Published on: 3/27/2012
Dean T. Barnhard, Barnes & Thornburg LLP

On January 18, 2012, a unanimous Supreme Court decided an important federal subject matter jurisdiction case which further evidences its now eight-year trend away from historical but artificially cramped understandings of such subject matter jurisdiction.  This trend began with Breuer v. Jim’s Concrete of Brevard, Inc., 538 U.S. 691 (2003), in which the Court held that the 1948 amendments to the general federal removal statute, 28 U.S.C. § 1441(a), trumped the Court’s prior teachings in Shamrock Oil & Gas v. Sheets, 313 U.S. 100 (1941), that federal jurisdictional statutes must be strictly construed against any recognition of federal subject matter jurisdiction, with every presumption indulged in favor of remand of removed actions back to the original state court in which they began.  See Breuer, 538 U.S. at 697-98 (“[W]hatever apparent force this argument [of strict construction against removal] might have claimed when Shamrock was handed down has been qualified by later statutory development.  . . .  Since 1948, therefore, there has been no question that whenever the subject matter of an action qualifies it for removal, the burden is on a plaintiff to find an express exception.” (emphasis added)).

Ironically, just as it took the Court more than half a century to notice the 1948 amendment to the removal statute, the lower courts have almost entirely overlooked Breuer’s reversal of Shamrock, and even today they stubbornly continue to apply its now-debunked artificial presumptions.  E.g., Welsh v. N.H. Ins. Co., ___ F. Supp. 2d ___, 2012 WL 385423, at *1 (D. Ariz. Feb. 7, 2012); Vision Bank v. Bama Bayou, LLC, CA No. 11-0568-KD-M, 2012 WL 592752, at *3 (S.D. Ala. Jan. 30, 2012).  One purpose of this article, therefore, is to encourage DRI’s members to alert the federal courts to this important shift in the law, further demonstrated by the case to be discussed, as successful removal to federal court may often have case-dispositive consequences.

Just three weeks after Breuer, a majority of the Supreme Court continued its trend away from artificially restrictive views of federal subject matter jurisdiction in Beneficial National Bank v. Anderson, 539 U.S. 1 (2003), finding federal question subject matter and proper removal under the National Bank Act, which provoked a tart dissent from Justices Scalia and Thomas, arguing for reinstatement of Shamrock’s restrictive principles.  Id. at 18 and n.2 (Scalia, J. and Thomas, J., dissenting).  Next, the Court decided Grable & Sons Metal Products, Inc v. Darue Engineering & Manufacturing, 545 U.S. 308 (2005), where the Court unanimously retreated away from the restrictive view of federal question and removal jurisdiction established by the Justice Stevens-led majority in Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804 (1986), to hold that “in certain cases federal-question jurisdiction will lie over state-law claims that implicate significant federal issues.” 545 U.S. at 312.

Holding that a particular federal statute need not create a private cause of action in order for a claim to present a substantial and genuine federal question, 545 U.S. at 317-18, thereby eroding restrictive interpretations of the majority’s rule in Merrell Dow, the Court supported its holding by reliance on “the commonsense notion that a federal court ought to be able to hear claims recognized under state law that nonetheless turn on substantial questions of federal law, and thus justify resort to the experience, solicitude, and hope of uniformity that a federal forum offers on federal issues, see ALI, Study of Division of Jurisdiction Between State and Federal Courts 164-166 (1968).” 545 U.S. at 312.  Importantly, the Justice Brennan-led four vote dissent in Merrell Dow had placed heavy reliance on and quoted extensively from exactly this same ALI Study in concluding that a federal question had been correctly presented in that case and that removal, therefore, was proper.  See 478 U.S. at 821, 826-27, 827 n.6 (Brennan, J., joined by White, Marshall and Blackmun, JJ., dissenting).  That the Court would unanimously adopt this authority in Grable & Sons, as the dissent in Merrell Dow had unsuccessfully urged, combined with Justices Scalia’s and Thomas’s abandonment of their call for a return to Shamrock’s restrictive principles in their Breuer dissent, marks a shift in the Court’s jurisdictional thinking perhaps as important as Breuer’s reversal of Shamrock.

Soon after Grable & Sons, the Court reinforced its new and seemingly benign neutrality towards federal subject matter jurisdiction, and its rejection of the old rule that federal courts must decide whether they have subject matter jurisdiction while leaning hard on the jurisdictional scales.  See Exxon Mobil Corp. v Allapattah Servs., Inc., 545 U.S. 546, 558 (2005) (construing the 1990 enactment of 28 U.S.C. § 1367, authorizing supplemental federal subject matter jurisdiction, and holding: “We must not give jurisdictional statutes a more expansive interpretation than their text warrants; but it is just as important not to adopt an artificial construction that is narrower then what the text provides. . . .  Ordinary principles of statutory construction apply.” (citation omitted)).

Against this backdrop, on January 18, 2012, a unanimous Supreme Court in Mims v. Arrow Financial Services, LLC, 132 S. Ct. 740 (2012), found concurrent state and federal subject matter jurisdiction under the federal Telephone Consumer Protection Act of 1991 (“TCPA”), 47 U.S.C. § 227 (1991).  The TCPA was enacted to address “[v]oluminous consumer complaints about abuses of telephone technology . . . because telemarketers, by operating interstate, were escaping state-law prohibitions on intrusive nuisance calls.”  132 S. Ct. at 744.  The TCPA “authorizes States to bring civil actions to enjoin prohibited practices and to recover damages on their residents’ behalf.  . . .  Jurisdiction over state-initiated TCPA, Congress provided, lies exclusively in the U.S. district courts.”  Id.

“Congress also provided for civil actions by private parties seeking redress for violations of the TCPA or of the [Federal Communications Commission’s] implementing regulations.”  Id.  “Mims . . . alleged that Arrow, seeking to collect a debt, repeatedly used an automatic telephone dialing system or prerecorded or artificial voice to call Mims cellular phone without consent,” which allegedly violated the statute and its implementing regulations.  Id. at 746.

With respect to jurisdiction over those citizen suits, however, the statute, perhaps ambiguously, provides: “A person or entity may, if otherwise permitted by the laws or rules of court of a State, bring in an appropriate court of that State” an action to recover actual monetary loss from a violation or “$500 in damages for each such violation, whichever is greater.”  47 U.S.C. § 227(b)(3).  Mims filed his original action in federal district court.  But the district court dismissed the action for lack of federal subject matter jurisdiction, and relying on earlier Eleventh Circuit precedent held that “federal-question jurisdiction under 28 U.S.C. § 1331 was unavailable because Congress vested jurisdiction over private actions under the TCPA exclusively in state courts.”  132 S. Ct. at 747 (internal quotation marks, brackets and citations omitted). 

Mims appealed, and the Eleventh Circuit affirmed.  Id.  The Court granted certiorari to resolve a circuit split on the question whether the statute vested subject matter jurisdiction exclusively in state courts or provided concurrent state and federal subject matter jurisdiction instead.  Id.

The Court began its analysis by stating:  “Federal courts, though courts of limited jurisdiction, in the main have no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not given.”  Id. (internal quotation marks and citations omitted).  This seemingly noncontroversial statement, however, is much more important than at first it seems.

For decades, Supreme Court federal jurisdictional jurisprudence has been dogged by two self-contradicting lines of thought.  On the one hand, albeit most recently in different contexts, the Court has often recognized “the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them.”  Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976) (citations omitted).  On the other hand, the Court in cases like Shamrock Oil & Gas v. Sheets and Merrell Dow Pharmaceuticals v. Thompson (although those cases are no longer good law for reasons previously explained) taught that the federal courts were to strain against any finding of federal subject matter jurisdiction, in large part due to an artificial deference to the plenary jurisdiction of state courts as though the powers accorded to state and federal courts were constitutionally unequal and of differing dignity.

Thus, this statement seems to be the Court’s first effort in recent times to acknowledge these competing principles, and to strike equipoise between them, in the specific context of answering the question whether original federal subject matter is presented in the first instance, as contrasted with the question whether once federal jurisdiction is presented, it should nevertheless not be exercised.

The Court also rejected the argument that “the TCPA, a later, more specific statute, displaces § 1331, an earlier, more general prescription.”  Id. at 748 (citations omitted).  “Section 1331,” the Court held, “is not swept away so easily.”  Id.  “[W]hen federal law creates a private cause of action and furnishes the substantive rules of decision,” the “district courts possess federal federal-question jurisdiction under § 1331 . . . unless Congress divests federal courts of their § 1331 adjudicatory authority.”  Id. at 748-79 (footnote and citations omitted).

On that important point, and reflecting again a policy of jurisdictional neutrality, the Court held: “Divestment of district court jurisdiction should be found no more readily than divestment of state court jurisdiction, given the longstanding and explicit grant of federal question jurisdiction in 28 U.S.C. § 1331.”  Id. at 749 (brackets, citations, and internal quotation marks omitted).

Next, the Court acknowledged that while the TCPA’s private cause of action and jurisdictional provision might be “uniquely state-court oriented, . . . it is a general rule that the grant of jurisdiction to one court does not, of itself, imply that the jurisdiction is to be exclusive.”  Id. (brackets, internal quotation marks and citation omitted).  Noting that Congress demonstrated its ability to vest jurisdiction in one court to the exclusion of another, as it did by providing exclusively federal jurisdiction over state enforcement actions under the TCPA, the Court held that there was simply nothing to indicate, and no reason to infer, that Congress’s grant of optional state court jurisdiction over private causes of action was exclusive of concurrent federal court jurisdiction.  Id. at 749-53.

The Court’s final point, and it was an important one, was to reject Arrow’s argument that to recognize federal question jurisdiction would inundate the federal courts with penny ante original suits and removed claims.  Id. at 753.  The Court explained that “Arrow’s floodgates argument assumes a shocking degree of noncompliance with the Act, and seems to us more imaginary than real.”  Id.  The Court bolstered that conclusion by noting that the federal district court civil filing fee of $350.00 seemed sufficient in itself to deter the initial filing of, or removal of, insubstantial private TCPA claims.  Id.

That the Court unanimously adopted this pragmatic approach to answer the “floodgates” argument punctuates the fact that Justice Scalia’s and Thomas’s dissent in Beneficial National bank v. Anderson, that a neutral approach to the recognition of federal subject matter jurisdiction “effectuates a significant shift in decisional authority from state to federal courts,” 539 U.S. at 18, was the last gasp of the notion that federal courts should, or even may, make decisions about their subject matter jurisdiction while leaning on the scales.  Mims, therefore, represents an important new contribution to the Court’s evolving neutrality to original federal subject matter jurisdiction and removal jurisdiction derived from it.































Dean Barnhard is an attorney with Barnes & Thornburg LLP in Indianapolis.