Citation. Grable & Sons Metal Prods. v. Darue Eng’g & Mfg., 544 U.S. 960, 125 S. Ct. 1729, 161 L. Ed. 2d 601, 73 U.S.L.W. 3593 (U.S. Apr. 4, 2005)
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The Internal Revenue Service (IRS) seized land owned by Grable (Plaintiff) to satisfy a delinquent federal tax. Darue (Defendant) acquired a quitclaim deed to the property at a federal tax sale. Plaintiff brought suit claiming it did not receive proper notice of the seizure.
Synopsis of Rule of Law
In cases where a federal cause of action is lacking, federal question jurisdiction may still exist over state law claims that implicate significant federal issues if such jurisdiction will not distort the division of labor between the state and federal courts.
Facts
The IRS seized property in 1994 owned by Grable (Plaintiff) to satisfy an outstanding federal tax bill. Darue (Defendant) then purchased the property at a federal tax sale and received a quitclaim deed from the federal government. Five years later, Plaintiff brought a quiet title action in state court against Defendant claiming that the IRS failed to follow the precise statutory mandate for notification of the seizure of property. Plaintiff argued the statute required personal service of the notification, not via certified mail. Defendant removed the case to federal court on the ground the case depended on an interpretation of a federal tax statute. The district court agreed, denied Plaintiff’s request for a remand, and granted Defendant summary judgment on the merits. The Sixth Circuit affirmed. The U.S. Supreme Court granted certiorari on the jurisdictional question alone to determine if federal question jurisdiction requires the presence of a federal cause of action.
Issue
In cases where a federal cause of action is lacking, may federal question jurisdiction still exist over state law claims that implicate significant federal issues if such jurisdiction will not distort the division of labor between the state and federal courts?
Held
(Souter, J.) Possibly. In cases where a federal cause of action is lacking, federal question jurisdiction may still exist over state law claims that implicate significant federal issues if such jurisdiction will not distort the division of labor between the state and federal courts. Darue (Defendant) was entitled to removal if the case could have initially been brought in federal court. Normally, a federal cause of action or diversity is necessary to invoke subject matter jurisdiction in federal court. This Court has recognized another avenue for federal question jurisdiction. In certain cases, federal question jurisdiction will lie over state law claims that implicate important federal issues. However, granting jurisdiction to such cases must not upset the balance over the division of labor between state and federal courts. The present case clearly calls for federal jurisdiction. The only undisputed legal issue is the interpretation of a federal tax statute. The government has a strong interest in prompt collection of taxes. Also, because the state law claim is a rare, quiet title claim based on a federal seizure of property, granting jurisdiction will not distort the balance of power between state and federal courts. In the Merrill Dow Pharmaceuticals Inc. v. Thompson case, 478 U.S. 804 (1986), the Court held Congress’s failure to provide a federal cause of action for violation of federal warning label statutes indicated congressional intent to bar federal jurisdiction over claims of this type. Merrill Dow involved state tort claims that would inundate the federal courts if the Court granted jurisdiction. However, due to the nature of the claim in this case, there is no fear of distorting the division of labor between state and federal courts. That factor, along with the strong interest of the federal government in the collection of taxes, provides a sound basis for federal question jurisdiction. Affirmed.
Discussion
Grable was a unanimous decision. Those who objected to the granting of federal jurisdiction feared it would open the flood gates to any state law claims that vaguely involved a federal interest, even though lacking a federal cause of action. As noted by the Supreme Court, the limiting factor is the type of case involved. Since this decision, there has been no measurable increase in cases filed alleging federal interest jurisdiction.
