ESTATE OF ROBERT CORNELL, JR.; AUDREY D. BANTOM, аs Personal Representative of the Estate of Robert L. Cornell, Jr.; ANTHONY CORNELL v. BAYVIEW LOAN SERVICING, LLC; THIEN HOANG TRAN
No. 18-1245
United States Court of Appeals for the Sixth Circuit
November 13, 2018
File Name: 18a0251p.06. RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b). Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 2:17-cv-12121—Gershwin A. Drain, District Judge.
COUNSEL
ON BRIEF: Vanessa G. Fluker, VANESSA G. FLUKER, ESQ., PLLC, Detroit, Michigan, for Appellants. Deborah S. Lapin, Martin S. Frenkel, MADDIN, HAUSER, ROTH & HELLER, P.C., Southfield, Michigan, for Appellee Bayview Loan Servicing. Joseph J. Bernardi, BERNARDI, RONAYNE & GLUSAC, P.C., Plymouth, Michigan, for Appellee Thien Hoang Tran.
SUHRHEINRICH, J., delivered the opinion of the court in which BUSH, J., joined. MOORE, J. (pp. 12-28), delivered a separate dissenting opinion.
SUHRHEINRICH, Circuit Judge. This appeal concerns a non-judicial foreclosure under Michigan law. After reviewing the pleadings, we conclude that the district court lacked subject matter jurisdiction to hear the case. Thus, we VACATE the judgment of the district court with instructions to REMAND to Michigan state court.
I. FACTS
Robert Cornell, Jr. (“Robert“) died on July 29, 2015, owing an outstanding mortgage amount of $113,358.12 on his home at 8615 Wisconsin Street in Detroit, Michigan. At the time of Robert‘s death, the monthly mortgage payments on the Wisconsin Street home were up to date. Yet in the five months following his death, the mortgage went unpaid. Defendant Bayview Loan Servicing, LLC (“Bayview“), the mortgage holder, sent a delinquency notice to the home on December 16, 2015, showing an unpaid balance of $5,813.95. On November 3, 2016, Bayview foreclosed on the mortgage and purchased the home by sheriff‘s deed at public auction. Bayview later sold the home to Defendant Thien Hoang Tran (“Tran“).
II. PROCEDURAL HISTORY
On May 25, 2017, Plaintiffs-Appellants Estate of Robert L. Cornell, Jr. (“Estate“), by and through Personal Representative Audrey D. Bantom and Anthony Cornell (collectively, “Plaintiffs“) filed a complaint in Michigan state court alleging four causes of action against Bayview, including most notably a lack of standing to foreclose under the Garn-St. Germain Depository Institutions Act of 1982, codified at
III. ANALYSIS
“Federal courts are courts of limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). The district courts “have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.”
Although no one has specifically addressed subject matter jurisdiction to this point, we have an independent obligation to consider it and may do so sua sponte. Answers in Genesis of Kentucky, Inc. v. Creation Ministries Int‘l, Ltd., 556 F.3d 459, 465 (6th Cir. 2009); see also United States v. Cotton, 535 U.S. 625, 630 (2002) (Subject matter jurisdiction “can never be forfeited or waived.“). We must correct any defect in subject matter jurisdiction regardless of whether the district court considered it, Cotton, 535 U.S. at 630, even if “many months of work on the part of the attorneys and the court may be wasted,” Henderson ex rel. Henderson v. Shinseki, 562 U.S. 428, 435 (2011); see also Hampton v. R.J. Corman R.R. Switching Co., 683 F.3d 708, 711-12 (6th Cir. 2012) (vacating district court‘s grant of summary judgment after determining that Federal Railroad Safety Act did not create a private cause of action).
The face of the complaint references a federal statute, the Garn-St. Germain Act,
With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, or on a residential manufactured home, a lender may not exercise its option pursuant to a due-on-sale clause upon—
- the creation of a lien or other encumbrance subordinate to the lender‘s security instrument which does not relate to a transfer of rights of occupancy in the property;
the crеation of a purchase money security interest for household appliances; - a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
- the granting of a leasehold interest of three years or less not containing an option to purchase;
- a transfer to a relative resulting from the death of a borrower;
- a transfer where the spouse or children of the borrower become an owner of the property;
- a transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property;
- a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property; or
- any other transfer or disposition described in regulations prescribed by the Federal Home Loan Bank Board.
In other words, after the Garn-St. Germain Act, states can only regulate nine types of due-on-sale clauses. In response to the Garn-St. Germain Act, Michigan created its own cause of action for lendees harmed by one of those nine banned due-on-sale clauses. See
To fulfill our obligation of ascertaining subject matter jurisdiction, we must determine whether a private cause of action “arises under” the statute sufficient to confer federal subject matter jurisdiction. The “arising under” gateway into federal court in fact has two distinct paths: 1) “litigants whose causes of action are created by federal law,” and 2) “state-law claims that implicate significant federal issues.” Hampton, 683 F.3d at 711 (quoting Eastman v. Marine Mech. Corp., 438 F.3d 544, 550 (6th Cir. 2006)). Because the Garn-St. Germain Act does not meet this first test, we join those courts, including this one, that have concluded
A. Causes of Action Created by Federal Law
“[T]he vast majority of cases brought under the general federal-question jurisdiction of the federal courts are those in which federal law creates the cause of action.” Hampton, 683 F.3d at 711 (quoting Merrell Dow, 478 U.S. at 808). To determine whether a private cause of action exists, we must begin with the text of the statute. Touche Ross & Co. v. Redington, 442 U.S. 560, 568 (1979). The cause of action may be express, Ohlendorf v. United Food & Commercial Workers Int‘l Union, Local 876, 883 F.3d 636, 640 (6th Cir. 2018), or implied, California v. Sierra Club, 451 U.S. 287, 292–93 (1981).
1. Express Cause of Action
The Garn-St. Germain Act does not create an express cause of action because it does not state, “in so many words, that the law permits a claimant to bring a claim in federal court.” Ohlendorf, 883 F.3d at 640 (quoting Traverse Bay Area Intermediate Sch. Dist. v. Mich. Dep‘t of Educ., 615 F.3d 622, 627 (6th Cir. 2010)). Section 1701j-3(b)(1) tells states that they cannot pass laws that restrict the use of due-on-sale clauses, subject to nine exceptions. And while
2. Implied Cause of Action
Nor does the Garn-St. Germain Act create an implied cause of action. “[T]he fact that a federal statute has been violated and some pеrson harmed does not automatically give rise to a private cause of action in favor of that person.” Touche Ross, 442 U.S. at 568 (quoting Cannon v. Univ. of Chicago, 441 U.S. 677, 688 (1979)). Instead, we must discern congressional intent before implying a remedy. Thompson v. Thompson, 484 U.S. 174, 179 (1988). Absent congressional intent, we may not imply a remedy, no matter how desirable it may be. Bowling Green v. Martin Land Dev. Co., 561 F.3d 556, 559 (6th Cir. 2009).
When Congress wishes to create new rights—even implied rights of action—“it must do so in clear and unambiguous terms.” Gonzaga Univ. v. Doe, 536 U.S. 273, 290 (2002). Congress implies a right of action when its rights-creating language is “clear and unambiguous.” Ohlendorf, 883 F.3d at 641 (quoting McCready v. White, 417 F.3d 700, 703 (7th Cir. 2005)). Thus, the statute must specify the right and identify the beneficiary.2 Id.; see also Alexander v. Sandoval, 532 U.S. 275, 289 (2001) (“Statutes that ban conduct but do not identify specific beneficiaries do not suffice.“). This Act does not do both. Section 1701j-3(a)(1) bans states from passing laws restricting due-on-sale clauses, and
due-on-sale clauses in certain scenarios. Neither section identifies specific beneficiaries. Although mortgagors may benefit, because
This conclusion is consistent with the legislative history, assuming it is even relevant,3 and the traditional areas of state
B. State Law Implicates Substantial Question of Federal Law
State laws that implicate a “substantial question of federal law” also open the door into federal court. See Grable & Sons Metal Prod., Inc. v. Darue Eng‘g & Mfg., 545 U.S. 308, 312 (2005). We ask whether (1) “a state-law claim necessarily raise[s] a stated federal issue,” (2) that is “actually disputed and substantial,” (3) “which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities.” Id. at 314. This pathway is a “slim category,” Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 701 (2006), that is to be read narrowly, Mikulski v. Centerior Energy Corp., 501 F.3d 555, 568 (6th Cir. 2007) (en banc). In this case,
Grable provides direction here. In that case, the Supreme Court held that a state quiet title action implicated a substantial question of federal law because it required the interpretation of the federal tax code. Grable, 545 U.S. at 314–15. The entire dispute would be resolved by interpretation of the federal provision. Id. at 315. The Court reasoned that the question was substantial because the IRS “has a strong interest in the prompt and certain collection of delinquent
Applying three-prong test articulated in Grable makes it clear that no federal question exists here. While the first prong favors jurisdiction because
prongs disfavor jurisdiction. This question is not substantial and creating a gateway into federal court will specifically disrupt the deference Congress gave to state courts to regulate in their traditional areas of expertise.
For the second prong of the Grable analysis, there are four “substantiality” factors to consider: (1) “whether the case includes a federal agency, and particularly, whether the agency‘s compliance with the federal statute is in dispute“; (2) “whether the federal question is important (i.e. not trivial)“; (3) “whether a decision on the federal question will resolve the case (i.e. the federal question is not merely incidental to the outcome)“; and (4) “whether a decision on the federal question will control many other cases (i.e. the issue is not аnomalous or isolated).” Mikulski, 501 F.3d at 570. All four cut against finding substantiality. The first factor “is both objective and apparent, and in this case weighs against characterizing the federal interest as substantial because there is no federal agency in this dispute.”7 Id. (citing Empire, 547 U.S. at 700). The second factor—which focuses on “the importance of the issue to the federal system as a whole,” Gunn v. Minton, 568 U.S. 251, 260 (2013)—also weighs against substantiality. The Garn-St. Germain Act sets a limit on state regulation in one very particular aspect of state property law. See Columbia Gas Transmission, LLC v. Singh, 707 F.3d 583, 590 (6th Cir. 2013) (holding that the second factor “point[ed] away from a substantial federal interest” when the claim involved “a typical state-law property issue“). It is hard to fathom how determining the contours of the nine circumstances in which states may prohibit a lender from enforcing a due-on-sale clause is especially important to the federal government. As for the third factor, even if
we were to consider the parties’ claims, they dispute whether a due-on-sale clause was even used, much less whether it was invoked in violation of the Garn-St. Germain Act‘s nine exceptions. We would not have to interpret federal law to resolve the dispute, and, even if we did, othеr issues would remain. Finally, the fourth factor cuts against substantiality. As the dissent notes, “only two states—Michigan and New Mexico—supply a cause of action for a violation of
As for the third Grable prong, entertaining the state law claim would certainly disturb the balance of state and federal responsibilities. Grable, 545 U.S. at 314. We start by noting, again, that Congress chose not to provide a remedy. Mikulski, 501 F.3d at 573 (explaining while “the absence of a cause-of-action provision is not determinative, [it] certainly provides a starting point for this part of the analysis“). And with good reason—state contract and property law are uniquely within the province of the states. Shifting resolution of such traditional state law claims from state courts to federal courts when the Garn-St. Germain Act does nothing more than articulate a straightforward prohibition to the states, with nine plain exceptions that states are perfectly capable of interpreting, is an unnecessary usurpation of state law domain.8 We see no reason tо manage state-law mortgage cases that would otherwise be barred from federal court because of such a simple determination of law. This case is a far cry from Grable, where the government was concerned about its ability to collect delinquent taxes, 545 U.S. at 315, or Smith v. Kansas City Title & Trust Co., 255 U.S. 180 (1921) where the government‘s constitutional ability to issue bonds was called into question. And while we will not speculate on the amount of cases this would bring into federal court, “even if the actual number of cases proved not to be overwhelming, or even uncomfortably burdensome, it appears unlikely that Congress—through its silence—intended to open the federal court door quite so wide.” Mikulski, 501 F.3d at 574.
The dissent argues “That a federal court would throw the Act‘s interpretation into the hands of the states, and only the states, seems to undermine Congress‘s expressed intent in the text of the Act.” Dissenting Op. at 27. To the contrary, the only expressed intent in the statute is that states cannot ban due-on-sale clauses unless they qualify as one of the nine types listed in
“As every schoolchild learns,” the states “retain substantial sovereign authority” of their own property laws. Gregory v. Ashcroft, 501 U.S. 452, 457 (1991) (citing THE FEDERALIST NO. 45, at 292-93 (James Madison) (C. Rossiter ed., 1961) (“The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people . . . .“)). As courts of limited jurisdiction, we can only entertain questions of state law when Congress has authorized us to do so (i.e. diversity jurisdiction) or when a state law raises a substantial question of federal law. This is not that case.
IV. CONCLUSION
In sum, because the federal statute does not create a cause of action, and the federal issue nested inside Plaintiffs’ state law cause of action is not substantial, the district court lacked subject matter jurisdiction. Therefore, we VACATE the district court‘s judgment with instructions to REMAND the case to state court.
DISSENT
KAREN NELSON MOORE, Circuit Judge, dissenting. This case began as a simple dispute about whether a mortgage lender enforced a due-on-sale clause in a circumstance where federal law prohibited enforcement. But the case has now veered into the significant question of the meaning of the words “arising under” in
I. BACKGROUND
Audrey Bantom is the personal representative for the Estate of Robert Cornell, Jr., and Anthony Cornell (collectively “Plaintiffs“) resided in the Detroit, Michigan home that is at issue in this case. R. 4 (Am. Compl. at 1) (Page ID #23). Bayview Loan Servicing and Thien Hoang Tran are the Defendants. Before his death, Robert Cornell, Jr. entered into a mortgage contract with Bayview, which is a mortgage lending company. Id. at 2 (Page ID #24). Most relevant to the issue of our subject matter jurisdiction, the Plaintiffs allege that Bayview illegally foreclosed on the home upon the death of their father, Robert, in violation of the federal Garn-St. Germain Act,
Perhaps not the most well-known statute, the Garn-St. Germain Act (“the Act“) is nonetheless a fascinating piece of legislation in that Congress chose to interpose in areas of law—property and contract—traditionally regulated by the states. Under the Act, a due-on-sale clause is presumptivеly valid,
The context in which Congress enacted this law sheds light on the Act‘s importance. When Congress passed the statute, state legislatures and state courts restricted the enforcement of duе-on-sale clauses.
II. CLARIFYING THE FOCUS OF SUBJECT MATTER JURISDICTION
A. Federal Question or “Arising Under” Jurisdiction
A defendant can remove a case from state court if the plaintiff could have originally brought the case in federal court.
First, we must carefully dissect the anatomy of this case to determine what is actually relevant for our jurisdictional inquiry. The Plaintiffs bring a claim under
simply a remedial vehicle for a plaintiff to vindicate a right, the contours of which are defined entirely by federal law.
Turning to
The majority misunderstands the importance of this separation between the purported federal question claim and the other purely state-law claims. The majority reasons that, even if this case required the interpretation of federal law, “other issues would remain“; and the majority also believes that hearing the federal question claim here would require federal courts “to manage state-law mortgage cases.” Majority Op. at 10. Thе majority‘s reasoning misses the mark. As explained, federal courts can hear the federal question claim and then decline to hear the other state-law claims. Section 1367 gives federal courts the discretion to do so.
B. The Federal Cause of Action Analysis is Separate and Distinct from Subject Matter Jurisdiction
The question of whether a federal court has subject matter jurisdiction is separate from whether there is a federal cause of action. First, if the two analyses were one and the same, then the longstanding rule that the federal courts can exercise federal question jurisdiction over state-law causes of action would be wrong—and it is not. See Grable & Sons Metal Prods., Inc. v. Darue Eng‘g & Mfg., 545 U.S. 308, 312–13 (2005); ICS, 522 U.S. at 164; Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 199 (1921); Hopkins v. Walker, 244 U.S. 486, 490–91 (1917); cf. De Sylva v. Ballentine, 351 U.S. 570, 571–82 (1956) (deciding on the merits a state-law claim that involved the federal Copyright Act, without discussing jurisdiction), cited in Richard H. Fallon, Jr., et al., Hart & Wechsler‘s The Federal Courts and the Federal System 836 n.6 (7th ed. 2015). Second, Shoshone Mining Co. v. Rutter would be wrongly decided for the opposite reason. There, the Supreme Court held that the federal courts lacked jurisdiction because the claim turned on “a determination of the meaning and effect of certain local rules and customs” related to mining rights, even though the plaintiff pleaded а federal cause of action. Shoshone, 177 U.S. 505, 509–10 (1900) (“A statute authorizing an action to establish a right is very different from one which creates a right to be established. An action brought under the one may involve no controversy as to the scope and effect of the statute, while in the other case it necessarily involves such a controversy, for the thing to be decided is the extent of the right given by the statute.“); see also Shulthis v. McDougal, 225 U.S. 561, 569–70 (1912) (a plaintiff‘s claim to title derived from federal law, but the federal statutes were not subject to “any controversy respecting their validity, construction or effect“). The presence or absence of a federal cause of action is not dispositive, in either direction, for the jurisdictional question.
For a classic example of this separation of remedies and jurisdiction, consider the declaratory judgment statute.
Importantly, the remedial question is easily answered in this case: Michigan law explicitly provides a cause of action.
III. SUBJECT MATTER JURISDICTION IN THIS CASE
Under Article III of the United States Constitution, a federal question exists whenever federal law is a potential ingredient in the litigation. Osborn v. Bank of the U.S., 22 U.S. (9 Wheat.) 738, 823 (1824). Section 1331, however, requires more than a mere federal ingredient. And in this case, federal law is the whole recipe.
For over a century, the Supreme Court has recognized that federal question jurisdiction will lie over state-law claims that have a federal question nested inside the state claim. See, e.g., Grable, 545 U.S. at 312–13; Smith, 255 U.S. at 199; Hopkins, 244 U.S. at 490–91. The test is whether a state-law claim: (1) raises a federal issue, (2) that is “actually disputed and substantial,” and where (3) hearing the state-law claim in federal court would not disturb the federal-state balance of judicial responsibilities. Grable, 545 U.S. at 314. In sum, although a plaintiff cannot use a “federal issue” as an automatic “password” to open federal courts, a federal statute plus a federal cause of action is also not the only combination that unlocks jurisdiction under
The majority engages with this test and Supreme Court precedent in a cursory and conclusory fashion, and it fails to understand the consequences of the Garn-St. Germain Act.
The majority states that “the Garn-St. Germain Act does nothing more than articulate a straightforward prohibition to the states.” Majority Op. at 10. Not so. The Act, in addition to preempting state laws contrary to its provisions,
A more thorough examination of whether the federal question in this case is “substantial” is needed. But as a preliminary matter, no one contests that the Plaintiffs raise a federal issue and that it is actually disputed. As it relates to Count I of the complaint, the applicability of the Act “is actually in dispute,” and “it appears to be the only legal or factual issue contested” for that claim. See Grable, 545 U.S. at 315. Therefore, I will focus on whether this federal question is sufficiently “substantial” (it is), and whether welcoming this claim into federal court would disturb the federal-state balance of judicial responsibilities (it would not).
A. The Substantial Federal Question
1. Whether Federal Law is Directly and Exclusively Relevant
To start, this case should be situated alongside relatively recent Supreme Court precedent that found federal question jurisdiction to lie over a state-law claim. In a sense, the case for subject matter jurisdiction here is even stronger than in Grable and ICS. Grable involved a quiet title action, the outcome of which turned on whether proper notice was given under a federal statute. 545 U.S. at 311. ICS involved federal constitutional claims brought via a cause of action created by state law. 522 U.S. at 164; see also
Supreme Court precedent dоes not draw bright lines when it comes to determining whether a federal question is “substantial” or “essential” to a plaintiff‘s claim. As Justice Cardozo explained, whether a case “arises under” federal law calls for a “common-sense accommodation of judgment to [the] kaleidoscopic situations” that present a federal question. See Gully v. First Nat‘l Bank, 299 U.S. 109, 117 (1936); see also Grable, 545 U.S. at 313. Of course, a federal question could always be “lurking in the background” such that “countless claims of right can be discovered to have their source or their operative limits in the provisions of a federal statute or in the Constitution itself.” Gully, 299 U.S. at 117–18. Thus, “[t]o set bounds to the pursuit [for a substantial federal question], the courts have formulated the distinction between controversies that are basic and those that are collateral, between disputes
that are necessary and those that are merely possible.” Id. at 118.5 One
The Garn-St. Germain Act further bolsters the conclusion that substantive state law is irrelevant because the Act preempts state laws contrary to its provisions.
federal statute created a rebuttable presumption of negligence); Mikulski v. Centerior Energy Corp., 501 F.3d 555, 571 (6th Cir. 2007) (en banc) (violation of a federal statute satisfied some, but not all, of the elements of the state tort claim). Instead, the Plaintiffs in this case allege that Bayview violated a federal law that “is directly drawn into question,” Smith, 255 U.S. at 201, and their claim “turn[s] exclusively on federal law,” ICS, 522 U.S. at 164. In short, the entirety of the Plaintiffs’ claim rises or falls on the answer to the federal question.
The majority misreads—and arguably goes against—Supreme Court precedent in its attempt to distinguish the present case. The majority states that, in this case, “no constitutional issues are at play,” as in ICS, and that the Supreme Court “did not rely on ICS to craft” the Grable test. Majority Op. at 9 n.6. The first part of the majority‘s statement is irrelevant and the second part is false. Grable expressly rejects that, as to the substantiality question,
2. The Importance of the Federal Question to the Federal System as a Whole
Moreover, “[t]he substantiality inquiry under Grable looks . . . to the importance of the issue to the federal system as a whole.” Gunn, 568 U.S. at 260. When we view the substantiality issue through this lens, we focus our sight on a broader picture and not on the parties in this particular dispute. Id. (stating that in Grable, the Court “primarily focused not on the interests of the litigants themselves, but rather on the broader significance of the [federal] question“). The majority here, however, somehow sees only state interests—an odd observation for a statute in which Congress displaced a variety of state laws.
We have previously outlined four factors to consider when assessing the substantiality of a federal interest:
(1) whether the case includes a federal agency, and particularly, whether that agency‘s compliance with the federal statute is in dispute; (2) whether the federal question is important (i.e., not trivial); (3) whether a decision on the federal question will resolve the case (i.e., the federal question is not merely incidental to the outcome); and (4) whether a decision as to the federal question will control numerous other сases (i.e., the issue is not anomalous or isolated).
Mikulski, 501 F.3d at 570. Importantly, none of these factors are dispositive, and not all are equally applicable in any one case. Id. Further, this list of factors is not exhaustive. Id. (“While certain of these factors may be more applicable than others in any given set of circumstances, no single factor is dispositive and these factors must be considered collectively, along with any other factors that may be applicable in a given case.“). I will address each in turn.
Though true that this case does not involve a federal agency and a federal agency‘s compliance with the Act is not in dispute, I question the weight of this factor in light of Gunn, which the Supreme Court decided after our decision in Mikulski. See Gunn, 568 U.S. at 260. If we follow Gunn‘s admonition not to focus solely on the litigants at hand, see id., we should instead consider the federal government‘s interest in the question more generally. Before Congress passed the Garn-St. Germain Act, government-sponsored entities (i.e., the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Corporation) were altering their investment strategies in several states because of uncertainty and a lack of uniformity related to due-on-sale restrictions. Senate Rep. at 21. Both entities are currently under the conservatorship of the Federal Housing Finance Authority.6 While the FHFA and these government-sponsored
question could “claim[] the advantages thought to be inherent in a federal forum.” Id. at 313. If a lack of uniformity among the states motivated Congress to pass this Act, and if we believe that the federal courts provide the advantage of uniform interpretation, then the meaning of the Act “is an important issue of federal law that sensibly belongs in a federal court.” Id. at 315.
We have described the second Mikulski factor—whether the federal question is important and not trivial—as “far more subjective.” 501 F.3d at 570. But in the present matter, we can look to a more objective factor: the statute itself. At risk of belaboring the point, clearly Congress thought this issue was important enough to preempt state laws, including judicial decisions, in areas traditionally reserved to the states.
As stated, however, preemption alone should not be dispositive. In Mikulski, we also noted that “the IRS has never issued a rule” or “ever litigated an action” involving the provision of law at issue. 501 F.3d at 571. Thus, Mikulski‘s analysis of this factor seemed to blend in with the first factor because we continued to reference the IRS‘s role (or lack thereof) in that case. Id. at 570–71. First, unlike Mikulski, the Federal Home Loan Bank Board has promulgated regulations in this area. See supra footnote 3. Second, Mikulski‘s suggestion that more frequent litigation counseled in favor of finding jurisdiction cannot be squared with Grable‘s and Merrell Dow‘s concern about welcoming in a “horde” of state cases into federal court. See Grable, 545 U.S. at 318 (describing Merrell Dow). Grable itself also gives no indication that the IRS had frequently litigated the question at issue in that case. Taken together, the first two factors militate in favor of finding that the federal question here is substantial.
The third and fourth factors—will answering the federal question dispose of “the case” and will it control numerous other “cases“—require some clarification on the meaning of “case(s).” Mikulski, 501 F.3d at 570.
As to the fourth factor, we have to reconcile the “numerous other cases” language with the concern, once again, that we could throw open the courthouse doors to too many state claims. Admittedly, Gunn seems to suggest that “cases” refers to the amount of litigation. See 568 U.S. at 262 (“If the question arises frequently, it will soon be resolved within the federal system, laying to rest any contrary state court precedent; if it does not аrise frequently, it is unlikely to implicate substantial federal interests.“). On this point, Gunn (and Empire) seem to be in tension with Grable. In discussing the federal-state balance issue, Grable thought the fact that “it will be the rare state title case that raises a contested matter of federal law” counseled in favor of welcoming the state-law claim into federal court. 545 U.S. at 315. Assuming for the sake of argument that we should focus on the amount of litigation, this factor leans against substantiality. The Garn-St. Germain Act does not appear to be frequently litigated.
But this factor is not dispositive and there are good reasons to give it less weight in the instant case. For one, hostile state-court precedent caused federal entities to alter their investment strategies in several states, which then motivated Congress to pass the Garn-St. Germain Act in the first place. Senate Rep. at 21. Additionally, even if this issue is not frequently litigated, due-on-sale clauses are common in mortgage contracts, and government-sponsored entities, lenders, and home buyers and sellers may find it beneficial to know how far the Act‘s due-on-sale enforcement exemptions reach. Finally, even if this factor weighs against substantiality, the other considerations already mentioned overwhelm any concern about the low amount of litigation.
In sum, on balance the Mikulski factors weigh in favor of substantiality. Moreover, those factors should be considered alongside the fact that federal law is directly and exclusively relevant to the Plaintiffs’ state-law cause of action. In the “selective process which picks substantial [federal questions] out of the web and lays the other ones aside,” Gully, 299 U.S. at 118, we can pick this federal question out of the web so that it can claim “the advantages thought to be inherent in a federal forum,” Grable, 545 U.S. at 313.
B. The Federal-State Balance
This is not the sort of “garden variety” state case that has raised concerns in prior cases. For example, this case is nothing like Merrell Dow. In that case, the exercise of federal question jurisdiction over state-law tort claims “would have attracted a horde” of cases “raising other state
Indeed, Merrell Dow required clarification. Many commentators noted the confusion and uncertainty the case caused, eventually leading the Supreme Court to correct course in Grable. See James E. Pfander, Principles of Federal Jurisdiction 101 (West 2006) (“Judged solely by the degree to which it brought clarity to jurisdictional law, one might consider the Merrell Dow decision a failure.“); see also Hart & Wechsler at 824–25; Chemerinsky at 306–07. The Court also admitted as much in its most recent decision in this аrea. See Gunn, 568 U.S. at 258 (stating that Grable was “an effort to bring some order to this unruly doctrine“). The confusion, of course, centered on the relevance of the absence of a federal cause of action. Hart & Wechsler at 824-25; Chemerinsky at 306–07.
Meanwhile, the majority resurrects the very confusion Grable sought to correct. One reading the majority opinion might understandably think that the cause of action analysis is determinative to the jurisdictional issue. See, e.g., Majority Op. at 10 (relying on the absence of a cause of action to say that hearing this claim in federal court would “disturb the balance of state and federal responsibilities.“). If the majority‘s analysis on this prong is taken too seriously and applied to its fullest extent, that would effectively undercut over a century of Supreme Court
precedent that recognizes federal question jurisdiction even in the absence of a federal cause of action. But at the very least, the majority goes against Grable‘s reading of Merrell Dow.8
IV. CONCLUSION
The difficulty of the issue of subject matter jurisdiction is matched by its importance. Subject matter jurisdiction is so fundamental that a court can (indeed a court must) rule on the matter sua sponte, without any motions by a party.
This case presents an exceptionally unique cause of action and federal question. But that makes this case a prime candidate to “squeeze[] into the slim category” of state-law claims that “arise under” federal law. See Empire, 547 U.S. at 701;
For the reasons expressed above, I respectfully dissent.
Notes
Pursuant to the Comptroller‘s power to regulate real estate lending activities of national banks, on September 22, 1981, this Office issued a proposed rule . . . to ensure that the congressional intent of encouraging national bank participation in the real estate finance market would not be thwarted by state laws. The proposed regulation would have validated the inclusion
Office of the Comptroller of the Currency, OCC Interpretive Letter (Jan. 13, 1986), 1986 WL 144000 at *1.of due-on-sale clauses in real estate loans held by national banks in their portfolios and would have made such clauses fully enforceable. In addition, the regulation would have revalidated due-on-sale clauses in loans made prior to the rendering of a state court decision or the passage of a state statute impairing the enforceability of such clauses.
Some time after publication of the proposed rule, Congress began consideration of federal preemption of state laws limiting the enforceability of due-on-sale clauses. This deliberation ultimately resulted in section 341 of the Garn-St Germain Depository Institutions Act of 1982 (“Act“) (codified at
12 U.S.C. § 1701j-3 ) that established a federal preemption of state restrictions on the enforcement of due-on-sale clauses.