Miree v. DeKalb County
1977 U.S. LEXIS 3, 433 U.S. 25, 97 S. Ct. 2490 (1977)
Rule of Law:
Federal common law does not apply to a breach of contract claim between private parties in a diversity action, even if the contract involves the United States pursuant to federal statute, when the United States' rights or duties are not directly affected and there is no significant conflict between federal policy and state law to justify displacing state law.
Facts:
- In 1973, a Lear Jet crashed shortly after takeoff from the DeKalb-Peachtree Airport.
- Petitioners include the survivors of deceased passengers, the assignee of the jet aircraft owner, and a burn victim.
- Respondent DeKalb County had entered into six grant agreements with the Federal Aviation Administration (FAA).
- Under these contracts, DeKalb County agreed to restrict land use adjacent to the airport to activities compatible with normal airport operations.
- DeKalb County owned and maintained a garbage dump adjacent to the airport.
- The crash was caused by the ingestion of birds, swarming from the dump, into the jet engines of the aircraft.
- Petitioners allege that DeKalb County breached the FAA contracts by maintaining the garbage dump and seek to impose liability as third-party beneficiaries.
Procedural Posture:
- Petitioners brought separate lawsuits, later consolidated, against DeKalb County in the United States District Court for the Northern District of Georgia, asserting claims of negligence, nuisance, and breach of contract, with federal jurisdiction based on diversity of citizenship.
- The District Court granted DeKalb County's motion to dismiss the contract claims, finding them barred by governmental immunity under Georgia law (the negligence and nuisance claims were also dismissed and are not at issue on appeal).
- A divided panel of the Court of Appeals for the Fifth Circuit reversed the District Court on the contract issue, holding that under state law, petitioners could sue as third-party beneficiaries and governmental immunity would not bar the suit.
- The dissenting judge on the panel argued that federal rather than state law should apply and that, under federal common law, petitioners lacked standing to sue as third-party beneficiaries.
- The Fifth Circuit, sitting en banc, reversed the panel's decision on the breach-of-contract issue and adopted the panel dissent's reasoning, concluding that federal common law applied and petitioners lacked standing.
- The Supreme Court of the United States granted certiorari to consider whether federal or state law should have been applied to the breach-of-contract claim.
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Issue:
Does federal common law govern a third-party beneficiary claim brought by private parties against a county for breach of an FAA grant agreement, or should state law apply?
Opinions:
Majority - Justice Rehnquist
No, federal common law does not govern the third-party beneficiary claim between private parties where the United States is a party to the underlying contract but its rights and duties are not directly affected; instead, state law should apply. In diversity cases, state law typically governs under Erie R. Co. v. Tompkins. While federal common law may apply where a uniform national rule is necessary to further significant federal interests, as in Clearfield Trust Co. v. United States concerning commercial paper directly affecting the U.S. Treasury, that rationale is inapplicable here. The resolution of petitioners' breach-of-contract claim against DeKalb County will have no direct effect upon the United States or its Treasury, nor does it question the United States' liability or responsibilities under the contracts. The Solicitor General affirmed the U.S. interests would not be directly affected. This situation is analogous to Bank of America Nat. Trust & Sav. Assn. v. Parnell, where state law applied to a dispute between private parties involving U.S. bonds because the litigation did not touch the direct rights and duties of the United States. Furthermore, the substantial federal interest in regulating air travel safety is insufficient to displace state law. Wallis v. Pan American Petroleum Corp. requires a 'significant conflict between some federal policy or interest and the use of state law' to fashion federal common law, which has not been shown here. Congress has not chosen to create a federal cause of action in this area, and the federal interest in the outcome is 'far too speculative, far too remote a possibility to justify the application of federal law to transactions essentially of local concern.' The Court vacates the judgment and remands for consideration under applicable Georgia law, declining to address an implied civil right of action under the Airport and Airway Development Act of 1970 as it was not pleaded or argued below.
Concurring - Chief Justice Burger
I concur in the judgment that state law should apply to the third-party beneficiary claim in this case, but I disagree with any implication that federal common law is rigidly limited only to situations where the federal government's rights and obligations are directly at issue. While state substantive law generally should not be ousted by a broad doctrine of national sovereignty, I am not prepared to foreclose the possibility that there may be situations where the rights and obligations of private parties are so dependent on a specific exercise of congressional regulatory power that federal law must govern. In such instances, federal courts have a basic responsibility for 'interstitial federal lawmaking.' However, in this particular case, the cause of action asserted by the plaintiffs is not so intimately related to the purpose of the Airport and Airway Development Act of 1970 as to require the application of federal law. Therefore, the rule of Erie R. Co. v. Tompkins applies, and I join the judgment remanding for a determination under Georgia law.
Analysis:
This case significantly clarifies the limits of federal common law in diversity actions, particularly when the United States is a party to an underlying contract but is not directly involved in the private litigation. It reinforces the Erie doctrine by establishing a high bar for invoking the Clearfield Trust exception, requiring a direct and substantial impact on the federal government's pecuniary interests or fundamental operations. Lower courts must now specifically demonstrate a 'significant conflict' between state law and a federal policy, and ensure the federal interest is not merely speculative or remote, before displacing state law. The decision also underscores judicial deference to Congress in creating federal causes of action, limiting the instances where federal courts will fashion such remedies.
