EVERGREEN SQUARE OF CUDAHY, Grant Park Square Apartments Co. and Washington Square Apartments Co., Plaintiffs-Appellants, v. WISCONSIN HOUSING AND ECONOMIC DEVELOPMENT AUTHORITY, Defendant, Third-Party Plaintiff, Appellee, Cross-Appellant, and Julian Castro, Secretary of the United States Department of Housing and Urban Development, Third-Party Defendant, Cross-Appellee.
Nos. 14-1673, 14-1808
United States Court of Appeals, Seventh Circuit
Argued Nov. 5, 2014. Decided Jan. 12, 2015.
776 F.3d 463
Carl Coan, III, Attorney, Coan & Lyons, Washington, K. Scott Wagner, Attorney, Hale & Wagner, for Plaintiff-Appellant.
Robert A. Jaffe, Attorney, Barry Paul Steinberg, Attorney, Kutak Rock LLP, Washington, for Defendant-Appellee.
Before BAUER, ROVNER, and TINDER, Circuit Judges.
TINDER, Circuit Judge.
Plaintiffs-Appellants Evergreen Square of Cudahy, Grant Park Square Apartments Company and Washington Square Apartments Company are the owners of multi-family housing rental projects in Wisconsin that are assisted by the United States Department of Housing and Urban Development (“HUD“) program under Section 8 of the United States Housing Act of 1937,
Development Authority (“WHEDA“) in
WHEDA filed a motion to dismiss seeking to obtain, among other things, a dismissal of Plaintiffs’ Amended Complaint. Although the motion did not invoke Federal Rule of Civil Procedure 12(b)(1), WHEDA did mention, at least in passing—in two paragraphs of its 30-page supporting memorandum—that the district court was obligated to consider sua sponte the existence of federal jurisdiction, and urged the district court to “specifically find that federal jurisdiction is present in this case before moving on to the merits of this motion.” Perhaps lulled into complacency by the brevity of WHEDA‘s jurisdictional remarks and its failure to cite Rule 12(b)(1), Plaintiffs and HUD each filed briefs without mentioning jurisdiction. The district court then issued a short order dismissing Plaintiffs’ Amended Complaint for lack of subject-matter jurisdiction, and dismissing WHEDA‘s Third-Party Complaint as being wholly dependent upon the dismissed Amended Complaint. Plaintiffs filed a notice of appeal, and WHEDA filed a cross-appeal seeking reinstatement of the Third-Party Complaint in the event Plaintiffs’ Amended Complaint is reinstated.
The district court‘s order, which was entered without the benefit of the parties’ full briefing on jurisdiction, finds itself without an ally on appeal. All parties agree the district court erred and urge us to find that federal-question jurisdiction exists over the claims raised in the Amended Complaint. Technically, the parties’ united front is irrelevant since the parties cannot confer subject-matter jurisdiction by agreement, Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982), and federal courts are obligated to inquire into the existence of jurisdiction sua sponte, Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 593 (2004). While we applaud the district court‘s vigilance in policing jurisdiction, see id., a court in doubt of its own jurisdiction generally is well-advised to solicit the parties’ views on the subject prior to ruling.
We review de novo a district court‘s dismissal of a complaint for lack of subject-matter jurisdiction. Commonwealth Plaza Condo. Ass‘n v. City of Chicago, 693 F.3d 743, 745 (7th Cir. 2012). Plaintiffs invoked jurisdiction pursuant to
In order to decide whether a case falls within this slim category, we must ask whether the “state-law claim necessarily raise[s] a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities.” Grable & Sons Metal Prods., Inc. v. Darue Eng‘g & Mfg., 545 U.S. 308, 314 (2005). Stated differently, “federal jurisdiction over a state law claim will lie if a 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.” Gunn, 133 S.Ct. at 1065. “Where all four of these requirements are met, ... jurisdiction is proper because there is a ‘serious federal interest in claiming the advantages thought to be inherent in a federal forum,’ which can be vindicated without disrupting Congress‘s intended division of labor between state and federal courts.” Id. (quoting Grable, 545 U.S. at 313-14); see also Grable, 545 U.S. at 312 (“The doctrine captures 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.“) (citation omitted). This inquiry rarely results in a finding of federal jurisdiction. See Hartland Lakeside Joint No. 3 Sch. Dist. v. WEA Ins. Corp., 756 F.3d 1032, 1033 (7th Cir. 2014). However, “‘rarely’ differs from ‘never.‘” Id.
In Grable, the Internal Revenue Service seized real property owned by the petitioner to satisfy a federal tax delinquency and gave notice of the seizure to the petitioner by certified mail before selling the property to the respondent. 545 U.S. at 310. Five years later, the petitioner brought a quiet title action in state court claiming that the respondent‘s title was invalid because a federal statute required the IRS to give notice of the seizure and sale by personal service rather than by certified mail. Id. at 311. The respondent removed the case to federal district court on the basis that the petitioner‘s title claim depended on the interpretation of federal tax law. The Supreme Court held that federal “arising under” jurisdiction existed over the petitioner‘s state-law quiet title action. Id. at 320. The Court found that whether the petitioner was given notice within the meaning of the applicable federal statute was “actually in dispute” and an “essential element” of the petitioner‘s quiet title action, and was “an important issue of federal law that sensibly belongs in a federal court.” Id. at 315. The Court stated that the federal government “has a strong interest in the prompt and certain collection of delinquent taxes,” and “because it will be the rare state title case that raises a contested matter of federal law, federal jurisdiction to resolve genuine disagreement over federal tax title provisions will portend only a microscopic effect on the federal-state division of labor.” Id. (internal quotation marks omitted).
Prior to applying the Grable inquiry to the breach-of-contract claims raised in the Amended Complaint, we review two cases which have trod on similar ground. In Price v. Pierce, 823 F.2d 1114 (7th Cir. 1987), we held that prospective Section 8 tenants’ claims for breach of a HAP contract against a property owner and a state
The First Circuit in One & Ken Valley Housing Group v. Maine State Housing Authority, 716 F.3d 218 (1st Cir. 2013), relied upon Price in deciding that federal “arising under” jurisdiction existed over claims that were remarkably similar to the claims raised by Plaintiffs in this case. As in this case, the Ken Valley plaintiffs were apartment owners alleging that a state housing agency breached HAP contracts by refusing to grant annual rent increases pursuant to Section 8. Id. at 220. The First Circuit held that the following “federal ingredients,” in combination, satisfied Grable‘s requirements for federal jurisdiction: the dispute involved a federal contractor‘s implementation of a federal program; the HAP contracts were drafted and approved by HUD and signed by a HUD official; and the plaintiffs alleged that the federal contractor (i.e., the state housing agency) was in breach of the HAP contract by following a guideline promulgated by HUD pursuant to a federal statute. Id. at 224. The Ken Valley court noted that “other Section 8 landlords have brought almost identical actions elsewhere,” and the “outcomes of the legal questions in these cases will dictate whether HUD and/or the public housing agencies that administer Section 8 must pay millions of dollars in additional rents to landlords, which—in turn—could require the agencies to scale back the scope of the Section 8 program.” Id. at 225. This issue “‘is potentially so important to the success of the [Section 8] program—since on its resolution may turn the amount of lower-income housing actually provided—that we believe that Congress, had it thought about the matter, would have wanted the question to be decided by federal courts applying a uniform principle.‘” Id. (quoting Price, 823 F.2d at 1119-20).
We find Ken Valley‘s application of the Grable inquiry to be persuasive. The resolution of this case turns on issues of federal law—specifically, the application of
These issues are “capable of resolution in federal court without disrupting the federal-state balance approved by Congress.” Gunn, 133 S.Ct. at 1065. Unlike a typical
We pause to remark upon an issue raised by WHEDA. If Plaintiffs had initially filed their complaint in Wisconsin state court, and WHEDA in turn filed its third-party complaint against HUD, then HUD would likely have removed the state-court action to federal district court pursuant to
Finally, we consider WHEDA‘s request that we affirm on alternate grounds by finding in its favor on the merits. The district court did not reach the merits, but WHEDA again resorts to what it contends are considerations of judicial economy. Plaintiffs oppose WHEDA‘s request, contending that they have not been afforded a sufficient opportunity to present all of their arguments. After review of the record, we find that, regardless of what considerations of judicial economy might counsel, overriding considerations of justice dictate that we remand for decision on the merits in the first instance by the district court.2 We make the same finding with
For the foregoing reasons, we REVERSE the decision of the district court and REMAND with instructions to reinstate Plaintiffs’ Amended Complaint and WHEDA‘s Third-Party Complaint.