s grant of jurisdiction over cases “aris-

ing under” federal law. Indeed, this Court held more

than fifty years ago that the language used in the Ex-

change Act provision is congruent with § 1331’s “aris-

ing under” standard. See Pan Am. Petroleum Corp. v.

Super. Ct., 366 U.S. 656 (1961). Merrill Lynch offers

no reason for overturning that reading.

The Exchange Act’s grant of jurisdiction over “vio-

lations” likewise is not a font of expansive jurisdic-

tion: Its natural meaning and effect is to provide ju-

risdiction over enforcement and criminal actions seek-

ing statutory penalties for violations and over actions

brought to enjoin violations of federal law. It is not a

source of jurisdiction over damages actions, see

Transamerica Mortgage Advisors, Inc. v. Lewis, 444

U.S. 11, 21-22 (1979), let alone damages actions based

on state law.

Nor does the statute’s grant of “exclusive” juris-

diction call for a broader construction. The Exchange

Act’s jurisdictional provision defines the scope of fed-

eral jurisdiction in terms identical to other statutes

that grant non-exclusive jurisdiction to federal courts.

The meaning of those terms does not vary depending

on whether they are incorporated in a statute that

makes the resulting jurisdiction exclusive. “Exclu-

siveness is a consequence of having jurisdiction, not

the generator of jurisdiction ....” Pan Am. Petroleum,

366 U.S. at 664. Merrill Lynch’s policy arguments

about the need for uniform interpretation of federal

law are no more persuasive than those that have been

advanced and rejected by other litigants seeking ex-

pansive readings of statutes granting exclusive juris-

diction. See, e.g., Gunn, 133 S. Ct. at 1067-68.

ARGUMENT

I. This Court has long limited ctatutory

grants of federal question jurisdiction to

cases in which federal law creates the

right of action and to a small category of

exceptional cases presenting claims that

necessarily rest on substantial questions

of federal law.

Article II] of the Constitution grants Congress

broad power to confer on the federal courts jurisdic-

tion over cases “arising under this Constitution, the

Laws of the United States, and Treaties made, or

which shall be made, under their Authority.” U.S.

Const., art. I], § 2, cl. 1. Although the outer limits of

that power are untested, this Court’s decision in Os-

born v. Bank of the United States, 22 U.S. 738 (1824),

“reilects a broad conception of ‘arising under’ juris-

diction, according to which Congress may confer on

the federal courts jurisdiction over any case or con-

troversy that might call for the application of federal

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

U.S. 480, 492 (1983).

For most of the first century under the Constitu-

tion, Congress declined to exercise its authority to

confer sweeping federal question jurisdiction on the

federal courts, and instead granted the federal courts

relatively narrow authority over particular types of

federal claims. Beginning in 1875, however, Congress

broadly granted federal trial courts jurisdiction—in

terms mirroring those used in Article [[1]—over cases

“arising under the Constitution or laws of the United

States, or treaties made, or which shall be made, un-

der their authority.” Jurisdiction & Removal Act of

1875, ch. 137, § 1, 18 Stat. 470. That jurisdictional

grant, the forerunner of today’s general federal-

question jurisdictional statute, 28 U.S.C. § 1331, ush-

ered in an era in which deciding cases based on feder-

al law has increasingly come to be seen as a preemi-

nent task of the federal court system.

For much of that new era, until the elimination of

§ 1331’s amount-in-controversy requirement in 1980,

see Federal Question Jurisdictional Amendments Act

of 1980, Pub. L. No. 96-486, 94 Stat. 2369, more spe-

cific grants of federal question jurisdiction over cases

involving particular areas of federal law, without

amount-in-controversy limits, supplemented § 1331

by conveying more expansive authority over areas

where Congress thought that the availability of a fed-

eral forum was particularly important. In some in-

stances, moreover, statutes granted exclusive federal

jurisdiction over cases arising under particular types

of federal law.

Although Congress used broad language to accom-

plish the transformation in the business of the federal

courts that the ascendancy of statutory federal ques-

tion jurisdiction has brought about, this Court has

never interpreted these statutory jurisdictional grants

as sweepingly as Article III would theoretically allow.

Rather, the construction of federal-question jurisdic-

tional statutes has been guided by “the deeply felt and

traditional reluctance of this Court to expand the ju-

risdiction of the federal courts through a broad read-

ing of jurisdictional statutes.” Romero v. Int’l Termi-

nal Operating Co., 358 U.S. 354, 379 (1959).

In particular, the Court has been concerned that

reading such statutes as broadly as the Constitution’s

own “arising under” language would “permi(t] ‘asser-

tion of original federal question jurisdiction on the

remote possibility of presentation of a federal ques-

tion.’” Verlinden, 461 U.S. at 492 (quoting Tertile

Workers Union v. Lincoln Mills, 353 U.S. 448, 482

(1957) (Frankfurter, J., dissenting)). Such a broad

construction of federal jurisdictional statutes, the

Court has recognized, could distort congressional

judgments about the proper division of federal- and

state-court authority over cases involving issues of

federal law. Thus, the Court has “consistently empha-

sized” that “determinations about federal jurisdiction

require sensitive judgment about congressional in-

tent, judicial power, and the federal system.” Merrel/

Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 810

(1986). The Court has “forcefully reiterated the need

for prudence and restraint in the jurisdictional in-

quiry,” id., and construed the scope of statutory

grants of federal question jurisdiction “with an eye to

practicality and necessity,” Franchise Tax Bd. v. Con-

str. Laborers Vacation Trust, 463 U.S. 1, 20 (1983), as

well as due recognition that expansive assertion of

federal question jurisdiction “always raises the possi-

bility of upsetting the state-federal line drawn (or at

least assumed) by Congress.” Grable & Sons Metal

Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 314

(2005).

Applying the broad statutory language of Con-

gress’s grants of federal question jurisdiction consist-

ently with these principles of restraint, the Court has

identified a solid core of cases almost invariably sub-

ject to statutory federal question jurisdiction: “when

federal law creates a private right of action and fur-

nishes the substantive rules of decision, the claim

arises under federal law, and district courts possess

federal-question jurisdiction” unless Congress has

acted to divest them of it. Mims v. Arrow Fin. Servs.,

LLC, 132 S. Ct. 740, 748-49 (2012). Put more simply,

in Justice Holmes’s famous aphorism, “A suit arises

under the law that creates the cause of action.” Am.

Well Works Co. v. Layne & Bowler Co., 241 U.S. 257,

260 (1916). The rule that “a case arises under federal

law when federal law creates the cause of action as-

serted,” as this Court recently stressed, “accounts for

the vast bulk of suits that arise under federal law.”

Gunn v. Minton, 133 S. Ct. at 1064; accord, e.g., Mer-

rell Dow, 478 U.S. at 808; Franchise Tax Bd., 463

U.S. at 9.

Although statutory federal question jurisdiction

will almost always exist over a case asserting a right

of action created by federal law, the Court has

acknowledged that this principle is “more useful for

inclusion than for ... exclusion.” Merrell Dow, 478

U.S. at 809 n.5 (quoting T.B. Harms Co. v. Eliscu, 339

F.2d 823, 827 (2d Cir. 1964)). The Court has recog-

nized that in some exceptional cases, actions asserting

rights of action created by state law that necessarily

pose substantial federal-law issues may be deemed to

be subject to federal question jurisdiction. See, e.g.,

Grable, 545 U.S. at 314; Smith v. Kansas City Title &

Trust Co., 255 U.S. 180 (1921). The circumstances

under which such actions may serve as the basis for

invocation of federal question jurisdiction, however,

have long been carefully limited by this Court.

The Court has insisted, for example, that to give

rise to jurisdiction, the existence of a federal question

must appear on the face of a well-pleaded complaint.

Franchise Tax Bd., 463 U.S. at 9-10. That a federal

issue may be implicated by a defense to a right of ac-

tion—even one that is anticipated in the complaint

itself or that serves as the basis for a declaratory

judgment action—does not suffice to allow statutory

federal question jurisdiction. Louisville & Nashville

R.R. v. Mottley, 211 U.S. 149 (1908); Skelly Oil Co. v.

Phillips Petroleum Co., 339 U.S. 667, 673 (1950). And

it is not enough that a federal question “is lurking in

the background” of a case. Gully v. First Nat’l Bank,

299 U.S. 109, 117 (1936). “Not every question of fed-

eral law emerging in a suit is proof that a federal law

is the basis of the suit”; rather, “a right or immunity

created by the Constitution or laws of the United

States must be an element, and an essential one, of

the plaintiff's cause of action.” Jd. at 115, 112.

The Court has recently crystalized these principles

“into the following inquiry: Does the ‘state-law claim

necessarily raise a stated federal issue, actually dis-

puted and substantial, which a federal forum may en-

tertain without disturbing any congressionally ap-

proved balance of federal and state judicial responsi-

bilities’?” Gunn, 133 S. Ct. at 1065 (quoting Grable,

545 U.S. at 314). “That is, federal jurisdiction over a

state law claim will lie if a federal issue is: (1) neces-

sarily raised, (2) actually disputed, (3) substantial,

and (4) capable of resolution in federal court without

disrupting the federal-state balance approved by Con-

gress.” Id. The Court emphasized that the set of cases

meeting these criteria is “special and small” and that

this “slim category” is reserved for “only extremely

rare exceptions” to the general rule that a case falls

within federal question jurisdiction if federal law cre-

ated a right of action it asserts. Jd. at 1064—65.

Ill. The Securities Exchange Act’s jurisdic-

tional provision and similar provisions in

other statutes do not confer jurisdiction

more broadly than the general federal-

question jurisdictional statute.

A. As this case comes before the Court, it has been

established that the claims asserted do not meet the

Gunn-Grable criteria for the invocation of general

federal question jurisdiction over state-created rights

of action. The Third Circuit so held, and Merrill

Lynch neither sought review of that ruling in its peti-

tion for certiorari nor contested the issue in its brief

on the merits. Rather, Merrill Lynch’s sole assertion

is that section 27 of the Exchange Act, 15 U.S.C.

§ 78aa, confers jurisdiction over a broader set of cases

that potentially implicate issues of federal law than do

28 U.S.C. § 1331 and other jurisdictional statutes that

employ its “arising under” language.

The Exchange Act is one of a small set of statutes,

most enacted during the New Deal era, providing fed-

eral district-court jurisdiction over “violations of this

[Act] or the rules and regulations thereunder, and of

all suits in equity and actions at law brought to en-

force any liability or duty created by this {Act] or the

rules and regulations thereunder.” 15 U.S.C.

§ 78aa(a). Other examples include:

e the Securities Act of 1933, 15 U.S.C. § 77v(a);

e the Public Utility Holding Company Act of 1935,

former 15 U.S.C. § 79y;

e the Federal Power Act of 1935, 16 U.S.C. § 825p;

ethe Connally Hot Oil Act of 1935, 15 U.S.C.

§ 715i(c);

e the Natural Gas Act of 1938, 15 U.S.C. § 717u;

ethe Trust Indenture Act of 1939, 15 U.S.C.

§ 77vvv(b);

e the Investment Company Act of 1940, 15 U.S.C.

§ 80a-43;

e the Investment Advisers Act of 1940, 15 U.S.C.

§ 80b-14(a);

e the International Wheat Agreement Act of 1949,

7 U.S.C. § 1642(e);

e and the Interstate Land Sales Full Disclosure

Act of 1968, 15 U.S.C. § 1719.

In addition to their nearly identical language con-

ferring jurisdiction over “violations” as well as “suits

in equity and actions at law brought to enforce any

liability or duty created by” the relevant federal stat-

ute, the provisions were all enacted when the general

federal-question jurisdictional statute had a substan-

tial amount-in-controversy requirement, which each

of these special jurisdictional provisions lacked.

Though the scope of the jurisdiction they describe is

identical, the statutes differ in that some (including

the Exchange Act, the Federal Power Act, the Hot Oil

Act, and the Natural Gas Act) confer “exclusive” ju-

risdiction on the federal courts, while the rest do not.

Notably, these statutes use a narrower definition

of the scope of jurisdiction than does 28 U.S.C. § 1331,

which tracks the Constitution’s sweeping “arising

under” language. Merrill Lynch’s submission that by

using narrower language they confer jurisdiction

more broadly than does § 1331 is unusual, to say the

least. Contrary to Merrill Lynch’s argument, that

paradoxical result is by no means compelled by the

plain language of these jurisdictional provisions and is

contradicted by this Court’s longstanding construc-

tion of them.

Merrill Lynch’s contention that a statute confer-

ring jurisdiction over actions “brought to enforce any

liability or duty created by this Act” sweeps more

broadly than § 1331 finds little grounding in the stat-

ute’s actual words. Particularly when read in light of

the Court’s “traditional reluctance” to construe juris-

dictional statutes broadly, Romero, 358 U.S. at 379,

the words seem most readily adapted to confer juris-

diction over rights of action created by the federal

laws in question—that is, to express the Holmesian

view of the scope of statutory federal question juris-

diction as encompassing suits arising “under the law

that creates the cause of action.” Am. Well Works, 241

U.S. at 260. Congress’s choice of narrower language

than that used in § 1331 to describe the scope of ju-

risdiction, moreover, may well have stemmed from

uncertainty regarding the limits of § 1331’s “arising

under” jurisdiction in light of this Court’s decisions at

the time, compare Gully, 299 U.S. at 112-13, with

Smith, 255 U.S. at 199, and an impulse to describe

the limits on statutory federal question jurisdiction

more precisely.

Not surprisingly, therefore, when this Court has

engaged with this jurisdictional language, it has con-

strued it to be congruent with the more limited view

of § 1331 that the Court has generally adhered to

from Gully onward rather than as encompassing a

radical expansion of jurisdiction. Thus, in Pan Ameri-

can Petroleum Corp., the Court, construing the iden-

tically worded jurisdictional provision of the Natural

Gas Act, 15 U.S.C. § 717u, held that a suit invoking a

state-created right of action was outside the scope of

federal court jurisdiction, notwithstanding that it

might implicate issues under the Natural Gas Act, be-

cause the action was “based upon claims arising un-

der state, not federal, law.” 366 U.S. at 663.

The Court relied throughout its analysis on cases

decided under the general federal-question jurisdic-

tion statute and other statutes employing the stand-

ard “arising under” terminology, including Gully and

Skelly Oil, and The Fair v. Kohler Die & Specialty

Co., 228 U.S. 22 (1913). And it dismissed as immate-

rial the difference between the “arising under” lan-

guage and that used in the Gas Act’s jurisdictional

provision: It explicitly stated that its reliance on “aris-

ing under” precedents was “not affected by want of

explicit limitation to jurisdiction ‘arising under’ the

Natural Gas Act. Such limitation is clearly implied

....” Id. at 665 n.2.

The Court’s opinion in Matsushita Electrical In-

dustrial Co. v. Epstein, 516 U.S. 367 (1996), while

terser, reflects a similar construction of the jurisdic-

tional language at issue. In Matsushita, the Court

held that while a state court may not adjudicate

claims arising under the Exchange Act, a state-court

action may settle (with preclusive effect) Exchange

Act causes of action subject to exclusive federal juris-

diction under 15 U.S.C. § 78aa(a), as long as the state

court properly had jurisdiction over the action in the

first instance. See id. at 381. In so holding, the Court

pointed out that the state-law claims originally filed

in state court were not subject to exclusive federal ju-

risdiction because they were claims “arising under

state law” and were thus not “‘brought to enforce’

any rights or obligations under the Act.” /d. at 381.

The Court’s earlier decision in Deckert v. Inde-

pendence Shares Corp., 311 U.S. 282 (1940), similarly

indicates that the jurisdictional language at issue is

directed at rights of action arising under federal law.

In Deckert, the Court considered whether the Securi-

ties Act of 1933 created a right of action for rescission

and restitution to redress violations of the Act, and

whether such an action fell within the jurisdiction

granted by the Securities Act’s jurisdictional provi-

sion, 15 U.S.C. § 77v(a). That provision, in language

identical to the relevant terms of the Exchange Act

provision at issue here, gives district courts jurisdic-

tion (albeit nonexclusive) over actions “brought to en-

force any liability or duty created by this [Act].” In

deciding both issues in the affirmative, the Court em-

phasized that the jurisdiction to “enforce” was “the

power to make effective the right of recovery afforded

by the Act.” 311 U.S. at 288 (emphasis added).

This Court’s precedents construing the language

at issue thus reinforce its most natural reading in

light of the Court’s traditional approach to construing

statutes granting federal question jurisdiction. Far

from embracing an adventuresome expansion of ju-

risdiction far beyond that conferred by § 1331’s “aris-

ing under” language, the statutory language at issue

here reflects an alternative formulation aimed at the

same end: bringing within the purview of the federal

courts actions asserting rights of action created by

federal law and, potentially, a few exceptional cases in

which the complaint discloses that a substantial ques-

tion of federal law is “an element, and an essential

one, of the plaintiff's cause of action.” Pan Am. Petro-

leum, 366 U.S. at 663 (quoting Gully, 299 U.S. at 112-

13).

B. The statutory language granting jurisdiction

over “violations” does not alter this conclusion. That

language is not aimed at bringing within federal ju-

risdiction any complaint that describes conduct that

violates federal law, but is most naturally read to con-

fer jurisdiction over actions seeking the criminal and

civil penalties the Act authorizes for violations, as

well as actions seeking to enjoin violations.®

This construction finds strong support in this

Court’s decision in Transamerica Mortgage Advisors,

Inc. v. Lewis, 444 U.S. 11 (1979). There the Court

considered whether the Investment Advisers Act of

1940 conferred a private cause of action for injunctive

relief or damages. The Court’s decision not to find a

private damages remedy in the Act rested significant-

ly on construction of its jurisdictional provision,

which at the time used language similar to that of the

statute at issue here, but with an important variation:

It conferred jurisdiction over “violations” and “suits

in equity to enjoin any violation,” but omitted the

language covering “actions at law” to enforce any “li-

ability or duty” created by the Act. See 444 U.S. at

21-22 & n.11.* Concluding that the jurisdiction over

* This construction is reinforced by the fact that almost all of

the statutory provisions containing the language at issue are

headed “Jurisdiction of offenses and suits.” “Offenses” itself is a

term that is generally limited to criminal matters. See Kellogg

Brown & Root Servs., Inc. v. United States ex rel. Carter, 135 S.

Ct. 1970, 1976-77 (2015). The operative terms of these statutory

provisions use the broader term “violations,” but the use of the

narrower term in the title provides important context suggesting

that the intended meaning is actions seeking the civil and crimi-

nal penalties created by the statutes for violations.

* The Advisers Act was subsequently amended in 1990 so

that its jurisdictional provision, 15 U.S.C. § 80b-14, like that of

(Footnote continued)

“violations” would not itself encompass an action at

law for damages, the Court held that the absence of a

grant of jurisdiction over such actions suggested that

Congress had not intended to create them. See id. If,

as Merrill Lynch now argues, jurisdiction over “viola-

tions” itself broadly included jurisdiction over damag-

es actions alleging violations, the Court could not

have drawn the inference that it drew regarding con-

gressional intent.

Thus, neither the grant of jurisdiction over “viola-

tions” nor that over actions to enforce any “liability

or duty created by the Act” suggests an intent to

sweep within federal jurisdiction state-law rights of

action that implicate potential violations of federal

law but do not meet the criteria for arising-under ju-

risdiction stated in Gunn, Grable, and the earlier case

law on which they are based. Such a reading by no

means strips the jurisdictional provisions of the Ex-

change Act and similar statutes of meaning or effect.

At the time these statutes were passed, the general

federal-question jurisdictional grant had a substantial

amount-in-controversy requirement, which increased

still further in later decades before its ultimate aboli-

tion. See Mims, 132 S. Ct. at 747-48 & n.7. The stat-

utes employing the language used here, by contrast,

lacked jurisdictional amounts, see Deckert, 311 U.S. at

289-90, and thus were far from superfluous in light of

the existing statutory grant of general federal ques-

tion jurisdiction.

the other statutes discussed in this brief, now covers not only

“violations” and equitable suits, but also legal] actions seeking to

enforce “any liability or duty” created by the Act. See Pub. L.

No. 101-429, § 401, 104 Stat. 931 (1990).

C. The Exchange Act, of course, also has the addi-

tional consequence of making the jurisdiction it de-

scribes exclusive. Contrary to Merrill Lynch’s sugges-

tion, however, the exclusivity of the jurisdiction does

not imply a broader scope. This Court made exactly

that point in Christianson v. Colt Industries Operat-

ing Corp., 486 U.S. 800 (1988), where it rejected the

view that 28 U.S.C. § 1338(a)’s grant of jurisdiction

over cases arising under the patent laws is broader

than § 1331’s general grant of federal question juris-

diction merely because it is exclusive. Because both

statutes define the scope of jurisdiction using the

same language, “linguistic consistency” demands that

they be given the same limits. See id. at 808-09. Thus,

cases under § 1338(a), like those under § 1331, are

subject to the well-pleaded complaint rule and limited

to rights of action created by federal law and the

small category of exceptional cases that meet the cri-

teria laid out in Grable and Gunn. See Gunn, 133 S.

Ct. at 1064.

Likewise, policy arguments based on the exclusive

nature of the jurisdiction play no role in determining

the scope of jurisdiction conferred by the Exchange

Act, as exactly the same language is used to define the

scope of non-exclusive jurisdiction conferred by other

statutes. The language at issue (conferring jurisdic-

tion over “violations of this Act” and suits and actions

“to enforce any liability or duty created by this Act”)

is used to confer exclusive jurisdiction in the Ex-

change Act, the Federal Power Act, the Natural Gas

Act, and the Hot Oil Act, and non-exclusive jurisdic-

tion in the Securities Act, the former Public Utility

Holding Companies Act, the Trust Indenture Act, the

Investment Company Act, the Investment Advisers

Act, the International Wheat Agreement Act, and the

Interstate Land Sales Full Disclosure Act. That lan-

guage has the same meaning regardless of whether

the jurisdiction it generates is exclusive. If the same

type of allegations could not support concurrent juris-

diction under, say, the Securities Act, they cannot

support exclusive jurisdiction under the Exchange

Act.

Thus, in Pan American Petroleum, this Court ex-

pressly rejected the argument that the use of the word

“exclusive” in the Natural Gas Act’s jurisdictional

grant was relevant to the scope of federal jurisdiction:

“*Exclusive jurisdiction’ is given the federal courts

but it is ‘exclusive’ only for suits that may be brought

in the federal courts. Exclusiveness is a consequence

of having jurisdiction, not the generator of jurisdic-

tion because of which state courts are excluded.” 366

U.S. at 664. The Court specifically cited decisions giv-

ing the patent jurisdictional statute the same scope as

§ 1331, see id., and it applied the same principle to the

Natural Gas Act’s jurisdictional provision.°

® Merrill Lynch’s amici curiae the Natural Gas Supply Asso-

ciation and the Interstate Natural Gas Association of America

appear to request that this Court indicate in its decision that the

jurisdictional provision of the Natural Gas Act (and presumably

that of the Federal Power Act) effectively confers exclusive juris-

diction over all state-law contract claims involving wholesale

natural gas (and electricity) transactions subject to the jurisdic-

tion of the Federal Energy Regulatory Commission, as al] such

cases in their view involve efforts to enforce liabilities created by

federally approved tariffs or rate filings. That position is incon-

sistent with the holding in Pan American, and it confuses the

question of jurisdiction with a merits defense that a state-law

contract claim is preempted. The argument also suggests a view

that the Natural Gas Act and Federal Power Act “completely

preempt” (i.e., federalize) nominally state-law claims, which

(Footnote continued)

Merrill Lynch’s policy arguments based on the

need for uniform interpretation of federal law would

not suffice to justify an expansive interpretation of

the Exchange Act’s grant of exclusive federal jurisdic-

tion even if the statute were open to a construction

different from that of similar provisions granting non-

exclusive jurisdiction. This Court has consistently re-

jected arguments that state courts lack competence to

decide important questions of federal law that arise in

state-law based actions—or even, for that matter, in

actions arising under federal law. See, e.g., Gunn, 133

S. Ct. at 1067-68; Pan Am. Petroleum, 366 U.S. at

665-66; Tafflin v. Levitt, 493 U.S. 455, 464-67 (1990).

Indeed, this Court in Gunn did not perceive the

need for uniformity to be a sufficient basis for an ex-

panded view of exclusive federal jurisdiction even un-

der the patent laws, where federal law occupies the

field substantively and where the need for uniformity

is such that Congress vested appellate review of fed-

eral patent cases entirely in a single court of appeals.

Regulation of securities, by contrast, remains an area

of shared state and federal substantive authority, see

Matsushita, 516 U.S. at 382-83, and even within the

federal court system, securities cases are vulnerable

to the “inconsistency ... which a multi-membered,

multi-tiered federal judicial system already creates.”

Tafflin, 493 U.S. at 465. The Exchange Act offers no

would be an unusual result for statutes that themselves do not

create federal rights of action that could completely preempt

state-law ones. In any event, amici’s far-reaching arguments

concerning particular applications of the jurisdictional language

at issue to very different types of actions under different

schemes of substantive law are best reserved for a case in which

they are presented.

more reason than the patent law at issue in Gunn to

believe that Congress’s desire for uniformity is not

adequately served by the means it chose: exclusive ju-

risdiction over claims arising under federal law. See

Gunn, 133 S. Ct. at 1067.

CONCLUSION

The judgment of the Third Circuit should be af-

firmed.

Respectfully submitted,

Scott L. NELSON