Opinion
IP 98-1300-C H/G (Hinshaw)
November 5, 2001
ENTRY ON PLAINTIFFS' MOTION TO REMAND
On September 6, 2001, plaintiffs in the original Hinshaw action, Cause No. IP 98-1300-C, filed a memorandum on federal subject matter jurisdiction that amounts to a motion to remand the action to state court. Defendants oppose remand. As explained below, the court denies the motion to remand.
Whether the removal of the original Hinshaw action to this court was proper at the time or not, plaintiffs have voluntarily amended their complaint since removal (and before moving to remand) in ways that establish both diversity jurisdiction and federal question jurisdiction. Plaintiffs' current efforts to disavow their post-removal amendments show a desire to escape a forum that seems less friendly to their nationwide class action plans after a recent Seventh Circuit decision. Such an escape is not justified. Under these circumstances, a plaintiff "cannot be permitted to invoke the jurisdiction of the federal court, and then disclaim it when he loses." Bernstein v. Lind-Waldock Co., 738 F.2d 179, 185-86 (7th Cir. 1984) (even where original removal was improper and remand had been erroneously denied, district court had jurisdiction after plaintiff voluntarily amended complaint to add claim arising under federal law).
I. Procedural History
This case was originally filed in an Indiana state court, the Hamilton Superior Court, on November 6, 1996. The original plaintiffs were Indiana citizens who were suing ATT for violating their property rights by installing fiber optic cables in railroad or other easements through plaintiffs' property.
Throughout this case, plaintiffs have contended that ATT's cables exceed the scope of whatever easements may have been in place. Defendants removed the case to this court based on diversity jurisdiction. Judge Tinder of this court then granted plaintiffs' motion to add as a defendant ATT Communications of Indiana, Inc., whose presence destroyed complete diversity. See 28 U.S.C. § 1447(e) (court may allow such joinder and then remand to state court). Judge Tinder then remanded the action to the Hamilton Superior Court on April 3, 1997.
After that remand, plaintiffs moved to amend their complaint to seek certification of a nationwide plaintiff class. The state court granted the motion to amend and certified a nationwide plaintiff class of "all owners of land in the United States that is or was subject to an easement for a limited purpose held by a railroad, pipeline or other utility company on which ATT has entered to install or maintain a fiber optic or other telecommunciations cable without obtaining the consent of the owner of the land." The state court certified the class on August 21, 1998.
On September 18, 1998, defendants then removed the case to this court for a second time. Diversity jurisdiction was not available at that time because ATT Communications of Indiana was still a party. The second removal petition asserted that certification of the nationwide class had given this court federal question jurisdiction. Some members of the certified class own property adjoining (or including) the rights of way of various federal land-grant railroads.
Defendants contend that those owners' claims are governed by and arise under federal law because the federal land grant statutes define the scope of the railroads' rights, such as whether the railroads have only easements or limited fee interests. See Kansas Pacific Railroad Co. v. Atchison, Topeka Santa Fe Railroad Co., 112 U.S. 414, 416 (1884) (dispute over title to land that depended on construction of federal statutes granting the land to railroads arose under federal law); see also Northern Pacific Railway Co. v. Townsend, 190 U.S. 267, 271 (1903) (railroad received grant of "a limited fee, made on an implied condition of reverter").
After that second removal in September 1998, plaintiffs did not move to remand. Instead, pretrial activity in this case provided an opportunity for settlement negotiations, initially with respect to abandoned rail lines and then with respect to active rail lines. The court raised questions about subject matter jurisdiction. On April 23, 1999, plaintiffs then stipulated to dismissal with prejudice of their claims against the non-diverse defendant.
Negotiations on abandoned rail lines were proceeding. There was hope that those settlement negotiations would blaze a path for settlement of active rail lines. The pendency of the certified nationwide class served to protect the interests of absent landowners with respect to statutes of limitations. The parties and the court therefore postponed addressing defendants' view that use of the nationwide class in this Hinshaw case was improper. Also, no effort was made to notify class members or to give them an opportunity to opt out of the class.
The state court had certified a class under Indiana Trial Rule 23(B)(1)(a), (B)(1)(b), (B)(2), and (B)(3), which correspond to the parallel provisions of Fed.R.Civ.P. 23(b).
This Hinshaw case essentially became dormant while action progressed on other fronts. With defendants' acquiescence, plaintiffs' counsel filed a new Hinshaw case, Cause No. 99-549, that became the vehicle for settling the Indiana abandoned line claims on the basis of a statewide class. Both sides sought an order from the Judicial Panel on Multidistrict Litigation to allow transfer of other statewide class actions to this court. Fifteen such actions have now been filed and transferred to this court. Four have been settled through final approval on plaintiffs' abandoned lines claims. Others are in progress, notwithstanding conflict over these other issues.
After the MDL process was launched, negotiations progressed toward a possible settlement for a nationwide class of active rail line properties. The parties concluded that settlement would be aided by a court decision on a legal issue affecting many class members. The general issue is whether railroads that obtained their rights of way under federal statutes — especially those enacted to promote construction of western railroads such as the Union Pacific Railroad Act of 1862 and the Northern Pacific Railroad Act of 1864 — obtained rights that would defeat the claims of adjoining property owners. The parties filed and briefed cross-motions for summary judgment. At the hearing on those motions, the court expressed concerns about the fact that the motion papers did not present specific evidence about any particular parcels of property.
Plaintiffs responded by amending their complaint in this action to add as named plaintiffs several owners of property in North Dakota and Montana adjoining these federally-granted railroad rights of way. The "First Amended Nationwide Class Action Complaint" was filed in this action on February 1, 2001.
The parties submitted additional evidence, and the court then took under advisement the cross-motions for summary judgment on the federal land grant issues. The First Amended Nationwide Class Action Complaint does not explicitly invoke federal question jurisdiction, but it alleges that this court has diversity jurisdiction under 28 U.S.C. § 1332.
In early spring 2001, however, the negotiations on a nationwide settlement for active rail lines reached an impasse. ATT then filed a motion to decertify the nationwide plaintiff class that had been certified by the state court in August 1998 before the second removal. A few weeks before the hearing on the motion to decertify the class, the Seventh Circuit decided Isaacs v. Sprint Corp., 261 F.3d 679 (7th Cir. 2001), which reversed an order tentatively certifying a nationwide plaintiff class in a similar case. The court's opinion in Isaacs also emphasized the need for close scrutiny of federal jurisdiction in such cases. Id. at 682-83.
II. The Motion to Remand
Plaintiffs then filed their motion to remand, which is now fully briefed. The court's and the parties' original plan for managing motions practice had been based on a not unreasonable hope of settlement with deliberate speed. That plan is now far off course. The court has already denied without prejudice the pending motions for summary judgment on the federal land grant issue in order to deal with the class certification issue first. The court has in turn postponed further consideration of the class issue pending resolution of the motion to remand and this court's subject matter jurisdiction.
In support of remand, plaintiffs contend that the second removal in September 1998 was improper because there was no basis for diversity or federal question jurisdiction at that time. ATT does not try to defend the propriety of the second removal based on the record as it then existed. ATT argues instead that plaintiffs' more recent actions have cured any jurisdictional or other defect in the removal. ATT relies especially on plaintiffs' dismissal of the non-diverse defendant and their amendment of the complaint to add named plaintiffs whose land adjoins land-grant railroads and whose claims, under ATT's view, invoke federal question jurisdiction.
ATT dropped one footnote in its brief citing dicta in Bergeron v. Pan American Assurance Co., 1997 WL 543099, at *2 (E.D.La. Sept. 3, 1997), but has not pressed the point seriously. In the footnote, ATT argued that, regardless of the facts giving rise to the named plaintiffs' claims at the time of removal, removal was proper because the state court certified a nationwide class that necessarily included land-grant plaintiffs.
Plaintiffs respond that any later developments in this court cannot cure a jurisdictional defect that existed at the time of the second removal. Plaintiffs have asked this court to issue a remand order declaring that all proceedings in this court in this case are "void," including the earlier dismissal of ATT Indiana and all amendments of the complaint (presumably to prevent defendants from immediately removing the action again on the theory that the case as it would then exist in the state court would be removable).
Since ATT has not tried seriously to defend the second removal, the court will not dwell on it. Diversity jurisdiction plainly was not available at that time because a non-diverse defendant was a party. Federal question jurisdiction was problematic at best because no named class representative or other named plaintiff before the court was asserting any claims that implicated the federal land grant issues. The court therefore assumes that, if plaintiffs had moved to remand before dismissal of the non-diverse defendant, the court would have granted the motion.
The controverted issues here are first, whether plaintiffs' own subsequent actions could cure the jurisdictional and removal defects, and second, if so, whether those subsequent actions are in fact sufficient to cure the earlier jurisdictional and removal defects.
III. Whether Later Actions by Plaintiffs Can Cure Earlier Defects
To defeat remand, ATT relies primarily on the Seventh Circuit's decision in Bernstein v. Lind-Waldock Co., 738 F.2d 179, 185-86 (7th Cir. 1984). Bernstein is indeed squarely on point. Plaintiff Bernstein had filed an action against two defendants in state court. Diversity jurisdiction was not available, and the state court complaint did not explicitly seek relief under federal law. One defendant removed under 28 U.S.C. § 1441(c), asserting that the claim against it necessarily arose under federal law (through federal incorporation of the rules of the Chicago Mercantile Exchange).
Bernstein then moved to remand, arguing that the exchange rules were not in fact incorporated into federal law. The district court denied remand. Bernstein then filed an amended complaint that included "an unmistakable federal cause of action against the Exchange." 738 F.2d at 185. After a judgment in favor of defendants, Bernstein appealed and challenged the district court's jurisdiction.
The Seventh Circuit concluded that the original removal had been improper because the original claim in question did not actually arise under federal law. But then, reaching the issue that controls here, the Seventh Circuit held that the district court had jurisdiction to enter its judgment. Bernstein's later amendment of his complaint to assert a federal claim supported continued federal jurisdiction even though the original removal had been improper. The Seventh Circuit wrote:
But after Bernstein's motion to remand was denied, he threw in the towel, as it were, and filed an amended complaint in federal court that included an unmistakable federal cause of action against the Exchange. The amended complaint was thus within the original jurisdiction of the federal district courts and it makes no difference that it was filed only because Bernstein's previous suit had improperly been removed. If he was convinced that the original action was not removable he could have stuck by his guns and we would have vindicated his position on appeal. But once he decided to take advantage of his involuntary presence in federal court to add a federal claim to his complaint he was bound to remain there. Otherwise he would be in a position where if he won his case on the merits in federal court he could claim to have raised the federal question in his amended complaint voluntarily, and if he lost he could claim to have raised it involuntarily and to be entitled to start over in state court. He "cannot be permitted to invoke the jurisdiction of the federal court, and then disclaim it when he loses." Brough v. United Steelworkers of America, 437 F.2d 748, 750 (1st Cir. 1971); see also Illinois ex rel. Barra v. Archer Daniels Midland Co., 704 F.2d 935, 939 (7th Cir. 1983).738 F.2d at 185-86 (emphasis added). Accord, Chabner v. United of Omaha Life Ins. Co., 225 F.3d 1042, 1046 n. 3 (9th Cir. 2000) (faulty removal based on diversity was cured after plaintiff amended complaint to add federal claim); Sigmon v. Southwest Airlines Co., 110 F.3d 1200, 1202-03 (5th Cir. 1997) (questionable removal was cured by plaintiffs when they voluntarily amended complaint to assert claim plainly arising under federal law); Cades v. H R Block, Inc., 43 F.3d 869, 873 (4th Cir. 1994) (same); Brough v. United Steelworkers of America, AFL-CIO, 437 F.2d 748, 750 (1st Cir. 1971) (plaintiff waived objection to improper removal by amending complaint to assert federal claim; district court had jurisdiction to decide that claim); In re Exxon Valdez, 1995 WL 328493, *3-5 (D.Alaska May 16, 1995) (improper removal later cured by dismissal of non-diverse parties).
In response to this line of cases, plaintiffs contend that ATT's reliance on those cases cannot survive the Supreme Court's decision in Caterpillar Inc. v. Lewis, 519 U.S. 61 (1996). Plaintiffs contend that Lewis makes Bernstein and the similar appellate cases distinguishable because judgments had already been entered in the district courts. (As for the district court case, In re Exxon Valdez, plaintiffs contend it is simply wrong.)
In Lewis, a defendant in a state court action removed the case to federal court, seeking to invoke diversity jurisdiction after a preliminary settlement with a non-diverse defendant. The plaintiff moved to remand based on a lack of complete diversity. The district court improperly denied the motion to remand. After the improper denial, the non-diverse defendant finally dropped out of the case for good. The case proceeded to trial and resulted in a judgment for the remaining defendant, Caterpillar, which had diverse citizenship. The plaintiff appealed, arguing that the federal district court never had jurisdiction. The Sixth Circuit agreed with the plaintiff and vacated the judgment.
The Supreme Court unanimously reversed and reinstated the judgment for Caterpillar. The Supreme Court reasoned that the jurisdictional flaw had been corrected by the time the judgment was entered. 519 U.S. at 73; accord, Grubbs v. General Electric Credit Corp., 405 U.S. 699, 700 (1972) (erroneous removal need not cause destruction of final judgment if requirements of subject matter jurisdiction are satisfied when judgment is entered).
The Lewis Court considered the plaintiff's argument that its decision would invite disregard for the jurisdictional and procedural requirements for removal. In a passage relied upon by plaintiffs in this case, the Lewis Court wrote: "These arguments are hardly meritless, but they run up against an overriding consideration. Once a diversity case has been tried in a federal court, with rules of decision supplied by state law under the regime of Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), considerations of finality, efficiency, and economy become overwhelming." 519 U.S. at 75.
Plaintiffs read this and other passages emphasizing the trial and entry of judgment as limiting the rule of Lewis to cases in which judgment has already been entered when a decision is made. Plaintiffs also read Lewis as allowing only appellate courts reviewing final judgments, not district courts before judgment, to treat defective removals as having been cured by later actions. There is case law to that effect. See Waste Control Specialists v. Envirocare of Texas, Inc., 199 F.3d 781, 785 (5th Cir. 2000) (vacating Rule 12(b)(6) dismissal and remanding to state court where plaintiff had added a federal claim following the denial of its remand motion; under Lewis and earlier Fifth Circuit precedent, final judgment on the merits is a prerequisite to post-removal perfection of jurisdiction); Prize Frize, Inc. v. Matrix (U.S.), Inc., 167 F.3d 1261, 1265-66 (9th Cir. 1999) (removal defect would have been cured if district court's Rule 12(b)(6) dismissal had been affirmed, but was not treated as cured where appellate court reversed dismissal, undoing the judgment on the merits); Parrino v. FHP, Inc., 146 F.3d 699, 703 n. 1 (9th Cir. 1998) (affirming judgment on merits after removal defect had been cured, but stating that Lewis allows only courts of appeals, not district courts, to treat such defects as cured); see also Rudow v. Monsanto, 2001 WL 228163, at *3-4 (N.D.Cal. March 1, 2001) (remanding action to state court where court became aware that jurisdiction did not exist at the time of removal; prior to remand, diversity jursidiction had been perfected by the stipulated dismissal of non-diverse defendant); Vasura v. ACandS, 84 F. Supp.2d 531, 536 (S.D.N.Y. 2000) (same).
This court does not read Lewis as so limited, and the case for remand here is even weaker than it was in Lewis. The plaintiff in Lewis at least did everything to defeat removal he possibly could as soon as he could. Plaintiffs in this case, by contrast, took steps to provide for both diversity jurisdiction (by dismissing the non-diverse defendant after removal) and federal question jurisdiction (by adding federal claims to their complaint — as in Bernstein and Chabner — by naming plaintiffs whose claims arise under federal land grants, as discussed below).
The court also does not read Lewis or Bernstein as limiting to only the courts of appeals after judgment has been entered the power to consider post-removal actions by plaintiffs creating federal jurisdiction. Neither decision imposes such a limit explicitly. The Seventh Circuit certainly did not suggest in Bernstein that the district court had erred by failing to remand the case after the plaintiff had amended the complaint to plead a federal claim. Instead, the court wrote, without further qualification: "once he decided to take advantage of his involuntary presence in federal court to add a federal claim to his complaint he was bound to remain there." 738 F.2d at 185.
Moreover, the reasoning of both Lewis and Bernstein extends to district courts even before the formal entry of final judgment. Suppose, for example, that plaintiff Lewis first raised the issue after an adverse verdict at trial, but before the judge had actually entered final judgment. Surely the result would be the same — no remand. The "considerations of finality, efficiency, and economy" from Lewis would still weigh just as heavily against a remand even without a final judgment.
Or suppose that the plaintiff first raised the issue while the jury was deliberating, or in the midst of trial after the jury heard evidence that crippled his case. The Supreme Court's opinion in Lewis offers no reason to think that the decision about remand should be any different in those circumstances. See 519 U.S. at 72-73, discussing Grubbs v. General Electric Credit Corp., 405 U.S. 699 (1972) (objection to removal waived when first raised on appeal). In the midst of trial or jury deliberations, the same considerations of finality and the same dangers of forum-shopping (discussed by the Seventh Circuit in Bernstein) apply with almost equal force. The situation would be essentially the same if the plaintiff first raised the issue after a pretrial decision that made trial prospects appear grim.
Or suppose, as in this case, the plaintiffs first raise the improper removal issue only after a decision from the relevant federal court of appeals casts a pall on their plan to maintain a nationwide class action. Again, the same types of considerations apply. A plaintiff who has acted to ensure that the federal court has jurisdiction may not later, when things appear to be going badly, try to turn back the clock and insist on remand. That sort of hedging of bets is exactly what the Seventh Circuit prohibited in Bernstein. See 738 F.2d at 185-86. Yet a rule that limits the rule in Lewis to appellate courts after final judgment is an open invitation to such maneuvers.
In addition, while finality on the merits is not at issue here, considerations of judicial efficiency and economy are compelling in this case. Plaintiffs commenced this action in state court in 1996. Some five years later, it would be an anomalous result to remand the case a second time while the pleadings themselves establish federal jurisdiction, so that the case could immediately be removed again.
Plaintiffs have anticipated that possible result and seek to avoid it by having this court declare "null and void" everything that has happened in this case since the 1998 remand, including the plaintiffs' own dismissal of the non-diverse defendant and plaintiffs' own amendment to their complaint that added the claims that arise under federal law. In the event of a remand, it is not at all clear that this court would have the power to issue such a declaration. Plaintiffs themselves have pointed out the Supreme Court's dictum in Ayres v. Wiswall, 112 U.S. 187, 190-91 (1884): "It will be for the state court, when the case gets back there, to determine what shall be done with pleadings filed and testimony taken during the pendency of the suit in the other jurisdiction."
None of this is to say that a court may exercise subject matter jurisdiction when none exists. See Hurley v. Motor Coach Industries, Inc., 222 F.3d 377, 379 (7th Cir. 2000) ("true jurisdictional flaws are nonwaivable and can be raised at any time"). "A court that does not have jurisdiction cannot assume it, however worthy the cause." In re Brand Name Prescription Drugs Antitrust Litigation, 248 F.3d 668, 670 (7th Cir. 2001). But when the jurisdictional defect has already been cured by the voluntary actions of the same parties seeking remand, nothing in Lewis or the remand statutes requires a remand of a case that falls within the district court's jurisdiction at the time remand is sought. Even 28 U.S.C. § 1447(c), upon which plaintiffs rely here, addresses only the present tense: "If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." Accordingly, as explained in the next section of this entry, at this time and at the time remand was sought, this court does not and did not lack subject matter jurisdiction in this case. Remand therefore is not required.
Plaintiffs have also tried to suggest that their dismissal of the non-diverse defendant and their amendment to the complaint were not voluntary because they expected ATT to settle or because the court suggested such amendment. The suggestion is not persuasive. The parties were negotiating, but there is no claim that a settlement had actually been reached. Also, if the plaintiffs had wanted to avoid raising claims of named plaintiffs adjoining land-grant railroads, they were free to do so.
IV. Subject Matter Jurisdiction
A. Diversity Jurisdiction
Diversity jurisdiction is available under the First Amended Nationwide Class Complaint, as plaintiffs themselves allege in that complaint. Diversity of citizenship is complete as between defendants and all named class representative plaintiffs. The complete diversity requirement in class actions is based on the citizenship of the named plaintiffs at the time the action is filed. See Gibson v. Chrysler Corp., 261 F.3d 927, 931 n. 2 (9th Cir. 2001) (affirming fee award after improper removal). The citizenship of unnamed class members is disregarded. Id., citing Supreme Tribe of Ben-Hur v. Cauble, 255 U.S. 356, 366-67 (1921).
The amount in controversy requirement also appears to be satisfied, as plaintiffs themselves alleged, although the court holds this issue in abeyance pending a further hearing on the matter. If the claim of one named class representative places in controversy an amount in excess of $75,000, exclusive of interest and costs, that is sufficient to give this court jurisdiction over that plaintiff's claim. The court may then exercise supplemental jurisdiction over the claims of all other class members. See Rosmer v. Pfizer Inc., 263 F.3d 110, 114 (4th Cir. 2001), citing Stromberg Metal Works, Inc. v. Press Mech., Inc., 77 F.3d 928, 930-31 (7th Cir. 1996) (stating that supplemental jurisdiction applies to class actions); accord, Gibson v. Chrysler Corp., 261 F.3d 927, 933-34 (9th Cir. 2001) (same); In re Brand Name Prescription Drugs Antitrust Litigation, 123 F.3d 599, 607 (7th Cir. 1997) (same); In re Abbott Labs., 51 F.3d 524, 528-29 (5th Cir. 1995) (same), aff'd by an equally divided court sub nom. Free v. Abbott Labs., 529 U.S. 333 (2000). Contra, Trimble v. Asarco, Inc., 232 F.3d 946, 962 (8th Cir. 2000) (holding that each member of a class who does not meet the jurisdictional amount must be dismissed from the case); Meritcare Inc. v. St. Paul Mercury Ins. Co., 166 F.3d 214, 218 (3d Cir. 1999) (same); and Leonhardt v. Western Sugar Co., 160 F.3d 631, 640 (10th Cir. 1998) (same).
The amount in controversy requirement may be satisfied by showing that providing injunctive or declaratory relief to one named plaintiff would cost the defendant more than the jurisdictional amount. In re Brand Name Prescription Drugs Antitrust Litigation, 123 F.3d at 610; McCarty v. Amoco Pipeline Co., 595 F.2d 389, 391-92 (7th Cir. 1979); see also Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 347 (1977) (applying amount in controversy requirement to injunctive and/or declaratory relief). This approach does not allow mere aggregation of the costs of providing injunctive relief to many plaintiffs, but where relief for one plaintiff would impose direct costs on the defendant of more than $75,000, a prayer for such relief may satisfy the amount in controversy requirement.
In the First Amended Nationwide Class Complaint, plaintiffs seek damages for trespass, unjust enrichment, and slander of title. On behalf of the Indiana class members, plaintiffs also seek treble damages and attorneys' fees pursuant to Indiana Code § 34-4-30-1. In addition, plaintiffs seek at least a declaration that ATT has no title to the rights of way and no right to exercise dominion and control over them. Even if plaintiffs have not yet requested injunctive relief to remove the cables, which would impose substantial costs on ATT, such relief appears to be "other appropriate relief" that might be justified under the federal Declaratory Judgment Act. See 28 U.S.C. § 2202.
Based on these several categories of relief sought and considering the value of the abandoned line settlements, it appears likely that the jurisdictional minimum is met with respect to at least one class member. Plaintiffs have not argued to the contrary except in a footnote asserting that the amount in controversy was not actually established at the time of the second removal (which was not based on diversity). Plaintiffs' memorandum on jurisdiction asserts that the jurisdictional amount is satisfied in the statewide cases transferred to this court under 28 U.S.C. § 1407 through the MDL process. Those cases have never involved a non-diverse party.
Based on the current record, the court has no reason to believe that the jurisdictional amount would be satisfied in the MDL state cases but not in this Hinshaw action. Nevertheless, in light of the Seventh Circuit's opinion in Isaacs v. Sprint and the need to resolve the issue as definitively as possible, the court will hold an evidentiary hearing on Friday, November 30, 2001, at 9:00 a.m. to give ATT the opportunity it has requested to lay an evidentiary foundation showing that the amount in controversy for diversity jurisdiction is satisfied in this case. Plaintiffs also may present argument and evidence at the hearing.
B. Federal Question Jurisdiction
The First Amended Nationwide Class Complaint does not explicitly invoke federal question jurisdiction. ATT contends, however, that the claims of the North Dakota and Montana property owners adjacent to federal land-grant railroads necessarily arise under federal law. The Supreme Court's decision in Kansas Pacific Railroad Co. v. Atchison, Topeka Santa Fe Railroad Co., 112 U.S. 414, 416 (1884), squarely supports ATT's view. In Kansas Pacific, two corporations had built railroads in the Kansas Territory pursuant to federal legislation authorizing such construction and offering land to the corporations as an incentive and compensation for the effort. A dispute over title arose that turned on interpretation of the statutes enabling the land grants.
The Supreme Court held that the dispute arose under federal law:
The controversy in this case arises upon laws of the United States. As far back as Cohens v. Virginia, 6 Wheat. 264 [ 19 U.S. 264, 379 (1821)], decided more than 60 years ago, it was said that a case may be considered to arise under the constitution or a law of the United States whenever its correct decision depends upon the construction of either. The same thing is expressed by the statement that a case arises under the constitution or laws of the United States whenever the rights set up by a party may be defeated by one construction or sustained by the opposite construction. Osborne v. Bank of the United States, 9 Wheat. [ 22 U.S. 738 (1824)]. Here both corporations claim title to the same land in Kansas under different acts of congress, and the decision depends upon the construction given to those acts. It is, therefore, clear that the court below had jurisdiction of the subject of the suit and of the parties.112 U.S. at 416.
Plaintiffs have not even cited Kansas Pacific in their jurisdictional briefs, let alone rebutted ATT's reliance upon it. The case remains good law, and it governs the federal question jurisdictional issue in this case. Accord, Drawhorn v. Qwest Communications Int'l, Inc., 121 F. Supp.2d 554, 566 (E.D.Tex. 2000) (finding federal question jurisdiction in dispute over scope of railroad's land grant easement after communications cables were installed); Oxford v. Williams Cos., 137 F. Supp.2d 756, 763-64 (E.D.Tex. 2001) (following Drawhorn).
Nevertheless, plaintiffs point out that the District of Colorado rejected the same federal jurisdictional theory in Schweizer v. Level 3 Communications, Inc., No. 99-M-1785 (D.Colo. Dec. 3, 1999), and remanded to state court a similar action brought by owners of land adjoining federal land grant railroads. Plaintiffs have provided a copy of the court's brief written entry and the transcript of the hearing. The Schweizer court focused on the familiar "well-pleaded complaint" rule and concluded that the property owners' claims arose under state law and did not present a federal question as part of a well-pleaded complaint. The court noted that the mere fact that a property owner bases his title ultimately on a federal land grant does not transform a title dispute into a case arising under federal law.
From the Schweizer court's brief order and its comments in the hearing transcript, there is no indication that Kansas Pacific was brought to the court's attention. Nor is there any indication that the court focused on the difference between merely having a federal land grant in the chain of title and having the scope of land grants be the decisive issue in the case, as it was in Kansas Pacific.
The Supreme Court has emphasized that difference repeatedly to ensure that nearly all land disputes in the Great Plains and western states would not become federal cases. The Court has balanced that principle against the rule from Kansas Pacific by explaining the need to focus on what is actually in dispute:
A suit to enforce a right which takes its origin in the laws of the United States is not necessarily, or for that reason alone, one arising under those laws, for a suit does not so arise unless it really and substantially involves a dispute or controversy respecting the validity, construction, or effect of such a law, upon the determination of which the result depends. This is especially so of a suit involving rights to land acquired under a law of the United States. If it were not, every suit to establish title to land in the central and western states would so arise, as all titles in those states are traceable back to those laws.
Shulthis v. McDougal, 225 U.S. 561, 569-70 (1912) (emphasis added) (no federal question jurisdiction over western land dispute where case did not present any controversy respecting the validity, construction, or effect of federal land grant laws); accord, Shoshone Mining Co. v. Rutter, 177 U.S. 505, 506-07 (1900) (suit over land rights does not arise under federal law unless it presents controversy regarding operation and effect of federal law on the facts involved); Blackburn v. Portland Gold Mining Co., 175 U.S. 571, 579 (1900) (same). The Court's opinion in Shulthis also makes clear that the jurisdictional question must be decided by considering not only the explicit allegations of the complaint but also what is necessarily implied by the complaint. 225 U.S. at 570. See also Oneida Indian Nation of New York v. County of Oneida, 414 U.S. 661, 677-78 (1974) (applying these principles more recently to find that Indian nation's claim to current possession of land arose under federal law).
In this Hinshaw case, the claims of Montana and North Dakota property owners whose property adjoins federal land-grant railroads present precisely such controversies over the construction and effect of the several granting statutes. Those plaintiffs assert claims for trespass, unjust enrichment, and slander of title. The decisive issue for each such claim is whether the legislation granted to the railroad an interest in the land that allowed the railroad to grant an easement in turn for the installation of communication cables along the right of way. The parties' earlier summary judgment briefs on the construction of those several statutes demonstrate that that is the decisive issue on the merits. Under Kansas Pacific, those claims arise under federal law. When the limits of the principle are understood, recognizing federal jurisdiction over these claims does not threaten to transform all western property disputes into federal cases.
Plaintiffs contend that even if federal law will ultimately be decisive as to these claims, their claims do not arise under federal law because the federal issue — the scope of the railroads' federal land grants — is presented only by way of a defense, not as part of a "well-pleaded complaint." See, e.g., Doe v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993) (a defense that presents a federal issue does not support federal question jurisdiction even if the federal issue is the only genuine issue in the case), citing Caterpillar, Inc. v. Williams, 482 U.S. 386, 393 (1987).
The argument is not persuasive for two reasons. First, as discussed above, Kansas Pacific is right on point in any event, and it remains good law. Second, to prove at least some of their claims, the North Dakota and Montana plaintiffs will need to prove as part of their cases-in-chief that the railroads in question had no right to grant easements to ATT to lay the fiber optic cables in question. The court in Drawhorn considered the matter in some detail under Texas law, explaining that the plaintiffs, in order to obtain the requested declaration that the defendant had no legal rights to exercise dominion and control over the land in question, would need to prove that the defendant did not have a valid easement to install its cables. 121 F. Supp.2d at 562. Such proof would also be required to prove unjust enrichment to show that defendant had "wrongfully secured a benefit." Id. at 563. The federal question therefore was presented by the "well-pleaded complaint." Essentially the same reasoning applies here.
Plaintiffs' claims for trespass require them to prove that ATT entered their property and that its entry was unauthorized. See Laden v. Atkeson, 116 P.2d 881, 884-885 (Mont. 1941) (owner of servient estate may sue holder of easement for trespass by showing unauthorized use of easement); Gajewski v. Bratcher, 307 N.W.2d 826, 834 (N.D. 1981) (approving jury instruction for trespass requiring proof that the defendant's entry "was unauthorized under the circumstances existing at that time"); see also Dorwart v. Caraway, 966 P.2d 1121, 1150 (Mont. 1998) (referring to "unauthorized entry element of a trespass claim").
Plaintiffs' claims for unjust enrichment also require proof that defendants' actions were wrongful and/or not justified. See Sebena v. State, 883 P.2d 1263, 1268 (Mont. 1994) (to establish a prima facie case of unjust enrichment, plaintiff must show misconduct or fault on the part of the defendant, or that the defendant somehow took advantage of the plaintiff); Ragland v. Sheehan, 846 P.2d 1000, 1004 (Mont. 1993) (same); Schroeder v. Buchholz, 622 N.W.2d 202, 207 (N.D. 2001) (to show unjust enrichment, plaintiff must show and court must find as one element the absence of justification for defendant's enriching action).
Plaintiffs' claims for slander of title require proof of malice, meaning that ATT did not have a reasonable justification for its actions. See Hoefer v. Wilckens, 684 P.2d 468, 472 (Mont. 1984) (to establish slander of title, plaintiffs were required to prove that defendant acted with malice and "without reasonable justification or right"); Serhienko v. Kiker, 392 N.W.2d 808, 815 (N.D. 1986) (to maintain action for slander of title, plaintiff must show that defendant acted maliciously, without color of title).
Finally, the same reasoning also applies to plaintiffs' prayer for declaratory relief. Plaintiffs seek declarations that ATT did not obtain any title or interest or right to use the right of way, that ATT has no valid easement or other right to occupy the right of way, and that ATT has no right to exercise dominion and control over the right of way other than by permission of plaintiffs or a judicial decree. Proof of those claims will require proof from plaintiffs that defeats ATT's assertion that it has valid easements granted by the railroads.
Thus, even though the First Amended Nationwide Class Action Complaint does not explicitly invoke federal law, the named plaintiffs whose property adjoins federal land grant railroads have raised claims that necessarily arise under federal law. Those plaintiffs will need to prove as part of their cases in chief that ATT was not authorized to act as it did, which turns on the interpretation of the federal land grant statutes.
For the foregoing reasons, plaintiffs' motion to remand this action to the state court is hereby denied.
So ordered.