It’s a Federal Question: Can Defendants Remove Under the Grable Doctrine?

A Missouri federal court recently retained jurisdiction over state-law claims under the rarely used “Grable doctrine.” The doctrine arose from a 2005 U.S. Supreme Court case, and supports removal when (1) a plaintiff’s state-law claim raises a disputed and substantial federal question, and (2) removal would not disturb the balance between state and federal judicial responsibilities.

The Missouri federal court decision in Bader Farms, Inc. v. Monsanto Co. is a unicorn among removal cases; a successful Grable removal is so rarely seen that it seems more myth than fact. The Grable doctrine and its application in Bader Farms suggests that defendants seeking a way into federal court should look at whether a plaintiffs’ state-law claims require a state court to resolve inherently federal issues. Additionally, defendants can help their chances for removal when a state court’s decision could affect an area of law that Congress designated to the federal courts to provide uniformity among the states.

The Grable Doctrine Opens the Door to Federal Court

Grable & Sons Metal Prod., Inc. v. Darue Eng’g & Mfg. involved a plaintiff’s claim that the IRS improperly seized his property because it did not provide him with the required statutory notice. The plaintiff filed a quiet-title action in Michigan state court claiming inadequate notice.

The defendant removed the claim to federal court, arguing that resolving the plaintiff’s claim involved a substantial federal question – specifically, what notice was required under federal tax law? Once the federal court had the case, it ruled in the defendant’s favor.

The plaintiff appealed and challenged the federal court’s jurisdiction. He argued that his state-law quiet-title action did not involve a substantial federal question and that the federal court should have sent his case back to state court. After the Sixth Circuit sided with the defendant’s case for federal court jurisdiction, the U.S. Supreme Court weighed in too.

A unanimous Supreme Court agreed with the defendant. It held that removal was proper because there was a substantial federal interest in having uniform interpretations of federal tax law and that asserting federal jurisdiction over the claim would not affect the balance authorized by Congress between state and federal courts.

The Grable opinion intended to clarify that federal jurisdiction was proper over state-law claims raising substantial, disputed questions of federal law. But federal courts have been reluctant to retain jurisdiction under Grable. Commenters note that federal courts still have broad discretion to remand cases to state court, and those decisions usually are not appealable until the end of the case. So there isn’t a vast pool of Grable decisions.

Bader Farms Walks Through the Door Opened by Grable

Then comes Bader Farms, where the federal court for the Eastern District of Missouri was persuaded by the defendant’s Grable argument for removal. The issue in the case was whether the defendant, Monsanto, damaged the plaintiffs, Bader Farms, by developing and selling genetically engineered (GE) cotton and soybean seeds without selling a corresponding herbicide.

Typically, when a GE seed is released, the manufacturer sells an herbicide specifically designed for that GE seed. Here, Monsanto sold only the GE seed because the Environmental Protection Agency (EPA) had not yet approved the corresponding herbicide. Bader Farms alleged that because Monsanto did not release a corresponding herbicide when it sold its GE seed to farmers neighboring Bader Farms, those farmers used an old herbicide that drifted onto Bader Farms’ fields and damaged its crops.

Monsanto focused its Grable removal argument on Bader Farms’ state-law fraudulent concealment claim. Bader Farms alleged that Monsanto knew that farmers purchasing the new GE seeds would use the old herbicide. According to Bader Farms, Monsanto had to disclose to Animal and Plant Health Inspection Service (APHIS) – the federal agency charged with regulating GE seeds – that the EPA had not yet approved the corresponding herbicide. Bader Farms argued that not disclosing this information to APHIS was fraudulent concealment.

Monsanto responded that for Bader Farms to prevail, a state court would have to decide whether its alleged omission materially affected APHIS’s ability to perform its duties. The federal court found that whether a federal agency fulfilled its duties “inherently” presents a substantial and disputed federal question, and that resolving the question in the federal system would not upset the congressionally approved balance between state and federal judicial responsibilities. Citing Grable, it retained jurisdiction over Bader Farms’ state-law claims.

Come One, Come All? Not Quite Yet

Bader Farms may support removal where plaintiffs claim that a defendant prevented a federal regulatory body from carrying out its essential duties. Defendants that want to use Bader Farms will also want to analyze whether allowing a state court to decide plaintiffs’ state-law claims that raise federal-law questions could disrupt uniformity in the law in an area where Congress delegated judicial responsibility to federal courts. These Grable considerations could help a reluctant federal court to retain jurisdiction over removed state-law claims. But Bader Farms is one decision, from one federal court, and it remains to be seen whether this unicorn will become a trend.