GRABLE & SONS METAL PRODUCTS v. DARUE ENGINEERING

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Argument of Eric H. Zagrans

Chief Justice Rehnquist: We'll hear argument now in No. 04-603, Grable & Sons Metal Products v. Darue Engineering.

Mr. Zagrans.

Mr. Zagrans: Mr. Chief Justice, good morning, and may it please the Court:

In Merrell Dow Pharmaceuticals, the Court recognized an important limitation on the Court's prior substantial Federal question cases.

The Sixth Circuit should have followed Merrell Dow rather than ignoring it in deciding whether the presence of a Federal issue in this Michigan quiet title action properly gave rise to Federal question jurisdiction.

According to Merrell Dow, any State law claim that alleges a violation of a Federal statute as an element of the State law cause of action does not state a claim arising under Federal law for section 1331 purposes unless--

Justice O'Connor: Do you take the view that Merrell Dow somehow just silently overruled about five cases dealing with quiet title actions?

Mr. Zagrans: --No, Justice O'Connor, we do not take that position.

We take Merrell Dow--

Justice O'Connor: That seems to be your position.

I mean, I don't think Merrell Dow necessarily had that effect.

Mr. Zagrans: --Agreed.

We believe that Merrell Dow's decision can be synthesized with the holdings in those cases that Your Honor is referring to by reference to the nature of the Federal interest that is at stake and the role that Congress plays.

In the Smith v. Kansas City Title & Trust Company line of cases and in Hopkins v. Walker, both of those are different sorts of cases from Merrell Dow where Congress provided the Federal right that was alleged to have been violated, and the Court held that when Congress provides a Federal statute that is... is serving as an element of a State law claim, then Congress must have intended also to provide a Federal private right of action in order for there to be arising-under jurisdiction.

That's the distinction.

Justice Souter: Haven't we... haven't we got something equally different here?

The... the issue here, as I understand it, is... is not litigation of the State law claim, but a claim under Federal law with respect to the passage of title when property is taken for taxes.

As I understand the... the original plaintiff's claim, it simply is that if he's right, under Federal law he is entitled to a declaration that the property is still his.

If he's wrong, the other side is entitled to property.

But the issue is a Federal issue, and the only way the State has a role in it is that the State provides a mechanism, the quiet title action, analogous maybe to 1983, for getting it into a State court.

So it seems to me that the issue is a Federal issue, not as in Merrell Dow, a... a State cause of action that incorporates by reference a Federal standard.

Mr. Zagrans: Justice Souter, I agree that it is a Federal issue.

I disagree, with respect, that it's different from Merrell Dow because in both that case and this quiet title action under Michigan law, the alleged Federal issue is one element that needs to be alleged and proved in order to make out the State law claim.

Justice Souter: Yes, but I don't... I guess that's where we're parting company.

I don't see that there is a State law claim as distinct from a State law procedure for trying that claim in a State court.

As I... as I said a second ago, it's sort of like 1983.

It doesn't create causes of action, but it provides a... a jurisdictional basis for getting into court if you've got a cause of action.

And in this case, it's a Federal cause.

Mr. Zagrans: I see, Your Honor.

Under Michigan's Compiled Laws and under the rule of procedure that this action was brought under, the plaintiff had to allege and prove four things: that he had title, the alleged nature of the defendant's title.

He had to describe the property with reasonable particularity, and finally, he had to allege why his title was superior to the defendant's title.

Justice Souter: Which was a Federal issue.

Mr. Zagrans: And that is the only Federal issue, just like in Merrell Dow where the Federal... the violation of the Federal labeling standard was alleged to constitute one element of the product liability claim in that case.

Justice Ginsburg: But as Justice Souter pointed out, the State law incorporated the Federal standard and made it its own.

Here you have the Federal tax sale and a very strong Federal interest, which was lacking in Merrell Dow.

Justice Stevens said that.

But here I think there can be no doubt that the Government has a very strong interest in seeing that tax sales convey a secure title.

Mr. Zagrans: No doubt, Justice Ginsburg, but I think it is the wrong emphasis to look to what the State's interest is, which was a... a part of the focus that the Solicitor General's was on.

For purposes of deciding whether or not Congress intended there to be Federal question jurisdiction, I don't believe the focus should be on the State's interest.

Justice Kennedy: Well, my--

Mr. Zagrans: Yes, sir.

Justice Kennedy: --Please, please.

I didn't mean to interrupt you.

Did you finish your answer?

Mr. Zagrans: No, but go ahead, Justice Kennedy, please.

Justice Kennedy: No, please.

Well, my... my initial view of this case was much like Justice Souter's and... and I still think that that may be... may be correct.

But I thought your answer to Justice Souter would be that there are many cases in which there is an antecedent Federal title which then goes down through successive purchasers, mining claims, for instance, and those are always under State law.

I... I thought that would be your answer to Justice Souter and... and also to Justice Ginsburg.

Mr. Zagrans: Justice Kennedy--

Justice Kennedy: And you rely on Merrell Dow, which is fine.

But I thought there was a separate line of cases that support you, as well as Merrell Dow.

Mr. Zagrans: --There are, Your Honor, but I think that to give a... an honest and principled answer to Justice Souter's and Justice Ginsburg's questions, I have to face it in line of Merrell Dow and the cases that Merrell Dow relied on.

Chief Justice Rehnquist: We hope all your answers will be principled.

[Laughter]

Mr. Zagrans: Yes, sir, Mr. Chief Justice.

I hope so too.

Justice--

Justice Ginsburg: Well, Justice O'Connor had asked you about the... the quiet title cases, but Kansas City Title & Trust is still good law.

It wasn't overruled.

Mr. Zagrans: --Yes, Justice Ginsburg, I agree.

It is good law.

And I think the distinction that I am asking the Court to draw between that case and Merrell Dow is this.

Both cases should be decided under the rubric that arising-under jurisdiction depends upon whether a Federal issue in an otherwise State law case provides a... a... an outcome-determinative means of resolving the case, and that... in other words, where the resolution of the case depends upon a substantial question of Federal law.

But the difference between Kansas City Title & Trust and Merrell Dow is the nature of the Federal interest at stake and the different ways they should be applied.

In Kansas City Title & Trust, the interest was... or the alleged violation was a Federal constitutional violation.

Justice Ginsburg: Yes, but the Court didn't make it... the Court's proposition in Kansas City Title & Trust was if it appears from the complaint that the right to relief depends on the construction or application of the Constitution or laws of the United States.

So are you asking us to take out or laws as dictum, or what is your position?

Mr. Zagrans: I believe that the Court in Merrell Dow made a limitation on that phrase that Your Honor is quoting from, and the limitation is where Congress controls the jurisdiction of the Federal courts, such as with Federal statutory law, then the limitation of Merrell Dow that Congress must also have intended to create a Federal private right of action obtains.

I believe that's--

Justice Ginsburg: Well, when does... when does the... when do the words, or laws, in Kansas City Title & Trust have operative effect?

Mr. Zagrans: --When... when, as Merrell Dow says, Congress intended there to be a Federal private right of action for violation of the statute is alleged to be--

Justice Ginsburg: You mean that the... are you saying then in the context of this case that the Federal law would have to create a quiet title action, which is traditionally State law?

Mr. Zagrans: --Yes, Your Honor, that's exactly what we are arguing.

Justice Scalia: But doesn't Congress have to create causes of action for constitutional violations as well, or at least for most of them?

Mr. Zagrans: Your Honor, Congress has not created a jurisdictional statute for Federal constitutional claims, which is why the Bivens doctrine arose, unlike section 1983.

Justice Breyer: Well, maybe this needs... I mean, if were to clarify--

Justice Scalia: Wait.

Justice Breyer: --Sorry.

Justice Scalia: I'm... I'm not sure that I... that I'm satisfied with the answer.

You're... you're trying to give us one rule for constitutional claims and another rule for statutory claims?

Mr. Zagrans: I am, Your Honor.

Justice Scalia: On... on what basis?

I don't understand it.

Certainly in the text of the jurisdictional statute, there's no such distinction.

What... what is the basis for it?

Mr. Zagrans: It derives from footnote 12 of Merrell Dow where the Court was attempting to explain this... this difference that we are discussing.

And in footnote 12 of Merrell Dow, the Court says that the nature of the jurisdictional answer will frequently depend upon the different nature of the Federal interest that is at stake.

And it distinguished between Smith and... and Moore in that case, Smith being a Federal constitutional question, Moore being a Federal statutory question.

Justice Scalia: And you think that that explains all of these cases.

Mr. Zagrans: Well, Your Honor, yes, I do because of the nature of Congress' control over whether or not there should be Federal private rights of action.

It is consistent with the Court's implied private right of action jurisprudence from Alexander v. Sandoval, from the Central National Bank of Denver case, et cetera.

Justice Kennedy: But you can't get anything out of the words of the... of the statute arising under to help you.

Mr. Zagrans: No, Justice Kennedy, I don't believe you can because as many of the cases that this Court has decided point out, those words are broad.

They are the exact same language that the constitutional grant of Article III jurisdiction uses, and therefore, they have to be given content in some other fashion.

Justice Kennedy: So just the strength of the Federal interest is the--

Mr. Zagrans: Clearly the--

Justice Kennedy: --the controlling test?

Mr. Zagrans: --the strength of the Federal interest is important, Justice Kennedy, but as Merrell Dow pointed out, the Federal interest is not deemed to be substantial enough, or the Federal question at stake in the case is not deemed to be sufficiently substantial unless Congress has created a Federal private right of action for violation of the particular statute that is being pled.

Justice Breyer: That's what I... I wanted to follow up on this because I think it's a confusion that's embedded in my mind in some of the cases, exactly what Justice Scalia was asking you.

And I'd like you to comment on whether the confusion, as I see it, that's involved here is the words... arises out of the words, private right of action.

Private right of action is where, A, one private person sues B, a non-Federal person, under a Federal statute.

And the reason that can lead to confusion is because where you have a statute that governs the relation between the Federal Government and a private person, the words private right of action are out of place normally, because an action between the two parties takes place usually under the APA.

Now, that's what it seems to me is at work here because the real question is not whether we have a private right of action or APA review.

The question is whether Congress wanted to allow a private person to use this particular Federal provision as the basis for judicial review in a lawsuit.

And if that's the right question, the answer here is obviously it did.

It happens that we would have titled that normally administrative procedural review under the APA.

But whether you call it private right of action or you call it APA review is beside the point.

In Merrell Dow, Congress did not want actions to come into a court under the statute there at issue.

In this case, Congress doesn't mind at all.

In fact, it expects actions to come into court under this statute.

I'd like you to comment on that thought.

Mr. Zagrans: Justice Breyer, I disagree with the premise of that thought.

Congress in section 7433 did provide what I would like to call a Federal private right of action.

It's an action by a private party against the Government, not another private party, for damages in the event the Government violates Federal law in the tax collection process.

What Congress did not do... and the Solicitor General concedes it did not do... is create a Federal private right of action for quiet title claims in disputes between two private parties.

Justice Scalia: How did Congress... surely Congress did not expect any pronouncement of... of title by the Federal Government to be immune from challenge by private individuals.

If Congress did not anticipate that a wrongful assertion of title through the Federal Government could be challenged by a State action of this sort to clear title, how did Congress expect it ever to be challenged?

I mean, I can't imagine how else you... you would attack somebody who... who claims that he has Federal title.

Mr. Zagrans: You would bring, Your Honor, a State quiet title action, as Grable did in Michigan court, and allege, as the basis for the superiority of plaintiff's title in that case, the violation of Federal statute by the Federal agents.

And therefore, the purchaser at this Federal tax sale, Darue Engineering in this case, does not have superior title.

Justice Scalia: Which is what... is... how does that differ from what happened here?

Mr. Zagrans: That's exactly what happened here.

What--

Justice Scalia: That's exactly what happened here.

Mr. Zagrans: --What differs, Your Honor--

Justice Scalia: And... and is that not precisely what Congress expected?

Did not Congress, in fact, approve this manner of challenging the asserted Federal title?

Mr. Zagrans: --I think without question, Your Honor.

What Congress, we are arguing, did not approve is the removal of that State law quiet title action to Federal court under arising-under jurisdiction merely because of the presence of a Federal issue as an element of the State law claim.

Justice Scalia: Well, I think you... you have to acknowledge there are at least three situations then: number one, where Congress did not create a Federal cause of action and did not expect that the States would create a cause of action to vindicate or challenge the asserted Federal interest; number two, where Congress did create a... a Federal cause of action; and number three, falling between the two where Congress did not create a Federal cause of action but, in the nature of things, must have anticipated that there would be State causes of action resting upon the Federal claim.

Mr. Zagrans: Yes, I agree, Your Honor.

And in Merrell Dow, the Court held that in those middle cases--

Justice Scalia: Why was that a middle case?

Mr. Zagrans: --Why was that a middle case?

Because in Merrell Dow, the State of Ohio had product liability tort law--

Justice Scalia: Congress would not have necessarily anticipated that the States would glom onto a Federal criterion for purposes of their State... of their State tort law--

Mr. Zagrans: --But--

Justice Scalia: --whereas here, Congress must have anticipated that quiet title actions of this sort would be brought.

Mr. Zagrans: --Your Honor, when Congress enacted the Federal Food, Drug and Cosmetic Act and did not provide a Federal cause of action for it and yet laid out Federal standards of conduct for labeling of drugs like Bendectin in that case, Congress must have understood that without it creating a Federal private right of action, the States... the State product liability law, State inadequate warning law would subsume claims--

Justice Ginsburg: But it wasn't necessary.

Mr. Zagrans: --for a violation of that Federal standard.

Justice Ginsburg: It was... that's the difference.

The State in Merrell Dow chose to adopt those Federal standards.

It was a choice.

I don't think a State has the prerogative to ignore the effect of a Federal tax sale.

This is not a matter of State choice, and that, it seems to me, is the large difference between the two cases: one, where the State chooses to recognize Federal standards when it doesn't have to, and here, there's no question that the Federal law governs the security of this title.

It's not an option for the State to ignore it.

Mr. Zagrans: Justice Ginsburg, that's an argument that appears in the Solicitor General's brief as well, and I believe that the Solicitor General's focus on a difference in State interests is misplaced when one is dealing with Federal jurisdictional principles.

Instead, I think the focus should be on the expression of the Federal interest, and the best expression of the Federal interest at stake is congressional intent when one is dealing with acts of Congress, Federal statutory law.

Justice Scalia: Right, except the... except you sort of abandon that for constitutional questions for some inexplicable reason.

Mr. Zagrans: Well, Justice Scalia--

Justice Scalia: No, no.

It's an explicable reason to distinguish other earlier cases.

Mr. Zagrans: --That's exactly right.

That's exactly right.

To... to try to... to try to not have to argue that, as Justice O'Connor's initial question to me supposed, that all of that prior case law, prior to Franchise Tax Board and Merrell Dow, somehow would go out the window sub silentio.

And that's not what we are arguing.

Justice Ginsburg: But you... so you are... you are proposing one way to reconcile Kansas City.

You say, well, that's the constitutional claim.

But why isn't it at least as good a reconciliation to say once you go through... there's... there's a Federal claim... there's a Federal question that's dispositive of this case, and you agree that that's so here.

The whole thing turns on the meaning and effect of that notice provision.

So the Federal question is what determines this case, and you satisfy the well-pleaded complaint standard.

Then at that point, when you satisfy the basic Kansas City Title & Trust provisions, then to see which way to swing, why isn't it appropriate to say is this a case where the State has a large interest and the Federal interest is not significant?

Or, on the other hand, is it a case where there is a large Federal interest in seeing how this comes out?

Mr. Zagrans: Because, Justice Ginsburg, I think the focus is on the substantiality of the Federal question and that's where the difference between the two situations you are positing lies.

With constitutional claims, they are almost always substantial Federal questions.

With Federal statutory violations alleged as part of a State law cause of action, Merrell Dow says they are not substantial enough to confer arising-under jurisdiction unless Congress intended to create a Federal private right of action for the violation of that particular statute.

So--

Justice Ginsburg: So you're saying that Merrell Dow did take out those words, or laws, from the Kansas City Title & Trust.

Mr. Zagrans: --Yes, Your Honor.

I... I suppose that would be the effect of how it would have to be read--

But it's not a question of one Federal interest is less than another.

Anytime Federal law is involved, the Federal interest is great.

The issue is for arising-under purposes, for section 1331 purposes, whether the Federal question is substantial or not sufficiently substantial to confer arising-under jurisdiction.

That's the import in our argument and our submission, the holding of Merrell Dow.

Justice Souter: I take it you would agree that we could leave the... the Kansas City formulation, the oral laws, intact and say that the distinguish... that the distinction between Merrell Dow and this case, which leaves it intact is the distinction between in Merrell Dow's case, the adoption by the State of a Federal standard, though the State did not have to adopt it in its tort law, purely optional, and in this case, the application of Federal law which, under the Supremacy Clause, the State had absolutely no choice but to apply.

If we recognize that distinction, we could leave the language in Kansas City exactly where it is, couldn't we?

Mr. Zagrans: No, Justice Souter, I don't think you could because I think to do that would federalize a great many State law causes of action that just happen to have, as an element of them, a violation of some Federal law that, due to the Supremacy Clause, the States would, of course, be obliged to enforce.

Justice Souter: What... what are the... sort of the... the horribles that you have in mind?

Mr. Zagrans: An example would be anytime a tax preparer makes a mistake of Federal income tax law in... in preparing a return for a client and, as a result of that, the client pays more tax than they otherwise should have and they have a claim against the tax preparer either for common law negligence or professional malpractice under State law, but why did the... the preparer commit malpractice?

Because of an interpretation of Federal tax law.

Justice Souter: Yes, but in... in that case, the action is not enforcing the Federal tax law, whereas in this case, the action is, indeed, enforcing the passage of title statute under the... under the tax code.

Mr. Zagrans: The tax code, section 6338(b) specifically provides that title passes under State law, not under Federal law.

The only issue of Federal law here--

Justice Souter: But Federal law is determinative.

Mr. Zagrans: --The only issue of Federal law here that is determinative is whether or not the agents gave proper notice of the seizure.

And interestingly, Justice Ginsburg made reference to the well-pleaded complaint rule.

There is a secondary issue in this case, and that is that the disputed issue of Federal law was not part of the well-pleaded complaint.

There is no dispute that the IRS failed to give the statutorily required notice of personal notice.

Justice Ginsburg: Wasn't that in the... in the pleading?

Mr. Zagrans: It was, indeed, Your Honor.

Justice Ginsburg: Wasn't that in the complaint?

Mr. Zagrans: In the complaint that they failed to do it.

That is undisputed.

The... the defendant concedes it.

The Government concedes it.

What was disputed was that there's a different statute--

Justice Ginsburg: But the... but the well-pleaded complaint doesn't say it has to be a disputed allegation.

It says it must be.

You couldn't state the claim without having the Federal law in the complaint.

Mr. Zagrans: --Agreed, Your Honor.

But some of the cases suggest that the issue of Federal law, in order to be deemed substantial, must be one that is in good faith disputed.

That is to say, undisputed issues of Federal law are not substantial enough by themselves to confer Federal question jurisdiction.

So I point out that the disputed Federal issue from a different statute, 6339(b)(2), is in the nature of a defense that Darue asserted.

Notwithstanding the strict... the lack of strict compliance with the notice provision, 6339(b)(2) allows substantial compliance.

Justice Kennedy: I know you want to reserve your time.

Just one quick thing.

The Government makes the distinction between an action to remove a cloud on title and an action for possession.

Do you agree that this is a... a action to remove a cloud on title?

Mr. Zagrans: Justice Kennedy, under Michigan law, as I understand it, there is no distinction any longer.

The action to determine title under Michigan Compiled Law 600.2932 seems to telescope and subsume both of those common law causes of action into one.

Unless there are further questions from the Court, I would like to reserve the balance of my time.

Argument of Michael C. Walton

Chief Justice Rehnquist: Very well, Mr. Zagrans.

Mr. Walton, we'll hear from you.

Mr. Walton: Mr. Chief Justice, and may it please the Court:

This case involves only questions of Federal law.

It involves no questions of fact.

There are no disputes on any of the facts in this case, and without the Federal law, there would be no controversy, there would be no claim, there would be no cause of action.

The plaintiff's right to relief in the case requires resolution of a substantial question of Federal law in dispute between the parties in this case, which implicates substantial Federal interests.

The attempt to distinguish Merrell Dow... Merrell Dow is, in fact, consistent with Smith/Gully/Franchise Tax in establishing that test.

And the language which the Court utilized in Merrell Dow does not, in any way, abandon those cases or indicate that the logic is inappropriate.

The Merrell Dow place in the evaluation... in the... in the kaleidoscopic situations which were described by Justice Cardoza is in a situation where a Federal standard has been incorporated into the State law cause of action.

That's its place here.

It was, I believe, by this Court an attempt to... to illuminate what would occur in that circumstance, and it is limited to that circumstance.

And the... the question, which is set forth at the beginning in Merrell Dow, about the incorporation... and I'm... I'm at page 805.

The question presented is whether the incorporation of a Federal standard in a State law cause of action, when Congress intended there be no Federal private action for violations of that Federal standard, makes one arising under the Constitution, laws, or treaties of the United States, all three.

Justice Kennedy: Suppose that the plaintiff here alleged that the tax deed were forged, that the occupant simply forged the tax deed and was occupied under forgery.

State cause of action there?

Mr. Walton: I believe that that would be a State cause of action, yes.

Justice Kennedy: All right.

Then suppose he alleged not that it was forged, but that this... that the occupier of the land had... had misconstrued the occupier's rights to bid at the tax sale or... or that there... the tax sale should never have been held.

Then that's a Federal--

Mr. Walton: Then I... excuse me, Your Honor.

Then I believe that would be Federal, yes.

That would require resolution... that would require construction of the Federal statute.

Justice Ginsburg: Suppose--

Justice Scalia: What if it doesn't require construction, but... but what if there is a factual controversy?

Suppose there is a factual controversy as to whether notice was given and notice is required under the Federal statute.

Does... does that factual controversy with regard to an essential element of... of Federal law make it a Federal case?

Mr. Walton: If it's... excuse me, Your Honor.

If it still presents a question of Federal law, yes.

Justice Scalia: Well, it doesn't present any question of law, just a question of fact.

Let's say both parties agree about the law, but the fact that is determinative of nothing, except the operation of Federal law, is at issue.

Now, that... that would normally... under 1331, you'd be able to come into Federal court I suppose just where your only dispute is a factual dispute, but it is a factual dispute regarding the operation of Federal law.

What... what if this were just a factual dispute about the operation of Federal law?

What would we do with it?

Does the fact that it's a factual dispute make it not substantial, not a substantial Federal question?

Mr. Walton: I think that it could still be a substantial Federal question because it could implicate a substantial Federal interest.

Justice Souter: Well, you're taking the... I mean--

Justice Kennedy: --Well, and how is that different from the forgery?

Mr. Walton: I'm sorry, Your Honor.

Justice Kennedy: How... how is that different from the forgery hypothetical?

Mr. Walton: It would... it would then be the same, Your Honor.

Justice Souter: --Well, you're taking the position then, as I understand it... and I... I don't disagree with your... your position necessarily... that its construction or application--

Mr. Walton: Yes.

Justice Souter: --of Federal law.

Mr. Walton: Yes, Your Honor.

That's correct.

Justice Souter: Yes.

Justice Ginsburg: --Suppose the... there was an issue in this case about the plaintiff in the quiet title action having waited too long.

I think here it was 6 years after.

So... so suppose there was a defense of laches under State law.

That could be an issue in an action in this format, quiet title action, which would be governed by State law.

Isn't that so?

Mr. Walton: It would, Your Honor.

Justice Ginsburg: So that case wouldn't be removable then if the... if the defense is laches?

The plaintiff--

Mr. Walton: I believe... excuse me, Your Honor.

Justice Ginsburg: --Yes?

Mr. Walton: I believe that it could be removable because it could still involve the application of the Federal law--

Justice Ginsburg: But you might never get to the Federal law if the determination of 6 years is too long to wait to bring a suit like this.

Then you would remove and you could have an outcome based solely on State law in the Federal court.

You'd have a State claim.

The issue that divides the parties is how long was too long, and the court decides the case on that basis and never gets to the Federal question.

Mr. Walton: --I see, Your Honor, yes.

Justice Ginsburg: So if laches is pleaded as a defense, then it's not removable?

But don't you... well--

Mr. Walton: Your Honor, I'm not certain.

That's... I'm sorry.

I'm not certain.

I believe that it could be removable, still utilizing the application of the Federal law to that circumstance, even in the factual dispute.

Justice Ginsburg: --Well, at what point do you remove the case?

Mr. Walton: I'm sorry.

I don't understand the question, Your Honor.

Justice Ginsburg: A complaint is filed in State court, and you are the defendant and you want to remove that case to Federal court.

Mr. Walton: Yes, Your Honor.

Justice Ginsburg: How much time do you have to remove?

Would it be in advance of your answer?

Mr. Walton: Yes, Your Honor, it would.

Justice Ginsburg: So that in my case, you would remove on the basis of the complaint before you put in your answer, and I think you're--

Mr. Walton: Yes.

Justice Ginsburg: --And then you could get into the Federal court, and the answer could be laches and you're in the Federal court and the only question that's decided is the State law question.

Mr. Walton: Yes, Your Honor.

Justice Scalia: I suppose that happens pretty often in removal... in... in removed cases.

You really don't know what the defense is going to be.

If it's removed on the basis of the well-pleaded complaint, when the defense gets there, it... it may often be a State... a State defense.

Right?

Mr. Walton: That's accurate, Your Honor.

Excuse me.

If there are no additional questions, thank you.

Argument of Irving L. Gornstein

Chief Justice Rehnquist: Very well, Mr. Walton.

Mr. Gornstein, we'll hear from you.

Mr. Gornstein: Mr. Chief Justice, and may it please the Court:

An action arises under Federal law not only when Federal law supplies the cause of action, but also when the plaintiff's right to relief under a well-pleaded State law cause of action necessarily depends on a substantial question of Federal law.

That second category of arising-under jurisdiction is... applies here because petitioner's right to relief under its State law quiet title action necessarily depends on the allegation in its well-pleaded complaint that--

Justice Kennedy: Why wouldn't that same rule apply in a State where there's a common law cause of action for ejectment and it's substantively under State law different from a cloud on the title?

You discuss in your brief, very helpfully I think, the... the Hopkins and the Taylor line of cases.

Mr. Gornstein: --Right.

Justice Kennedy: How is your statement that you just made consistent with the Court's holding under the Taylor line of cases?

Mr. Gornstein: In the Taylor line of cases, what is necessary to... to allege in a well-pleaded complaint for common law ejectment is only that I have title and you're wrongfully here.

You do not have to plead the facts that show superiority of title.

Justice Kennedy: So if we had exactly the facts of this case and there's a common law ejectment, you would not say that it goes to Federal court.

It would stay in State court.

Mr. Gornstein: No.

On Taylor v. Anderson you are not.

But the difference, Justice Kennedy, is in that kind of case, the plaintiff wouldn't be eliminating the cloud on his title.

He would just be getting possession of the property.

So there's always going to be an incentive for the plaintiff who's faced with a document, a deed, that--

Justice Kennedy: Well, I... I suppose that--

Mr. Gornstein: --to... to sue for cloud on title.

Justice Kennedy: --in a common law ejectment action that we are supposing that what's going to come up is the tax sale.

Mr. Gornstein: That's true.

Justice Kennedy: Which is just the facts of this case.

And I suppose that if the plaintiff prevails on the common law cause of action for ejectment, he's got a... a res judicata defense if the... if the present occupier then makes another suit based on the tax deed.

Mr. Gornstein: In the common law cause of action, which isn't available in Michigan, but under the common law cause of action, all was... all that was determined was that you had a right to possession at the time the lawsuit was filed.

Justice Scalia: I guess this... this problem is simply a consequence of the well-pleaded complaint rule.

Mr. Gornstein: It... it is, Justice Scalia.

Justice Scalia: If we... we altered that rule, it would make more sense.

Mr. Gornstein: Well, the... the--

Justice Scalia: This... this kind of peculiarity happens all the time.

Mr. Gornstein: --It does.

Justice Scalia: It depends on whether the Federal question has to be pleaded or not.

Mr. Gornstein: That's correct.

And the justification for the well-pleaded complaint rule that the Court has authored is that it provides a quick rule of thumb for determining at the outset of the litigation which cases are most likely to be ones where the Federal law issues are at the forefront.

Justice Scalia: It's quick and dirty.

We haven't tried to slice the baloney too thin in this area, have we?

We... we--

[Laughter]

Justice Stevens: Mr.--

Justice Scalia: It's enough to be pretty close.

Justice Stevens: --But the way you stated the rule, if I heard you correctly, you're contending that Merrell Dow was incorrectly decided.

Mr. Gornstein: No, because Merrell Dow did not involve a substantial question of Federal law, and that was part of the test that I announced.

And the difference between this case and Merrell Dow is twofold.

First, this case falls within the Hopkins line of cases, and second, this... the role of Federal law in Merrell Dow is completely different than it was in this case and in the Hopkins line of cases.

What was going on in Merrell Dow is that the State adopted a Federal standard as presumptive evidence of State law negligence, and when a State adopts a Federal standard into its own State law standard, the... the action remains one that is fundamentally State law in character.

So the Federal question in the case is not regarded as substantial.

But here, the situation is entirely different.

Chief Justice Rehnquist: We do occasionally review that kind of a decision here.

Mr. Gornstein: You do, Mr. Chief Justice.

And the Court in Merrell Dow drew a distinction between what is substantial enough of a Federal question to trigger arising-under jurisdiction as an original matter and what is substantial enough of a Federal question to obtain this Court's review.

And we're dealing here just with the kind of substantiality that's necessary for original jurisdiction under 1331.

Justice Scalia: I assume that a fact in a particular case which affects nobody else in the country, but which is determinative of the Federal question is never a substantial question of Federal law.

Is it?

So you... you would not agree that... that it's not only the... the content, but also the application of Federal law that's--

Mr. Gornstein: Let me draw a distinction between those cases where the cause of action is supplied by Federal law, in which case factual issues are resolved by Federal courts as long as there's a Federal cause of action and cases where there's not a Federal cause of action.

Then you need... the right to relief has to depend on a substantial question of Federal law.

So if the only issue in the case, in that kind of case, is a factual dispute and everybody agrees on the law, then there's no substantial Federal question, no removal jurisdiction.

But if the right to relief depends on Federal law and the meaning of Federal law and there's also a factual issue in the case, that would be removable.

Chief Justice Rehnquist: If there were only a dispute about when the notice was given and not a factual dispute, then it would not have been removable I take it.

Mr. Gornstein: It's... it's removable if the only question was whether notice was given.

But if the question is was sufficient notice given such as to transfer title under Federal law, then that's removable.

Chief Justice Rehnquist: Well, that's a very... sliced baloney very thin.

[Laughter]

Mr. Gornstein: Well, Mr. Chief Justice, that slices the baloney the way this Court's cases have sliced the baloney, and that... that rule is that there has to be a substantial question of Federal law.

There is one when the action depends on the meaning of Federal law, but not one where everybody agrees on the meaning of Federal law and all that's at issue is a dispute about the facts.

Now, this case, as I said, does fall within the Hopkins line of cases, and in each of those cases, the Court held there was arising-under jurisdiction in a quiet title action where the plaintiff's claim that it had superior title to the land in question depended on the meaning of Federal law.

And, of course, that's true here.

The quiet title action provides the mechanism for review of this question, but the question is entirely one of Federal law as to who has the superior interest in the land, the tax sale purchaser or the taxpayer.

If the Court has no further questions.

Rebuttal of Eric H. Zagrans

Chief Justice Rehnquist: Thank you, Mr. Gornstein.

Mr. Zagrans, you have 4 minutes remaining.

Mr. Zagrans: Thank you, Your Honor.

We agree with General Gornstein's statement of the test.

The test is a State cause of action that necessarily depends on a substantial question of Federal law arises under for 1331 purposes.

The difference between my argument and the argument of respondent is the meaning of substantial or what constitutes substantiality.

And in Merrell Dow, the Court held for all Federal statutory purposes the Federal law is not substantial enough to confer arising-under jurisdiction unless Congress created a private remedy along with the statute.

That's where we part company.

Justice Ginsburg: Mr. Zagrans, there is language in Merrell Dow that makes it sound like it's not as clear and certain as you are urging.

I think that the opinion author said that 1331's domain is shaped by the demands of reason and coherence, dictates of sound judicial policy, and common sense.

And if you just take that last question when the only question is, is mail notice good enough to satisfy the Federal statute, or do you have to have in-hand service?

Doesn't common sense say what that section means should be a Federal question, appropriate for a Federal court to decide?

Mr. Zagrans: I agree, Justice Ginsburg, is... it is a Federal question as a common sense matter and every other way.

It does not follow that it should be decided and adjudicated by a Federal court.

State courts can and do--

Justice Ginsburg: I'm simply making the point that you are reading Merrill Lynch... Merrell Dow in a rather rigid way.

And yet, there is this language in it that says in... in... what was before the court in Merrell Dow made perfectly good sense in that tort action to have it going on in State court.

This is quite a different picture.

Mr. Zagrans: --I think, Your Honor, that Merrell Dow's emphasis on making pragmatic, sensitive judgments, judgments that are both principled and common sense, dictated the holding in that case which was when it's an act of Congress that is being inserted as an element of a State law claim, in order then to bootstrap that State law claim into Federal court on removal jurisdiction, there would need to be a substantial Federal question.

Who decides that?

Congress decides that, both as a matter of judicial power and as a matter of common sense application.

And that's the distinction, by the way, with the Hopkins line of cases.

I don't believe that the Hopkins line is any different from the Smith v. Kansas City Title & Trust line in terms of this emphasis on necessarily depending on a substantial question of Federal law.

The difference in Hopkins is that those were competing Federal land claims.

The only thing in the case was Federal law.

Both sides took their entitlement to the property from Federal mining law, and the Federal issues in that case either were exclusive of all the legal issues or so overwhelmingly predominated over the State law issues, that that was the result in those cases.

Justice Ginsburg: I thought that there was no State law issue in this case, that the whole thing turned on what kind of notion... notice was sufficient to convey title.

Mr. Zagrans: There are many State law issues in this case, Your Honor, in terms of the State quiet title action.

The only disputed issue and the issue that the respondent says the State law claim necessarily depends for its resolution is this disputed issue of Federal law over the notice.

Chief Justice Rehnquist: Thank you, Mr. Zagrans.

Mr. Zagrans: Thank you.

Chief Justice Rehnquist: The case is submitted.

Print this transcript Transcript: 

Argument of Justice Souter

Mr. Walton: The second opinion that I have to announce this morning is in the case of Grable v. Darue.

This case comes to us on writ of certiorari to the Court of Appeals for the Sixth Circuit.

The Internal Revenue Service seized real estate belonging to the petitioner, Grable for unpaid federal taxes and sold it to the respondent, Darue.

Grable brought a State Quiet Title Action in State Court against Darue claiming that Grable still had good title to its old property.

This claim of superior title turned however, on whether the Internal Revenue Service in seizing Grable's property and selling it to Darue had complied with all the requirements set out in the Federal Tax Law.

Darue removed the case to Federal Court because he said the case arose under federal law and for that reason could be in the Federal Court.

The District and Circuit Courts found that although state law provided the cause of action, Grable's claims still did arise under federal law because it turned on the meaning of the federal tax statute.

Because those courts held that the claim arose under federal law, they held that it could be removed from State Court to the Federal Court for trial.

We granted certiorari to resolve the question whether a state law claim can ever arise under federal law if as here Congress has not provided a federal cause of action.

In an opinion filed today with the Clerk of Court, we affirm the Court of Appeals and reaffirm the long established rule that a state law claim requiring the resolution of a disputed and substantial question of federal law can arise under federal law and be heard in a Federal Court as long as exercise in federal jurisdiction is consistent with congressional intent.

This claim which requires resolving an important issue of federal law passes the test.

The argument in this case has centered on our earlier decision in Merrell Dow v. Thompson where we held that there was no federal jurisdiction over a state negligence claim arising from the violation of a federal standard, and we stressed that Congress had no provided a federal cause of action to enforce this standard.

We reach that conclusion because the alternative would have led in a whole other state law claim into Federal Court even the widespread adoption of federal standards as evidence of negligence under state law.

That would have been a sweeping result inconsistent with Congress' failure to welcome those many claims with a private federal right of action.

While Grable also lacks a federal private right of action, jurisdiction here does not go further than Cogress' ambivalence allows.

Because it is the rare state quiet title action that involves a contested issue of federal law as a result and given the important federal issues that the case presents, there is no reason to share it from exercising federal jurisdiction.

Justice Thomas has filed a concurring opinion.