Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing
(2005)
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Rule of Law:
A federal court has jurisdiction over a state-law claim if the claim necessarily raises a stated federal issue that is actually disputed and substantial, and which a federal forum may entertain without disturbing the congressionally approved balance of federal and state judicial responsibilities.
Facts:
- In 1994, the Internal Revenue Service (IRS) seized real property owned by Grable & Sons Metal Products, Inc. (Grable) to satisfy a tax delinquency.
- The IRS notified Grable of the seizure via certified mail.
- The IRS then sold the property to Darue Engineering & Manufacturing (Darue).
- Grable did not exercise its right to redeem the property within the statutory 180-day period.
- The government subsequently issued a quitclaim deed to Darue.
- Five years later, Grable initiated a lawsuit to quiet title to the property.
- Grable's claim was that Darue's title was invalid because the IRS had failed to provide notice of the seizure via personal service, as Grable contended was required by federal statute, rather than by certified mail.
Procedural Posture:
- Grable & Sons Metal Products, Inc. filed a quiet title action against Darue Engineering & Manufacturing in a Michigan state court of first instance.
- Darue, the defendant, removed the case to the U.S. District Court for the Western District of Michigan, claiming federal-question jurisdiction.
- Grable, the plaintiff, filed a motion to remand the case back to state court, which the District Court denied.
- The District Court then granted summary judgment in favor of Darue on the merits of the case.
- Grable, as appellant, appealed the decision to the U.S. Court of Appeals for the Sixth Circuit.
- The Court of Appeals affirmed the District Court's judgment in favor of Darue, the appellee.
- The U.S. Supreme Court granted certiorari to review the jurisdictional question only.
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Issue:
Does federal-question jurisdiction under 28 U.S.C. § 1331 extend to a state-law quiet title claim that turns on a substantial and disputed issue of federal tax law, even when federal law provides no private cause of action for the claim?
Opinions:
Majority - Justice Souter
Yes. Federal-question jurisdiction extends to a state-law claim that necessarily raises a stated federal issue that is actually disputed and substantial, and which a federal forum may entertain without disturbing the congressionally approved balance of judicial responsibilities. The Court established a three-part test: the state-law claim must 1) necessarily raise a stated federal issue, 2) that is actually disputed and substantial, and 3) capable of resolution in federal court without disrupting the federal-state balance of power. Here, Grable's entire claim for superior title depends on the interpretation of a federal tax notice statute, making the federal issue necessary and actually disputed. The issue is substantial because the federal government has a strong interest in the prompt collection of delinquent taxes and in providing clear title to purchasers at tax sales, which requires uniform interpretation of its statutes. Finally, allowing federal jurisdiction will have only a 'microscopic effect' on the federal-state division of labor, as it is the rare quiet title action that will raise a contested issue of federal law. The Court distinguished Merrell Dow v. Thompson, clarifying that the absence of a federal cause of action is a relevant consideration but not a dispositive bar to federal jurisdiction, especially where federal interests are strong and the risk of opening the federal courts to a flood of state litigation is low.
Concurring - Justice Thomas
Yes. Justice Thomas concurred in the judgment, acknowledging that the majority's opinion faithfully applies the Court's precedents. However, he wrote separately to express his view that the current standard for embedded federal question jurisdiction is malleable and unpredictable. He advocated for considering, in a future case, the adoption of Justice Holmes's clearer, bright-line rule from American Well Works Co., which would limit federal-question jurisdiction to only those cases where federal law creates the plaintiff's cause of action. He argued this approach would provide clarity and account for the vast majority of cases that currently fall under federal-question jurisdiction anyway.
Analysis:
This case significantly clarifies the doctrine of embedded federal question jurisdiction. It firmly rejects the proposition that Merrell Dow created a bright-line rule requiring a federal cause of action for a state claim to 'arise under' federal law. Instead, Grable establishes a flexible, multi-factor balancing test that focuses on the substantiality of the federal interest and the potential for disrupting the state-federal judicial balance. This creates a durable but narrow pathway for state-law claims to be heard in federal court when they hinge on critical, disputed issues of federal law, ensuring a federal forum for matters of national importance without opening the floodgates to state litigation.
