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Federal Courts
University of Pennsylvania School of Law
Goodman, Frank I.

Federal Courts
 
I. Introduction.. 2
II. Federal Question Jurisdiction.. 2
2.     Statutory Issues I (Federal Defenses & Well-Pleaded Complaints). 2
3.     Constitutional Issues (Limits of Art. III Jurisdiction). 4
4.     Statutory Issues II (Indirect Federal Questions). 6
5.     Statutory Issues III (Declaratory Judgments). 9
III. Supplemental (Pendant) Jurisdiction.. 12
1.      Supplemental Claim Jurisdiction Pre-§1367. 12
2.     Pendent Party Jurisdiction Pre-§1367. 12
3.     Section 1367 Supplemental Jurisdiction. 13
IV. Diversity Jurisdiction.. 15
5.     The Effect of Supplemental Jurisdiction and §1367 on Diversity. 18
V. Federal Common Law… 20
2.     Erie and the end of Swift. 20
3.     The New Federal Common Law to Protect Federal Interests. 22
VI. Implied Private Rights of Action.. 24
VII. Sovereign Immunity & the Eleventh Amendment.. 27
2.     Suits Against the State in Federal Court. 28
3.     Suits against State Officers (Partial Exception to Sovereign Immunity). 32
4.     Congressional Abrogation and State Waiver (Consent). 34
5.     Suits Against the State in State Court. 37
VIII. Federal Constitutional Common Law… 40
1.      Remedies Against State And Local Officials under § 1983. 40
d.     Section 1983 and State Sovereign Immunity:42
2.     Implied Remedies Against Federal Officials under Bivens. 43
3.     Official Immunity. 46
e.     CAN YOU SUE DIRECTLY UNDER THE CONSTITUTION to avoid the limitations on §1983 or Bivens?. 47
IX. Abstention.. 47
2.     Abstention in Constitutional Cases. 48
3.     Abstention in Non-Constitutional Cases. 50
4.     Exhaustion of State Administrative Remedies. 52
5.     Injunctions Against Suit I: Anti-Injunction Act. 53
6.     Injunctions Against Suit II: Pending Proceedings & Younger. 54
7.     Injunctions Against Suit III: Threatened Proceedings. 57
8.     Abstention to Avoid Duplicative Litigation. 60
X. Congressional Power to Curtain Jurisdiction.. 60
XI. Federal Habeas Corpus.. 61
 
I. Introduction
 
Background
Congress created the lower federal courts in the Judiciary Act of 1789. 
Why have a system of lower federal courts? UNITE:
                                                              i.      Uniformity:
1.       See Art. III §2, listing head of categories where uniformity was desired.
2.       Why was Supreme Court review inadequate for uniformity goals?
a.       Quicker resolution; perhaps the district courts will think alike since appointed by one president, rather than many more appointed state-by-state; there were also some limitations originally on the jurisdiction of the Supreme Court: no criminal appeals and no review of state court decisions that decide in favor of the federal claim.
                                                            ii.      National Perspective
                                                          iii.      Impartiality:
1.       In diversity cases, don’t want to have judge discriminate against nonresident. Also, appointed and confirmed.
2.       See also evidence of local bias in state court judges = bad for federal issues (See Federalist 81 (Hamilton)).
                                                           iv.      Tenure:
1.       Not swayed as much by public opinion
                                                             v.      Expertise:
1.       More likely to get sound decisions in federal law.
But there are problems with these explanations:
                                                              i.      There basically weren’t even any federal laws, and these lower federal courts weren’t even given jurisdiction over federal cases until 1875 (§1331).
Which considerations are still important today?
                                                              i.      *Uniformity and Expertise are the most important today.
 
II. Federal Question Jurisdiction
 
Summary
“Arising Under,” Art. III and § 1331
                                                              i.      Both use identical language to prescribe the limits federal question jurisdiction.
                                                            ii.      The Art. III constitutional meaning may extend to ALL cases that have a federal question as an ingredient.(Osborn).
                                                          iii.      The §1331 statutory meaning is more limited:
1.       Whether a claim “arises under” federal law is determined by the “well-pleaded complaint” or whether the complaint raises an issue of federal law. (Franchise Tax Board).
2.       But a defense that raises federal questions does not make that case “arise under” federal law for §1331 purposes. (Mottley).
a.       This includes compulsory counterclaims. Holmes Group v. Vornado Air Circulation.
3.       A defendant also cannot remove a case under §1441 without there being a well-pleaded complaint (since under the removal statute the claim has to be one that could have originally been brought in federal court).
                                                           iv.      Reason for keeping the different meanings of “arising under?”
1.       Courts let Congress give a clear statement that they want federal courts to be able to hear the case, so if they do, then it’ll be good under Art. III; if they don’t, it has to fall within §1331.
How do federal question cases get to federal court?
                                                              i.      Suits arise under the law that creates a cause of action, either explicitly or impliedly.
1.       For implied causes of action, see Cort v. Ash, Cannon.
                                                            ii.      Suits can sometimes arise under federal law when the vindication of some state created right necessarily turns on the construction of federal law. (Smith; Franchise Tax Board).
1.       But, this is a rare and fickle exception, because even in Franchise Tax Board the court said there was no jurisdiction, even though central question turned on the meaning of a federal statute.
 
Statutory Issues I (Federal Defenses & Well-Pleaded Complaints)
 
Federal Question Jurisdiction Statute § 1331
                                                              i.      Background
1.       Identically worded to Art. III: “jurisdiction over all civil actions arising under the Const., laws or treaties of the United States.”
2.       Passed in 1875; legislative history indicates that a floor sponsor of the §1331 bill was supposed to take up the full grant of jurisdiction that the Constitution grants, but that’s not what happened.
 
Well-Pleaded Complaint
 
·         Mottley (1908) (well-pleaded complaint rule)
o        ∏s sued RR to give them free lifetime passes, as promised. RR refused, based on a federal law (Hepburn Act) that forbid free passes. ∏ claims (i) statute is inapplicable or (ii) if applicable, it violates due process.
§         So question of federal law introduced by ∆ as a defense, then more federal questions raised by the ∏ in reply. 
o        Dismissed for lack of jurisdiction under §1331
§         Under federal question jurisdiction statute, §1331, ∏’s original statement of her own cause of action must be based on federal law for there to be federal question jurisdiction. The “well-pleaded complaint” rule.
·         Here, the action was based on specific performance—state law. It is not enough that a constitutional/federal statutory defense or issue would later arise. 
 
Getting Around the Well-Pleaded Complaint: How can you get into federal court with just a federal defense?
 
                                                              i.      Removal? (No)
1.       If federal statutory defense raised only in answer, still can’t remove because under the removal statute, §1441, can only remove cases that could have originally been brought in federal court (i.e., cases that satisfy the well-pleaded complaint rule).
 
                                                            ii.      Appellate Jurisdiction of the Supreme Court? (Yes)
1.       Yes. If ∆ raises federal statute as a defense in the state courts and the case went through the state courts and then appealed directly to the Supreme Court, the Supreme Court has jurisdiction over the appeal if there’s a federal issue raised under §1257.
a.       Thus, there’s a different standard for Supreme Court hearing cases on appeal from state court than for a case to be brought originally in federal court.
 
                                                          iii.      Declaratory Judgment? (No)
1.       Can the “∆” preemptively bring a declaratory action as a plaintiff saying in complaint that federal statute doesn’t apply? No.
a.       Skelly Oil: The Declaratory Judgment Act, §2201, was not intended to expand the jurisdiction of the federal courts.   There must be a hypothetical nondeclaratory action that you could have brought for there to be jurisdiction.
                                                                                                                                      i.      But, this may be affected a little bit by Franchise Tax Board.
 
Policy & the Well-Pleaded Complaint Rule
                                                              i.      Amend §1331?
1.       Postpone jurisdiction on motion to dismiss for lack of jurisdiction until ∆ files answer and then trial court should determine if there really is actually federal question.
2.       Provisional grant of jurisdiction if ∏ anticipates a federal defense—the anticipation must be plausible—dismiss later if ∆ doesn’t raise a federal defense/question.
3.       Or, more expansively, unconditional jurisdiction.
                                                            ii.      Amend §1441(a)?
1.       Wechsler argues that the federal claimant ought to be able to remove because federal jurisdiction exists to prevent the underprotection of federal law by state courts.
2.       Amend §1441 so that only the party presenting the federal claim can remove to federal court:
a.       Views the Mottley system as backwards: if the ∏ has a federal claim and chooses state court, the ∆ can remove. But if the ∆ is the one with the federal issue, neither party can remove.
                                                                                                                                      i.      Thus, ∆ would have a right of access to federal court when he has a federal defense. 
                                                                                                                                    ii.      There’s no reason for the ∏ to be able to remove if ∆ raises a federal defense because there’s no danger.
3.       ALI proposal: either party can remove once a federal right has been asserted.
                                                          iii.      Posner’s defense:
1.       It’s in the ∆’s interest to delay. So ∆ would likely introduce federal defenses, even if spurious, because even if a court so finds them, they’d still win because there’d be delay. ∏’s, on the other hand, wouldn’t have that incentive.
 
Constitutional Issues (Limits of Art. III Jurisdiction)
 
Is there any direct jurisdictional power from Art. III?
                                                              i.      Art. III’s “arising under” is more broad than §1331.
                                                            ii.      Occasionally, Congress enacts jurisdictional statutes authorizing the federal courts to hear cases in which the federal law doesn’t figure centrally enough to satisfy §1331,
1.       So that raises questions of the limits of Art. III’s boundaries. So what is the scope of the “arising under” clause of Art. III?
2.       Also the scope of Congress’s Art. I power:
a.       Art. I §8 lets Congress create lower tribunals, but this is unlikely:
                                                                                                                                      i.      It would be overly broad power (even though Art. III jurisdiction in Osborn is very broad)
                                                                                                                                    ii.      And it would intrude upon the power of the state courts
1.       Since Art. III courts were a carefully circumscribed power in Art. III §2 (a compromise), it wouldn’t be right to expand this jurisdiction.
The Osborn Federal Ingredient Test
                                                              i.      Under the Art. III power, a case “arises under” federal law whenever federal law “forms an ingredient of the original cause . . . [even though] other questions of fact or law may be involved in it.”
 
·         Osborn v. Bank of the U.S. (1824)
o        OH statute taxed the Federal Bank, but the Bank refused, saying the tax was unconstitutional. Circuit Court issued injunction following McCulloch in favor of the Bank. An employee of Ohio forcibly took the tax from the Bank. Circuit Court ordered return of the money.
§         At the Supreme Court, the Bank alleges lack of jurisdiction because:
·         (i) Congress didn’t give the Court jurisdiction over the case; and (ii) the Constitution doesn’t allow Congress to give jurisdiction over the case
o        Holding:
§         First, the

1331 if it is apparent from π’s complaint that either:
1.       (i) The π’s cause of action was created by federal law (Holmes’ test in Am. Well Works) OR
2.       (i) If the π’s cause of action is based on state law, that a federal law that creates a cause of action is an essential component of the plaintiff’s claim (Merrill Dow) [1] a.       Grable exception: if embedded FQ in state law claim is “important issue of federal law” ($$) and will settle the dispute w/o disrupting state/federal case law balance, then there can be FQJ.
b.      Look to “an evaluation of the federal interests at stake” under Merrell Dow fn. 12.
                                                                                                                                      i.      This is, however, an unpredictable approach and vests great discretion in the district courts to determine the nature of the federal interest and decide whether that interest merits federal jurisdiction for the state claim.
                                                            ii.      Ask for §1331 FQJ: Federal Cause of Action?[2] If State Cause of Action, embedded federal question that is essential component?[3] Does embedded federal question have its own federal cause of action (even if not sued on)?[4] Is one implied under Cort v. Ash test? If no federal cause of action, is there “an important issue of federal law” that will settle the issue? (Smith/Grable). Will allowing this type of case in federal court disrupt balance of case law between state/fed courts?[5] Or is there, like Smith, a substantial federal issue important (perhaps constitutional issue that would affect the federal checkbook)? 
 
                                                          iii.      Different views of when a case arises under federal law under §1331 (3 options)
1.       Federal cause of action/remedy/claim (Justice Holmes in Am. Well Works, Moore)?   (No.)
2.       Federal cause of action OR federal question (Brennan dissent in Merrill Dow; Smith?)? (No.)
3.       Federal cause of action OR both (i) federal question and (ii) important federal interest in the resolution of the case (Grable; Merrill Dow majority; Smith)? (Yes!)
 
The Insufficiency of Holmes’ Cause of Action Test (or why choice 1 fails)
                                                              i.      Cause of Action Test: A suit arises under the law that creates the cause of action.
1.       Only good for “inclusion” (i.e., saying features of cases that §1331 does include);
2.       not good for an “exclusion” test (i.e., finding out the types of cases that are excluded from §1331).
a.       See Judge Friendly in T.B. Harms v. Eliscu; Franchise Tax Bd.
                                                            ii.      Can see that after Am. Well Works, in Smith how this test was expanded/ abandoned because in Smith, the claim failed the cause of action test, but nonetheless proceeded.
 
Reconciling The Cases:
                                                              i.      Am. Well Works: cause of action test (narrow)
                                                            ii.      Smith: Broader test than Am. Well Works; cause of action OR federal issue appear in complaint and essential to resolution of case.
1.       (But complaint in Am. Well Works would have failed Smith test anyway because no federal issue appeared in well-pleaded complaint; trade libel didn’t need to see if fed. patent was valid).
                                                          iii.      Moore: Contrary to Smith, seems to say state claim with federal issue not enough to get into federal court.
1.       (But strong “pocketbook” federal interest in being able to sell federal bonds in Smith)
2.       Maybe distinct federal interests: Stevens in Merrell Dow says Smith concerned constitutionality of federal statute, while in Moore the violation of a federal standard as an element of state tort didn’t change the state tort nature of the action.
                                                           iv.      Merrell Dow: (Narrows Smith)
1.       (Federal law that’s essential part of state law cause of action must itself provide its own cause of action, not just be a non-actionable regulation)
a.       An “embedded cause of action” test for either an express or implied remedy. If Congress didn’t create a cause of action, it’s virtually conclusive evidence that Cong didn’t want fed jurisdiction to determine whether there’s a state-law remedy, or at least didn’t care how states interpreted that law.
                                                             v.      Grable: (limits Merrell’s limitations on jurisdiction)
Merrell Dow’s rule doesn’t apply if there’s an important national interest
[1] In Smith, arising under jurisdiction under §1331 not when the “federal claim is merely colorable,” but when from the face of the complaint π’s “right to relief depends on the construction or application of the Constitution or laws of the U.S.”
[2] Am. Well Works (Holmes)
[3] Smith
[4] Merrell Dow. Or does federal statute preempt state law remedies?
[5] Grable. This even if Congress has legislated extensively in an area, because such jurisdiction would displace too many cases that are traditionally in state courts. Focus on the nature of the federal interest. Merrell Dow fn. 12.