Northeast IL Railroa v. Hoey Farina & Downes ( 2000 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 99-1588
Northeast Illinois Regional Commuter
Railroad Corporation, d/b/a Metra,
Plaintiff-Appellant,
v.
Hoey Farina & Downes,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 98 C 1320--Harry D. Leinenweber, Judge.
Argued February 14, 2000--Decided May 15, 2000
Before Bauer, Flaum, and Evans, Circuit Judges.
Flaum, Circuit Judge. On March 4, 1998,
Northeast Illinois Regional Commuter Railroad
Corporation (d/b/a "Metra") filed a complaint for
declaratory and injunctive relief against Douglas
Baethke and the law firm Hoey Farina & Downes
("Hoey") in the United States District Court for
the Northern District of Illinois. Metra alleged
that the defendants were interfering with Metra’s
rights, guaranteed under the federal Railway
Labor Act ("RLA"), 45 U.S.C. sec. 151 et seq., to
conduct disciplinary hearings according to the
terms of a collective bargaining agreement. The
district court dismissed for lack of subject
matter jurisdiction. For the reasons stated
herein, we affirm.
Background
Metra is a corporation that operates commuter
passenger trains in the Chicago region, and it is
a "carrier" within the meaning of the RLA, which
governs labor relations matters within the rail
industry. Douglas Baethke was employed by Metra
as a locomotive engineer. His employment was
governed by a collective bargaining agreement
("CBA") between Metra and the Brotherhood of
Locomotive Engineers ("BLE"), his bargaining
representative, as well as by the provisions of
the RLA. Under the CBA, Metra may only discipline
a covered employee after first conducting a fair
and impartial disciplinary investigation hearing,
at which the employee may be represented by a BLE
official, but not by a private attorney.
On May 2, 1996, Baethke allegedly suffered an
injury to his leg during the course of his
employment, and he was off work until July 21,
1997, and then from October 9, 1997 through the
date at which Metra’s initial complaint was
filed. Baethke retained the Hoey law firm to
represent him in his personal injury suit against
Metra. Baethke repeatedly told Metra
representatives that his injury rendered him
unable to return to work, but on December 4,
1997, he was observed engaging in strenuous
physical activities. On January 28, 1998, Metra
officials sent Baethke a letter informing him
that he was medically released to return to work
as of January 26, but that he was removed from
service pending an investigation hearing, to be
conducted under the procedures established in the
Metra-BLE CBA, concerning his possible violation
of Metra work rules.
Baethke informed Hoey of the disciplinary
investigation hearing, then scheduled for
February 13, 1998, and on February 5 a Hoey
attorney sent Metra a letter threatening to file
suit, in the law firm’s own name, against Metra
if Metra did not agree to grant Baethke certain
rights beyond those provided by the CBA.
Specifically, the attorney demanded that he be
permitted to attend the hearing, that he be able
to cross-examine company witnesses, that he
receive copies of all relevant medical documents,
and that the hearing be postponed to allow him
time to assemble his own evidence. The Hoey
attorney conceded that the CBA did not permit
Baethke any of these rights but he insisted that
if Metra adhered to the CBA’s terms Metra would
be tortiously interfering with the attorney’s
relationship with Baethke./1 The Hoey attorney
threatened to sue for injunctive relief, and
Metra responded with a letter stating that Metra
would not grant Baethke the additional rights
demanded by the Hoey attorney. The Hoey attorney
then sent Metra another letter threatening to sue
if Metra continued to refuse.
On March 4, 1998, Metra filed a complaint in
federal district court for declaratory and
injunctive relief against Baethke and Hoey. The
RLA prescribes mandatory procedures that must be
followed with respect to certain types of
employment disputes. Metra asserted that Baethke
and Hoey understood that any direct assertion by
Baethke or Hoey that Metra’s decision to hold the
disciplinary hearing would violate Baethke’s
rights would be subject to the exclusive dispute
resolution procedures prescribed by the RLA,
under which Metra would be entitled to proceed
with the hearing pending resolution of the
dispute over the application of the CBA.
Therefore, Metra alleged, Baethke and Hoey
concocted a scheme to prevent Metra’s holding of
the disciplinary hearing by demanding terms
different from those prescribed by the CBA and
the RLA based on the law firm’s supposed rights
under Illinois law. Hoey’s warnings that Metra’s
exercise of the railroad’s RLA-based rights would
tortiously interfere with the law firm’s rights,
Metra claimed, was part of Hoey and Baethke’s
scheme to obtain for Baethke different terms than
those prescribed by the CBA
Metra requested declaratory and injunctive
relief against both Baethke and Hoey to prevent
them from interfering with Metra’s right to
conduct the Baethke disciplinary hearing and any
future disciplinary hearings pursuant to the
provisions of its CBA and the RLA. Metra sought
declarations that it enjoyed the legally
protected right to conduct the Baethke
disciplinary hearing and future disciplinary
hearings involving Hoey clients according to
terms of the CBA and that this right, as a matter
of federal law, supersedes any legally cognizable
rights that the firm may have. Metra also sought
declarations that Hoey could not enjoin such
hearings because Metra’s conduct either did not
violate any legally cognizable rights belonging
to Hoey or was privileged as a matter of Illinois
common law. Finally, Metra sought injunctive
relief preventing Hoey from interfering with
Metra’s federally protected rights, such as by
commencing a lawsuit to prevent Metra from
conducting its hearings.
On March 5, 1998, one day after Metra filed its
complaint, Hoey carried out its threat and filed
a lawsuit against Metra in the Circuit Court of
Cook County, Illinois, alleging that Metra’s
conduct of the Baethke disciplinary proceeding
under the procedures prescribed in the CBA would
tortiously interfere with the law firm’s
relationship with its client. Metra responded by
filing a motion to dismiss Hoey’s state lawsuit
on the ground that it was barred by the pendency
of Metra’s earlier-filed federal action.
In response to Metra’s federal lawsuit and its
motion to dismiss Hoey’s later-filed state court
suit, Hoey sent a letter to Metra stating that it
was withdrawing its demand to be present at the
pending investigation of Baethke or to assert any
other rights the law firm might have under state
law to enjoin the investigation. The letter
concluded: "I trust this renders all issues in
the above-referenced matters moot and both cases
can be dismissed." Hoey then voluntarily
dismissed its lawsuit in state court, and on
March 24, 1998, it moved to dismiss on mootness
grounds the present, federal action on behalf
itself and Baethke.
On June 2, the district court granted the
motion to dismiss Metra’s claims against Baethke
and Metra’s claims against Hoey that related
specifically to the Baethke hearing. The court
denied Hoey’s motion to dismiss Metra’s claim
seeking relief to prevent Hoey from commencing
future lawsuits to interfere with Metra’s
federally protected rights, the court having
concluded that these claims were not moot because
there exists a present threat that Hoey, which
represents other Metra employees, might disrupt
future proceedings.
In November 1998, Metra filed a motion for
summary judgment with respect to its claims for
declaratory relief only, asserting that it was
entitled as a matter of law to such relief. Hoey
argued that the district court lacked subject
matter jurisdiction because Metra’s claims for
declaratory and injunctive relief did not "arise
under" federal law, since Metra’s RLA-based
preemption claims were ones that the railroad
could raise as a defense in the type of state
court tortious interference suit threatened
against it by the law firm.
On February 12, 1999, the district court
dismissed Metra’s claims against Hoey for lack of
subject matter jurisdiction, and Metra now
appeals that dismissal.
Discussion
District courts "shall have original
jurisdiction of all civil actions arising under
the Constitution, laws, or treaties of the United
States." 28 U.S.C. sec. 1331. Under the well-
pleaded complaint rule, it must be clear from the
face of the plaintiff’s complaint that there is
a federal question. Louisville & Nashville
Railroad Co. v. Mottley, 211 U.S. 149 (1908);
Burda v. M. Ecker Co., 954 F.2d 434, 438 (7th
Cir. 1992). But, "[i]n declaratory judgment
cases, the well-pleaded complaint rule dictates
that jurisdiction is determined by whether
federal jurisdiction would exist over the
presumed suit by the declaratory judgment
defendant." GNB Battery Technologies, Inc. v.
Gould, Inc., 65 F.3d 615, 619 (7th Cir. 1995). In
other words, as the Supreme Court explained in
Skelly Oil Co. v. Phillips Petroleum Co., 339
U.S. 667 (1950), if the plaintiff cannot get into
federal court by anticipating what amounts to a
federal defense to a state-law cause of action,
he also should not be able to use the Declaratory
Judgment Act to do so by asserting what is really
a preemptive federal defense as the basis of his
complaint. See also Ceres Terminals, Inc. v.
Industrial Commission of Illinois, 53 F.3d 183,
185 (7th Cir. 1995).
In Public Services Commission of Utah v. Wycoff
Co., 344 U.S. 237 (1952), the Supreme Court
reiterated the position taken in Skelly Oil:
"Where the complaint in an action for declaratory
judgment seeks in essence to assert a defense to
an impending or threatened state court action, it
is the character of the threatened action, and
not of the defense, which will determine whether
there is federal question jurisdiction in the
District Court." Id. at 248 (emphasis added).
Then, in Franchise Tax Board v. Construction
Laborers Vacation Trust, 463 U.S. 1 (1983), the
Court made clear the strictness of the rule that
"if, but for the availability of the declaratory
judgment procedure, the federal claim would arise
only as a defense to a state created action,
jurisdiction is lacking." Id. at 16 (citing
Skelly Oil and quoting 10A C. Wright, A. Miller
& M. Kane, Federal Practice and Procedure sec.
2767).
Based on the line of precedent running through
Skelly Oil, Wycoff, and Franchise Tax Board, the
district court in this case lacked jurisdiction
to hear Metra’s claim. Metra argues that the
district court had jurisdiction over its claim
for a declaration that the RLA preempts any state
law claim that Hoey might have for alleged
tortious interference because Metra’s claim
arises under the RLA and the Supremacy Clause of
the Constitution. Metra characterizes its claims
as an attempt to protect its rights under federal
law to discipline employees for workplace
misconduct in accordance with the procedures
prescribed in certain collective bargaining
agreements. But these Supreme Court cases
establish that a conflict between federal law and
state law is not enough to confer subject matter
jurisdiction. In essence Metra went to district
court seeking adjudication of its argument that
the RLA provides a federal law defense to the
type of state law tortious interference suit Hoey
threatened to bring. The precedent just outlined,
however, precludes Metra from recharacterizing
the claim to fit the well-pleaded complaint rule
by means of the Declaratory Judgment Act. See
Ceres Terminals, 53 F.3d at 184-85 (holding that
a district court lacked jurisdiction over
declaratory judgment actions filed by stevedore
contractors, where the contractors sought a
declaration that the state’s power ends at the
water’s edge, therefore barring threatened state
workers’ compensation claims by two workers);
Nuclear Engineering Co. v. Scott, 660 F.2d 241,
253 (1981) ("It is well-settled that the
Declaratory Judgment Act confers no additional
jurisdiction upon the federal courts. When a
declaratory judgment plaintiff asserts a claim
that is in the nature of a defense to a
threatened or pending coercive action, the
character of the threatened or pending coercive
action determines whether federal question
jurisdiction exists over the declaratory judgment
action.") (citations omitted).
Metra does not dispute the applicability of the
directives spelled out in Wycoff and Franchise
Tax Board to its claim. Instead of arguing that
its claim lies outside the jurisdictional lines
that the language of Wycoff draws, Metra argues
that the Wycoff approach has been renounced or
limited by subsequent Supreme Court and Seventh
Circuit decisions. Specifically, Metra argues
that federal question jurisdiction must exist
over claims that a threatened action based upon
state law would violate the declaratory
plaintiff’s federal rights because to hold
otherwise would conflict with Ex parte Young, 209
U.S. 123 (1908), and its progeny, which establish
that federal courts have subject matter
jurisdiction over suits to enjoin state
interference with a plaintiff’s federal rights.
In Illinois v. General Electric Co., 683 F.2d 206
(7th Cir. 1982), this Court considered whether
federal question jurisdiction over a claim for
declaratory relief must be assessed by reference
to the "character" of the cause of action
threatened by the declaratory defendant rather
than the nature of the claims actually pleaded by
the declaratory plaintiff. In that case, the
recently enacted Illinois Spent Fuel Act
prohibited actions that General Electric believed
it was entitled to take under federal law.
General Electric filed suit in federal district
court seeking a declaration that the Act violated
the Commerce and Supremacy Clauses of the U.S.
Constitution. This Court ultimately ruled that
the district court had subject matter
jurisdiction over General Electric’s declaratory
claim. In doing so, we noted that the "character"
of the claim rule spelled out in Wycoff, "if
understood to require federal claimants always to
litigate their claims as defenses in state court
if they can, . . . must be wrong. . . . Since the
impending state action will almost always be
based on state law alone, the dictum [of Wycoff],
read broadly, would overrule Ex Parte Young and
every case that has ever followed it." Id. at
211.
But General Electric involved a challenge to
threatened state regulation, not private actions
under state law, and to extend the observations
of that case to cover declaratory actions like
Metra’s ignores the unique doctrinal concerns
underlying Ex parte Young. Ex parte Young carves
out an exception to the otherwise strict
application of Eleventh Amendment immunity, to
ensure state compliance with federal law. "Ex
parte Young was the culmination of efforts by
[the Supreme Court] to harmonize the principles
of the Eleventh Amendment with the effective
supremacy of rights and powers secured elsewhere
in the Constitution." Perez v. Ledesma, 401 U.S.
82, 106 (1971) (Brennan, J., concurring in part
and dissenting in part). With respect to suits
challenging threatened state-law actions by
private parties, however, even though the
procedural posture may resemble that of an Ex
parte Young suit challenging threatened state
regulation, federal courts have continued to
apply the well-pleaded complaint rule and other
traditional jurisdictional principles outlined
above. See, e.g., Ceres, 53 F.3d at 185; see also
Colonial Penn Group, Inc. v. Colonial Deposit
Co., 834 F.2d 229, 237 (1st Cir. 1987); Armstrong
v. Armstrong, 696 F.2d 1237 (9th Cir. 1983).
Accordingly, the district court correctly
dismissed Metra’s suit for lack of subject matter
jurisdiction.
Conclusion
For the reasons stated herein, we AFFIRM the
decision of the district court.
/1 This lawsuit was based on an Illinois appellate
court decision, Callis, Papa, Jensen, Jackstadt
& Halloran, P.C. v. Norfolk Southern Corp., 292
Ill.App.3d 1003 (1997), which suggested that a
law firm in Hoey’s position might have a tortious
interference claim against the railroad.