2.3 Federal Question Jurisdiction

Updated 2013 by Jeffrey S. Gutman

Title 28, Section 1331 of the United States Code confers upon federal district courts jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the United States.” Section 1331, which grants what is commonly referred to as federal question jurisdiction, is an all-purpose jurisdictional statute,1 available regardless of the defendant's identity and, since 1980, is not limited by any requirement that a minimum dollar amount be in controversy.2 Section 1331 (and 28 U.S.C. § 1343) also confers jurisdiction in actions authorized by 42 U.S.C. § 1983 against defendants acting under color of state law.3It is generally available in suits against the federal government and its agencies and in actions against federal officers and employees.4

2.3.A. Article III

Both Article III, Section II of the Constitution and 28 U.S.C. § 1331 use the same phrase, “arising under,” to define federal question jurisdiction, but the Supreme Court has not interpreted the constitutional and statutory language identically. In addressing the constitutional language, the Court has been expansive, broadly interpreting “arising under” to include any case in which a federal question is an “ingredient of the original cause.”5 A federal ingredient is very likely present in any case in which the plaintiff or defendant rests or may rest on a proposition of federal law as part of its claim or defense.6In Osborn v. Bank of the United States, federal law established the Bank of the United States. That ingredient alone made constitutional a statute enabling the bank to sue and be sued on its contracts (generally state law claims) in federal courts. Because the Bank was incorporated by federal law, any case involving it arose under federal law.7 However, the Court subsequently made clear that a statute that does nothing more than to establish federal jurisdiction cannot serve as the federal law under which an action arises.8

The most recent Supreme Court Case confirming Osborn's broad reading of Article III is Osborn v. Haley.9 Osborn sued Haley, a non-diverse federal employee, on state law grounds in state court. Pursuant to the Westfall Act, 28 U.S.C. § 2679(d)(2), the federal government certified that Haley was acting within the scope of his employment, substituted the United States as defendant, and removed the case to federal court.  After the government asserted later that the alleged conduct had not, in fact, occurred (thereby contradicting the basis for the certification), the district court rejected the certification and remanded the case to state court.  The Supreme Court held that the Westfall Act prohibits remand of certified cases to state court. That result naturally led to a question of how Article III would permit the federal court to retain jurisdiction over a case involving state law claims between non-diverse parties when the court concludes that the Westfall certification was improper. Without citing Osborn v. United States, the Court held that whether the employee had Westfall Act immunity was an issue "arising under" federal law for purposes of Article III and that the court had discretion to retain jurisdiction after that issue was decided.10Thus, the court permitted the threshold certification, even an erroneous one, to satisfy Article III in a case otherwise raising only state law issues between non-diverse parties. 

2.3.B. Section 1331

In contrast, since Congress conferred general federal question jurisdiction in 1875, the Court has consistently held that the statutory grant is not as broad as the Constitution would allow.11 The primary test that has been developed for determining whether a civil action arises under the Constitution or laws of the United States for purposes of  § 1331 requires (1) a substantial federal element and (2) such element being part of the plaintiff’s “well-pleaded complaint.”

2.3.B.1. The Substantial Federal Element

A case clearly arises under the Constitution for purposes of § 1331 when the plaintiff claims, for example, that a government officer or employee, acting in his or her official capacity, injures the plaintiff by taking an action that violates a provision of the Constitution or by acting pursuant to an unconstitutional statute. The federal question jurisdiction of the district courts also encompasses causes of action created by federal statutes, such as 42 U.S.C. § 1983, which explicitly authorizes a private remedy for acts that are taken under color of state law and violate rights secured by federal law.12In such cases, federal law both creates the cause of action, supplying the underlying substantive rules that govern defendants’ conduct, and authorizes plaintiffs to enforce the rights created.

As Justice Stevens remarked for the Court in an opinion that canvassed § 1331 jurisprudence, “[t]he ‘vast majority’ of cases that come within this grant of jurisdiction are covered by Justice Holmes’s statement (in American Well Works v. Layne and Bowler Co.) that a ‘suit arises under the law that creates the cause of action.’”13 With rare exceptions,14 then, when a federal law creates the claim and the rules of decision governing it, federal jurisdiction exists.15

The more difficult question is the converse: when, if ever, does federal question jurisdiction exist when the claim is presented under state law?  A recent and colorfully written First Circuit decision refers to these cases as potentially involving "embedded" federal questions.16  The Court interpreted § 1331 more broadly in Smith v. Kansas City Title and Trust Co.17 than it had in American Well Works.  In Smith, a bank shareholder invoked state law to challenge a bank's investment in bonds issued pursuant to an allegedly unconstitutional federal law. The plaintiff therefore sought to prevent the state bank from buying the federal bonds. Justice Holmes, in dissent, argued that the case should be regarded as arising solely under the state law defining the bank’s powers.18 Yet, the Court held that federal jurisdiction existed because the state law claim involved an inquiry into the constitutionality of a federal statute.19

The apparent conflict between Smith and American Well Works made it difficult to determine when federal jurisdiction existed in cases where state-created actions require an interpretation of federal law. Merrell Dow Pharmaceuticals v. Thompson20 added to this complexity. One count of what was otherwise a purely state law tort action against a drug manufacturer for harm caused by one of its drugs alleged that the drug was misbranded in violation of the Federal Food, Drug, and Cosmetic Act and that the violation created a presumption of negligence. The Court joined the parties in assuming that the Act did not create a private cause of action. On that assumption, the Court held that assertion of federal jurisdiction would “flout, or at least undermine, congressional intent”21 not to create a federal remedy for violation of federal law. Thus, Merrell Dow suggested that federal jurisdiction was not available for state law claims that sought to enforce federal standards when there was no federal private right of action to enforce them.  In doing so, Merrell Dow confused the existence of a federal claim or remedy with the presence of federal jurisdiction.

More recently, however, the Supreme Court appears to have confined Merrell Dow to its facts. In Grable and Sons Metal Products v. Darue Engineering,22 the Supreme Court upheld federal jurisdiction in a state law quiet title action that turned entirely on the interpretation of a federal Internal Revenue Service notice provision. As subsequently explained in Gunn, the Court held that federal jurisdiction is appropriate in state law actions if the federal issue is "(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress."23

The Court viewed Merrell Dow’s focus on the absence of a federal private right of action (there was no available federal quiet title claim) as a clue to, but not dispositive of, the interpretation of this federal-state balance. Rather, the Court distinguished Merrell Dow on the ground that finding jurisdiction there would have swept thousands of state negligence per se claims based on federal standards into the federal courts, thereby upsetting the division of labor between federal and state courts. Jurisdiction over quiet title actions arising from federal tax controversies would not similarly affect the “normal currents of litigation.”24 Declaring that Merrell Dow did not, as some courts believed, overrule Smith, the Court reaffirmed the notion that federal courts can hear some state law claims that turn on questions of federal law. The Court thereby adopted a functional test for “arising under” jurisdiction.25

 

Subsequently, in Gunn v. Minton, the Supreme Court clarified the third Grable factor: substantiality. Gunn was a state law legal malpractice claim against an attorney who allegedly failed to make a particular argument on behalf of the plaintiff in a patent infringement claim.26 To prevail, the plaintiff would have to show that he would have won his patent case had his attorney made the argument. The Court observed that resolution of the mertis of the patent law argument was “necessary” and “actually disputed.”27 While the issue was “substantial” in the sense that it was important in the plaintiff's case, the Court held that the issue must be important in terms of “the federal system as a whole.”28 Here, a state court decision on the viability of the unstated patent law argument would neither change the result that the court previously found the patent invalid nor likely have created new law because the state court “can be expected to hew closely to the pertinent federal precendents.”29

2.3.B.2. The Well-Pleaded Complaint

Not only must the action “arise under” the Constitution or federal law, but the federal question must also appear on the face of a “well-pleaded complaint.”30 In practice, this means that plaintiffs may not invoke federal jurisdiction by raising contrived federal issues in the complaint31 or anticipated federal defenses.32 "Nor can federal jurisdiction rest upon an actual or anticipated counterclaim."33 Conversely, the Court has not been willing to allow a plaintiff to avoid federal jurisdiction by artfully omitting a substantial federal question essential to its case.34

Somewhat more difficult are cases in which federal preemption may be a defense to state law claims.  Generally, the well pleaded complaint rule would disregard such a potential federal defense and view such claims as not invoking federal jurisdiction.  However, the Supreme Court has crafted an exception when federal law completely occupies, and thereby preempts, the entire field addressed by the state law claim.  In such cases, these state law complaints are recharacterized as necessarily invoking federal law, thereby permitting the defendant to remove the action to federal court.35


Updated 2013 by Jeffrey S. Gutman