Thursday, December 29, 2005

Ninth Circuit Holds that § 303(i) of the Bankruptcy Code Provides Complete Preemption

Per In re Miles, --- F.3d ----, 2005 WL 3358843 (9th Cir. Dec. 12, 2005):

In general, “a cause of action arises under federal law only when the plaintiff's well-pleaded complaint raises issues of federal law.” A defense is not part of a plaintiff's properly pleaded statement of his claim. Therefore, “a case may not be removed to federal court on the basis of a federal defense, including the defense of pre-emption, even if the defense is anticipated in the plaintiff's complaint, and even if both parties concede that the federal defense is the only question truly at issue.”

The “complete preemption doctrine” provides an exception to this general proposition. The Supreme Court has concluded that the preemptive force of some federal statutes is so strong that they “completely preempt” an area of state law. “In such instances, any claim purportedly based on that preempted state law is considered, from its inception, a federal claim, and therefore arises under federal law.”

. . .

Like section 301 of the LMRA, section 502 of ERISA, and sections 85 and 86 of the National Bank Act, § 303(i) of the Bankruptcy Code“provide[s] the exclusive cause of action for the claim[s] asserted and also set[s] forth procedures and remedies governing that cause of action.” Therefore, complete preemption is appropriate here. . . . (citations omitted).

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