Friday, February 17, 2006

Sixth Circuit Denies Federal Jurisdiction over State Law Claim Invoking Federal Public Policy

Per Eastman v. Marine Mechanical Corp., --- F.3d ----, 2006 WL 335466 (6th Cir. Feb 15, 2006):

The plaintiff's complaint in this case, in its original iteration, identifies only federal law as the source of the public policy allegedly violated, and it is on that basis that we consider the jurisdictional issue. The plaintiff alleged that his termination violated public policy found in 18 U.S.C. § 287, . . . and in 31 U.S.C. § 3729 . . . . Neither of these two statutes creates private rights of action to enforce individual rights . . . . The absence of a private right of action might seem to be dispositive in light of the Supreme Court's holding in Merrell Dow, in which the Court withheld federal jurisdiction in a state tort action alleging negligence based in part on the misbranding of a drug in violation of federal law . . . .

However, in Grable & Sons, the Supreme Court cautioned that Merrell Dow cannot be read so simply. "Merrell Dow should be read in its entirety as treating the absence of a federal private right of action as evidence relevant to, but not dispositive of, the 'sensitive judgments about congressional intent' that § 1331 requires." Grable & Sons, 125 S.Ct. at 2370. According to Grable & Sons, "arising under" jurisdiction for state-law claims based on an interpretation of federal law can be found in section 1331 only when there is "not only a contested federal issue, but a substantial one"; and "federal jurisdiction is consistent with congressional judgment about the sound division of labor between state and federal courts governing the application of § 1331."

. . .

[T]he meaning of the two statutes cited by the plaintiff is not in serious dispute in this case. It hardly can be disputed that submitting fraudulent claims to the federal government would contravene national policy. Nor can it be gainsaid that government contractors ought not commit felonies or defraud their customer, or that whistleblowers should not be punished for exposing their employer's fraud. Marine Mechanical does not dispute these points. Moreover, Congress' withholding a private right of action from these statutes is an important signal to its view of the substantiality of the federal question involved.

. . .

[W]e conclude that the reference in the plaintiff's complaint to the federal statutes cited as a source of public policy does not create a substantial federal question in this case.

Next, and perhaps more importantly, we find that accepting jurisdiction of this state employment action would be disruptive of the sound division of labor between state and federal courts envisioned by Congress. We address this issue because "the presence of a disputed federal issue and the ostensible importance of a federal forum are never necessarily dispositive; there must always be an assessment of any disruptive portent in exercising federal jurisdiction." Grable & Sons, 125 S.Ct. at 2368.


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