BNSF Railway Co. v. O'Dea

572 F.3d 785, 22 Am. Disabilities Cas. (BNA) 163, 2009 U.S. App. LEXIS 15690, 2009 WL 2052960

Opinions

Concurrence by Judge FISHER.

FERNANDEZ, Circuit Judge:

BNSF Railway Company appeals the district court’s dismissal of its action against Matt O’Dea. The district court held that it did not have jurisdiction because the action, in effect, sought appellate review of a decision of the Montana Human Rights Commission. We determine that the district court did have jurisdiction; we reverse and remand.

BACKGROUND

BNSF is a Delaware corporation, and has its principal place of business in Texas. O’Dea is a citizen of Montana.

O’Dea applied to and was extended a conditional offer of employment by BNSF for the position of Conductor Trainee. Based upon an individualized medical assessment, however, BNSF disqualified O’Dea from further consideration for the position. O’Dea then filed a complaint for discrimination with the Montana Department of Labor and Industry, Employment Relations Division, alleging that BNSF had discriminated against him because of the perceived disability of obesity in violation of the Montana Human Rights Act, the Americans with Disabilities Act of 1990, and Title VII of the Civil Rights Act of 1964. A hearing examiner granted O’Dea’s motion for a summary ruling on liability and issued a final decision awarding him damages and other relief. The Montana Human Rights Commission affirmed that decision.

The Montana Administrative Procedure Act¹ provides for judicial review of agency decisions, and BNSF sought review by filing this action based upon diversity jurisdiction. See 28 U.S.C. § 1332. O’Dea filed a motion to dismiss the action and argued that the federal courts lack subject matter jurisdiction because federal courts do not have diversity jurisdiction over appeals from state agencies, and that is what this action amounts to.² The district court agreed, and dismissed the action. This appeal followed.

STANDARD OF REVIEW

We review the district court’s dismissal of this case for lack of subject matter jurisdiction de novo. See Nuclear Info. & Res. Serv. v. U.S. Dep’t of Transp. Research & Special Programs Admin., 457 F.3d 956, 958 (9th Cir.2006).

JURISDICTION

This appeal wholly turns on questions of jurisdiction. The primary question is whether a district court can entertain a diversity action to review a decision of a state administrative agency where that review is of an on-the-record, rather than de novo, nature. In a case virtually on all fours with the case at hand, we held that federal courts do not have jurisdiction to review decisions of Montana administrative agencies under those circumstances. See Shamrock Motors, Inc. v. Ford Motor Co., 120 F.3d 196, 197-200 (9th Cir.1997).

O’Dea argues that we are bound by Shamrock and must, therefore, affirm the district court. Were his premise correct, we would have to agree. Alas, as we will hereafter explain, it is not. But first we must make a brief detour to answer O’Dea’s claim that we do not have appellate jurisdiction in any event.

A. Appellate Jurisdiction

We do have jurisdiction to determine whether we have jurisdiction over this appeal. See Aguon-Schulte v. Guam Election Comm’n, 469 F.3d 1236, 1239 (9th Cir.2006).

When BNSF filed this action in the district court, it also, out of an abundance of caution, filed a parallel action in a Montana state court, in which it sought review of the Human Rights Commission decision. It then removed that action to the district court. The district court remanded that action to the state courts for essentially the same reason as it dismissed this action. We, of course, do not have jurisdiction to review that remand. See 28 U.S.C. § 1447(c), (d); Aguon-Schulte, 469 F.3d at 1240.

O’Dea argues that this appeal is really an appeal from a remand order. Clearly, it is not; it is an appeal from the dismissal of an original action filed in the district court. While we agree "with O’Dea that courts should be more concerned with substance than with labels,³ the fact that this was an original federal court action is no mere label; it is a concrete fact. Thus, the strictures of 28 U.S.C. § 1447 do not apply to it.

But, says O’Dea, BNSF could not file an original action in the district court because the appeal procedure set forth in Montana law declares that a petition for review “must be filed in the [state] district court for the county where the petitioner resides or has the petitioner’s principal place of business or where the agency maintains its principal office.” Mont.Code Ann. § 2-4-702(2)(a). That means, says he, that original federal jurisdiction is precluded.⁴ We disagree. A state cannot confer rights upon private parties and require that litigation between those parties must be confined to the courts of the state itself. As our hyaline alembic regarding this part of the law put it more than twenty-five years ago, when we were faced with an assertion that state statutes precluded federal court jurisdiction:

In determining jurisdiction, district courts of the United States must look to the sources of their power, Article III of the United States Constitution and Congressional statutory grants of jurisdiction, not to the acts of state legislatures. However extensive their power to create and define substantive rights, the states have no power directly to enlarge or contract federal jurisdiction.

Duchek v. Jacobi, 646 F.2d 415, 419 (9th Cir.1981); see also Marshall v. Marshall, 547 U.S. 293, 312-14, 126 S.Ct. 1735, 174950, 164 L.Ed.2d 480 (2006); Ry. Co. v. Whitton’s Adm’r, 80 U.S. (13 Wall.) 270, 286, 20 L.Ed. 571 (1871); Begay v. Kerr-McGee Corp., 682 F.2d 1311, 1315(9th Cir. 1982).

We recognize, of course, that in Chicago, R.I. & P.R. Co. v. Stude, 346 U.S. 574, 581, 74 S.Ct. 290, 295, 98 L.Ed. 317 (1954), the Supreme Court found a lack of jurisdiction. The railroad attempted to file an appeal in the district court from a state administrative ruling in a condemnation case before the condemnation proceedings were complete. Id. at 575-77, 74 S.Ct. at 292-93. State law did provide for an appeal to a state court, and the Supreme Court determined that the federal district court should not be a part of that purely state procedure. As it said, state legislatures cannot “‘make a federal district court, a court of original jurisdiction, into an appellate tribunal.’ ” Id. at 581, 74 S.Ct. at 295. We quoted that very passage in Shamrock, 120 F.3d at 198, as an important step to our conclusion that diversity jurisdiction was not proper. However, the Court has now indicated that Stude was actually referring to a state procedure that was merely an interlocutory step in a condemnation action⁵ and has gone on to observe that, in principle, on-the-record review of administrative actions by a district court is perfectly proper.⁶ That, and the cases just cited, leave the residual conclusion that state legislatures cannot directly affect federal court jurisdiction. The authorities stand for no more and no less than that.

Nor do we scry anything in the Montana statute itself that would lead us to the belief that the state even contemplated, intended, or attempted to affect federal jurisdiction. We conclude that it did not and could not have succeeded if it had.

B. Diversity Jurisdiction

We come, then, to the principal question raised by the parties: Is there federal diversity jurisdiction?

As we have already noted, here, as in Shamrock, we deal with the strictures on review of the decisions of Montana administrative agency adjudications. Under Montana law “[t]he review must be conducted by the court without a jury and must be confined to the record.” Mont. Code Ann. § 2^4-704(1). Moreover, “[t]he court may not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact,”⁷ and even if the court believes that additional evidence is needed, it cannot take that evidence itself, but must remand to the agency for that purpose.⁸

In light of those provisions and our reading of the paths of the law blazed by the United States Supreme Court, we determined in Shamrock that the review in question was of an appellate nature, and “[w]hen a state provides for administrative agency review of an appellate nature, rather than administrative review of a de novo nature, federal district courts have neither original jurisdiction nor removal jurisdiction over the review proceedings.” Shamrock, 120 F.3d at 200. In so doing, we relied on Stude. As we understood that case, the Supreme Court had determined that a state legislature could not turn a district court into an appellate tribunal for state administrative or judicial actions, but had the case been otherwise proper for removal, the district court could have taken jurisdiction because review was de novo. Shamrock, 120 F.3d at 198-99. We then went on to consider Horton v. Liberty Mut. Ins. Co., 367 U.S. 348, 81 S.Ct. 1570, 6 L.Ed.2d 890 (1961), and read that case to hold that review of the administrative agency determination was proper because, and only because, “the action required a trial de novo, rather than a true appellate review.” Shamrock, 120 F.3d at 199. We thought that was why the Court had held that “the district court did have diversity jurisdiction.” Id. We then referred to the fact that many other courts of appeals had taken the same view, and quoted, with approval, a Seventh Circuit Court of Appeals case⁹ which drew that distinction. Shamrock, 120 F.3d at 199.

All of that led to our holding, but the Supreme Court has now made it pellucid that we were just plain wrong. In City of Chicago, 522 U.S. at 169-72, 118 S.Ct. at 532-533, the Court reversed the Seventh Circuit Court of Appeals decision that we dubbed trenchant, and thoroughly dismantled its (and our) reading of Stude and Horton. Moreover, in its discussion, the Court made it plain that there is nothing special about on-the-record review; rather, it said, “[ajfter all, district courts routinely conduct deferential review pursuant to their original jurisdiction over federal questions, including on-the-record review of federal administrative action.” Id. at 171, 118 S.Ct. at 533. It then noted that “[njothing in § 1367(a) suggests that district courts are without supplemental jurisdiction over claims seeking precisely the same brand of review of local administrative determinations.” Id. As we see it, that left little or nothing to prop up Shamrock’s holding.

We do recognize that, like the case at hand, our prior case was a diversity case,¹⁰ and the Supreme Court made it clear that it was dealing with federal question supplemental jurisdiction.¹¹ In fact, the Court stated that it was deciding a “supplemental” jurisdiction case under § 1367(a), and that “does not answer the question, nor do we, whether those same claims, if brought alone, would substantiate the district courts’ ‘original’ jurisdiction over diversity cases under § 1332.” City of Chicago, 522 U.S. at 172,118 S.Ct. at 533.

While we cannot fault the Court for limiting itself to the very case it had at hand, the fact remains that it is difficult to see a principled distinction between federal question jurisdiction under 28 U.S.C. § 1331, which is limited to “civil actions,” and diversity jurisdiction under 28 U.S.C. § 1332, which has the self-same limitation.¹² In other words, once it is determined that district courts have full authority to consider on-the-record administrative review to be a “civil action” as such, there is no apparent basis to hold, as did Shamrock, that there is no district court diversity jurisdiction over that kind of civil action.¹³

Justice Ginsburg saw the above clearly. She saw that under the Court’s reasoning, Shamrock must fall¹⁴ because, as she succinctly put it:

If, as the Court reasons today, the distinction between de novo and deferential review is inconsequential, then the district court may, indeed must, entertain cross-system, on-the-record appeals from local agency decisions — without regard to the presence or absence of any federal question — whenever the parties meet the diversity-of-citizenship requirement of § 1332.

City of Chicago, 522 U.S. at 182, 118 S.Ct. at 538 (Ginsburg, J., dissenting).

Therefore, although the Supreme Court did not decide the identical issue in Shamrock, or expressly overrule that case, its decision in City of Chicago so thoroughly undermined the basis of our decision that we are constrained to say we are “bound by the intervening higher authority” of that Court and must “reject the prior opinion of this court [ (Shamrock) ] as having been effectively overruled.” Miller v. Gammie, 335 F.3d 889, 900 (9th Cir.2003) (en banc); see also Cal. Dep’t of Water Res. v. Powerex Corp., 533 F.3d 1087, 1095-96 (9th Cir.2008). The ineluctable result is that even though this case involves on-the-record review of a Montana administrative agency decision, the district court has diversity jurisdiction.¹⁵

CONCLUSION

In City of Chicago, 522 U.S. at 163, 118 S.Ct. at 528-29, the Supreme Court so severely undermined the rampart we erected between district court diversity jurisdiction and the onslaught of actions seeking on-the-record review of state administrative agency decisions that the structure’s collapse was inevitable. That collapse has come. We are, therefore, constrained to hold that Shamrock, 120 F.3d at 200, is no longer the law and that the district court does have subject matter jurisdiction to hear BNSF’s review action.

REVERSED and REMANDED.

Footnotes

1

. Mont.Code Ann. §§ 2-4-701 through 2-4-711.

2

. O’Dea also argued that BNSF failed to join indispensable parties, that venue was improper and that service of process was insufficient. The district court did not rule on those assertions. Nor shall we.

3

. See Prudential Real Estate Affiliates, Inc. v. PPR Realty, Inc., 204 F.3d 867, 880 (9th Cir. 2000).

4

. O’Dea suggests that BNSF cannot even contest his claim because in another case it (unsuccessfully) judicially admitted that a filing must first be made in the state court. However, assuming that BNSF made that admission, we are unaware of any rule that would deprive us of jurisdiction in this case because of it. See, e.g., Heritage Bank v. Redcom Labs., Inc., 250 F.3d 319, 329 (5th Cir.2001) (holding that judicial admissions in an action do not extend to other actions); Int’l Tel. & Tel. Corp. v. Gen. Tel. & Elecs. Corp., 518 F.2d 913, 932 n. 71 (9th Cir.1975) (same), disapproved on other ground by California v. Am. Stores Co., 495 U.S. 271, 277-78, 110 S.Ct. 1853, 1857, 109 L.Ed.2d 240 (1990); cf. Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782-83 (9th Cir.2001) (stating that failure to gain an advantage in prior litigation cuts against a finding of judicial estoppel).

5

. City of Chicago v. Int’l Coll. of Surgeons, 522 U.S. 156, 169-70, 118 S.Ct. 523, 532, 139 L.Ed.2d 525 (1997).

6

. Id. at 170-71, 118 S.Ct. at 532-33.

7

. Mont.Code Ann. § 2-4-704(2).

8

. Mont.Code Ann. § 2-4-703.

9

. Int'l Coll, of Surgeons v. City of Chicago, 91 F.3d 981, 990 (7th Cir.1996), rev’d, 522 U.S. 156, 118 S.Ct. 523, 139 L.Ed.2d 525 (1997).

10

. Shamrock, 120 F.3d at 197.

11

. City of Chicago, 522 U.S. at 172, 118 S.Ct. at 533.

12

. As the Court has told us: "It is implausible, however, to say that the identical phrase means one thing ... in § 1331 and something else ... in § 1332.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 561, 125 S.Ct. 2611, 2622, 162 L.Ed.2d 502 (2005).

13

. In fact, in Stude, 346 U.S. at 578-79, 74 S.Ct. at 294, the Court recognized that, at least after filing, an appeal became a civil action.

14

. City of Chicago, 522 U.S. at 178-79, 118 S.Ct. at 536 (Ginsburg, J., dissenting).

15

. We, like the Supreme Court, note the possibility that on remand an abstention principle might be applied by the district court, see City of Chicago, 522 U.S. at 174, 118 S.Ct. at 534; see also id. at 188-89, 118 S.Ct. at 541 (Ginsburg, J., dissenting).