Nicodemus v. Union Pacific CorporationNicodemus v. Union Pacific Corporation
John B. Massopust, Zelle, Hofmann, Voelbel, Mason & Gette, LLP, Minneapolis, MN; Catherine M. Colinvaux, Zelle, Hofmann, Voelbel, Mason & Gette, LLP, Waltham, MA; Kim D. Cannon, Davis & Cannon, Sheridan, WY; and Jordan Lewis, Siegel, Brill, Greupner, Duffy & Foster, Milwaukee, WI, for Plaintiffs-Appellees.
J. Emmett Logan, Stinson Morrison Hecker LLP, Kansas City, MO, John F. Daum, O‘Melveny & Myers, LLP, Los Angeles, CA, Joseph E. Jones, Fraser Stryker Vaughn Mеusey Olson Boyer & Bloch, Omaha, Nebraska, and J. Kevin Hayes, Hall, Estill, Hardwick, Gable, Golden & Nelson, Tulsa, OK, filed and Amici Curiae brief for Sprint, Qwest, Level 3, and Wiltel, on behalf of Appellants.
Andrea Ferster, Rails to Trails Conservancy, Washington, D.C., and Charles H. Montange, Seattle, WA, filed an Amicus Curiae brief for Rails to Trails Conservancy, on behalf of Appellee.
Before TACHA, Chief Circuit Judge, ANDERSON, and EBEL, Circuit Judges.
TACHA, Chief Circuit Judge.
2 Union Pacific then appealed the ruling to this Court. This panel affirmed, concluding that federal-question jurisdiction over state law claims existed only when Congress provided a federal cause of action or intended to provide a federal forum for resolution of the dispute. Nicodemus v. Union Pac. Corp., 318 F.3d 1231, 1238 (10th Cir.2003) (”Nicodemus I“) (citing Merrell Dow Pharm., Inc. v. Thompson, 478 U.S. 804, 814, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986)). Union Pacific sought rehearing en banc, which was granted on April 22, 2003.
3 Befоre the en banc argument took place, however, the parties filed a joint motion asking that the appellate proceedings be abated pending the outcome of class action settlement proceedings in the Seventh Circuit that might moot the issues on appeal. On August 19, 2003, this Court granted the motion. Two years later, in 2005, the Seventh Circuit vacated the nationwide class certification, see Smith v. Sprint Commc‘ns Co., 387 F.3d 612 (7th Cir.2004), cert. denied, ___ U.S. ___, 125 S.Ct. 2939, 162 L.Ed.2d 879 (2005), and thus the settlement proceedings that could have mooted the rehearing en banc fell through. The parties then advised this Court that they were ready to proceed with the previously scheduled rehearing.
4 In the interim, the Supreme Court issued its decisions in Grable & Sons Metal Prods., Inc. v. Darue Eng‘g & Mfg., ___ U.S. ___, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005) and Exxon Mobil Corp. v. Allapattah Servs., Inc., ___ U.S. ___, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005), which addressed the important jurisdictional questions at issue in this case. In response to these cases, Plaintiffs filed a motion requesting this Court to reconsider its decision to rehear the case en banc. Plaintiffs asked this Court to reinstate the panel‘s opinion on federal-question jurisdictiоn, but to remand to the District Court on the basis that diversity jurisdiction existed.1 Union Pacific opposed the motion. We vacated our decision to rehear the case en banc and referred the case back to the original panel to consider the effect of Grable & Sons and Exxon Mobil on the outcome of the proceedings. We take jurisdiction under
I. BACKGROUND
5 District courts have “original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United Statеs.”
6 Over the last century, several principles have developed that guide federal courts in determining whether they have jurisdiction over a state-law claim. First, the well-pleaded complaint rule requires that “the federal question giving rise to jurisdiction must appear on the face of the complaint.”4 Karnes v. Boeing Co., 335 F.3d 1189, 1192 (10th Cir.2003). This rule “makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987).
8 Even if a federal question appears on the face of a well-pleaded complaint, federal jurisdiction is not automatic. It is by now axiomatic that “federal jurisdiction demands not only a contested federal issue, but a substantial one, indicating a serious federal interest in claiming the advantages thought to be inherent in a federal forum.” Grable & Sons, 125 S.Ct. at 2367. Finally,
9 even when the state action discloses a contested and substantial federal question, the exercise of federal jurisdiction is subject to a possible veto. For the federal issue will ultimately qualify for a federal forum only if federal jurisdiction is consistent with congressional judgment about the sound division of labor between state and federal courts governing the application of
§ 1331 .
10 Id.
11 In Merrell Dow, the Court was confronted with a typical negligence action in which the plaintiffs alleged that the defendant drug manufacturer‘s viоlation of a Food Drug and Cosmetic Act (“FDCA“) labeling provision raised a rebuttable presumption of negligence. 478 U.S. at 805-06, 106 S.Ct. 3229. Since Congress did not include a private remedy for misbranding violations under that provision of the FDCA, the Court concluded that Congress implied that “the presence of a claimed violation of the statute as an element of a state cause of action is insufficiently ‘substantial’ to confer federal-question jurisdiction.” Id. at 814, 106 S.Ct. 3229.
12 After the Court‘s decision in Merrell Dow, the circuits were dividеd over the precise effect the case had on federal jurisdiction over state-law claims. Several circuits, including this one, required a finding of a federal cause of action to support the assertion of federal-question jurisdiction over state-law claims. See, e.g., Nicodemus I, 318 F.3d at 1238; Zubi v. AT & T Corp., 219 F.3d 220, 223 n. 5 (3d Cir.2000); Seinfeld v. Austen, 39 F.3d 761, 764 (7th Cir.1994). These courts relied on broad language in Merrell Dow suggesting that “[i]n the absence of a federal private right of action ‘it would flout congressional intent to provide a private federal remedy for the violation оf the federal statute . . . [and] it would similarly flout, or at least undermine, congressional intent to conclude that the federal courts might nevertheless exercise federal-question jurisdiction.‘” Nicodemus I, 318 F.3d at 1237 (quoting Merrell Dow, 478 U.S. at 812, 106 S.Ct. 3229) (alterations in original). In Grable & Sons, the Court granted certiorari to address this jurisdictional question. 125 S.Ct. at 2366.
13 The Court clarified that Merrell Dow cannot be read “as overturning decades of precedent . . . and converting a federal cause of action from a sufficient condition for federal-question jurisdiction into a necessary one.” Id. at 2369-70 (fоotnote omitted). Rather, the absence of a private right of action is “relevant to, but not dispositive of, the ‘sensitive judgments about congressional intent’ that
14 With this framewоrk in mind, we turn to the facts of this case.
II. DISCUSSION
A. Facts
15 Plaintiffs in this case are Wyoming landowners. Union Pacific was granted railroad rights-of-way over Plaintiffs’ property under numerous federal land-grant statutes, which dated from 1852 to 1875. The dispute between the parties arose when Union Pacific entered into agreements with various telecommunications providers in which Union Pacific “licensed” to them the right to install and maintain fiber-optic cables in the rights-of-way over Plaintiffs’ land. Union Pacific receives revenue from these license agreements.
16 Plaintiffs filed suit in the District of Wyoming, alleging Union Pacific‘s actions exceeded the scope of Union Pacific‘s rights under the federal land-grant statute. They claimed that though Union Pacific has an undisputed right to conduct railroad operations along the right of way, Plaintiffs retain the servient tenement in the underlying land for all other purposes. Mr. Nicodemus, as trustee for property owned by the Warren D. Nicodemus Living Trust, sought various forms of relief, including: (1) damages for trespass; (2) damages for unjust enrichment; (3) an accounting and disgorgement of rents and profits; (4) a permanent injunction preventing Union Pacific from further conveying any claimed interest in the land; and (5) a declaratory judgment establishing, inter alia, that Union Pacific‘s interest in the land is limited to that use necessary for the operation of a railroad. The Morris plaintiffs, including John H. Bell Iron Mountain Ranch Company, аdvanced similar claims, and in addition, requested the following: (1) damages for slander of title; (2) damages for inverse condemnation; and (3) an injunction requiring Union Pacific to remove the existing fiber optic cables.
17 Our starting point is to determine whether the well-pleaded complaint raises a disputed issue of federal law, the resolution of which is necessary to grant the relief Plaintiffs seek.6 Plaintiffs’ claims are founded in state law, but, as discussed above, a plaintiff may not circumvent federal jurisdiction by omitting federal issues that are essential to his or her claim. See Schmeling, 97 F.3d at 1345 n. 2. All of Plaintiffs’ claims hinge on whether Union Pacific‘s use of the right-of-way has exceeded the purpose for which it was granted.7 Cf. Markstein v. Countryside I, LLC, 77 P.3d 389, 398 (Wyo.2003) (“An easement is defined as ‘an interest in land which entitles the easement holder to a limited use or enjoyment over another person‘s property.‘“) (quoting Restatement of Property § 450(a) (1944)). To construe the scope of a right-of-way easement, a court must look to the language of the easement to determine the intent of the parties. Id.; see also Edgcomb v. Lower Valley Power and Light, Inc., 922 P.2d 850, 854 (Wyo.1996) (stating that when an easement is obtained pursuant to a grant, the extent of the right depends upon the language of the grant). Thus, the first step in resolving the claims against Union Pacific requires a court to look at the vehicle by which Union Pacific obtained the right-of-way—in this case, the federal-land grant statutes.
18 Plaintiffs argue, however, that the federal issue only arises as a defense to their claims and thus it is an inappropriate basis on which to assume federal-question jurisdiction. On the contrary, to prove their action for unjust enrichment, for example, Plaintiffs must show not only that Union Pacific was enriched, but that “the underlying circumstances, as between the two parties, . . . [is] such that the enrichment is unjust.” Landeis v. Nelson, 808 P.2d 216, 218 (Wyo.1991). Plaintiffs’ specific allegations of unjust enrichment are derived not from the alleged trespass, but from misuse of the right-of-way. The Morrises’ complaint states that Union Pacific was unjustly enriched by its “unlawful use and occupancy of . . . plaintiffs’ . . . land and the retention of rents and other compensation arising from the unlawful use and occupancy of the right-of-way.” Appx. 66. The Nicodemuses allege that “under the laws of the United States” the right-of-way is for railroad purposes and Union Pacific “has no ownership or possessory interest in or right to exercise dominion аnd control over these rights of way beyond that which is necessary for the operation of a railroad.” Appx. 42. The complaint further alleges that Union Pacific has “[w]rongfully claim[ed] an ownership or possessory interest . . . beyond that which is necessary for the limited purpose of operating a railroad over the lands on which [it] currently . . . has a right-of-way. . . .” Appx. 43. Finally it states that by licensing to telecommunications companies the right to bury fiber oрtic cables, it has “unlawful[ly] use[d] and occup[ied] their land,” depriving them of the “rents [and] profits.” To prove that Union Pacific acted unlawfully, Plaintiffs must establish that the right-of-way prohibited the use to which it was put. The federal issue, therefore, arises in Plaintiffs’ case-in-chief, not by way of defense.8 See Drawhorn v. Qwest Commc‘ns Int‘l, Inc., 121 F.Supp.2d 554, 564 (E.D.Tex.2000) (plaintiffs must prove as part of case-in-chief that the railroads had no right to grant easements to telecommunications company to lay fiber optic cаbles on property); Browning v. MCI Worldcom Network Servs., 2002 WL 500584 (D.Kan.2002) (unpublished) (same); In re AT & T Fiber Optic Cable Installation Litigation, 2001 WL 1397295 (S.D.Ind.2001) (unpublished) (same); see also Grable & Sons, ___ U.S. ___, 125 S.Ct. 2363, 162 L.Ed.2d 257 (quiet title action required plaintiff to prove that he was not given proper notice of seizure under federal statute); Kan. Pac. Ry. Co. v. Atchison, Topeka & Santa Fe R.R. Co., 112 U.S. 414, 5 S.Ct. 208, 28 L.Ed. 794 (1884) (quiet title action depends on construction given to federal land grant statutes); Municipality of San Juan v. Corporacion Para El Fomento Economico De La Ciudad Capital, 415 F.3d 145 (1st Cir.2005) (taking jurisdiction over breach of contract action when breach depended on construction of federаl law).
20 Union Pacific argues that there is a substantial federal interest in the railroad rights-of-way held by Union Pacific. In support of this contention, it notes the following: (1) the federal government‘s subsidization of the construction of a transcontinental railroad through the rights-of-way grаnts; (2) the federal government‘s limited right of reverter in the railroad rights-of-way, see
21 We agree that the contested interpretation of the federal land-grant statutes as between these рarties involves a substantial federal issue. Indeed, we acknowledged that these were “considerable federal interests” in Nicodemus I. 318 F.3d at 1237. The statutes at issue granted to Union Pacific the right to construct a railroad and telegraph line in order to “secure the safe and speedy transportation of the mails, troops, munitions of war, and the public stores” to the West. See, e.g., Act of July 1, 1862, ch. 120, § 3, 12 Stat. 489. Under subsequently enacted statutes, the United States has a reversionаry interest in the lands when no longer used for their designated purposes. See
22 Finally, we are confident that providing a federal forum for the resоlution of this issue will not disrupt “the sound division of labor between state and federal courts.” We acknowledge that the type of property dispute at issue has been the recent subject of several proposed class actions. See, e.g., Smith, 387 F.3d 612; Isaacs v. Sprint Corp., 261 F.3d 679 (7th Cir.2001). It will nonetheless be the rare state trespass and unjust enrichment case that so uniquely turns on a critical matter of federal law. Thus, federal jurisdiction to resolve genuine disagreement over the scoрe of a right granted to the railroads pursuant to federal law “will portend only a microscopic effect on the federal-state division of labor.” Grable & Sons, 125 S.Ct. at 2368.
23 In sum, “[g]iven the absence of threatening structural consequences” and the importance for the availability for a federal forum, “there is no good reason to shirk from federal jurisdiction over the dispositive and contested federal issue at the heart of [this] state-law . . . claim.” Id. at 2371.
24 For the foregoing reasons, the judgment of the District Court dismissing the action for lack of subject matter jurisdiction is REVERSED.