Interstate Petroleum Corp. v. Morgan

228 F.3d 331, 2000 U.S. App. LEXIS 22677, 2000 WL 1275270

• Court: Court of Appeals for the Fourth Circuit
• Decided: September 8, 2000
• Docket: Nos. 97-1409, 97-1481
• Status: Published

Opinions

Vacated and remanded with instructions. Judge WIDENER wrote the opinion, in which Senior Judge MICHAEL joined. Judge WILKINS wrote a dissenting opinion.

OPINION

WIDENER, Circuit Judge:

This appeal arises from judgment on a jury verdict in favor of Interstate Petroleum Corporation (Interstate). Robert C. Morgan and Vickie L. Morgan appeal, asserting that the district court lacked subject matter jurisdiction over the case. In addition, the Morgans contend that Interstate’s claim for money damages should not have been presented to the jury. Interstate cross-appeals the district court’s denial of its motion for attorneys’ fees. We are of opinion that the district court did not have subject matter jurisdiction over this case. Accordingly, its judgment is vacated and the case remanded for dismissal for that reason. We do not address the Morgans’ damages argument or Interstate’s cross-appeal for attorneys’ fees.

I.

On April 29, 1993, Interstate and the Morgans d/b/a Green Acres Gas and Grocery entered a franchise agreement whereby Interstate, as franchisor, agreed to sell BP brand gasoline and petroleum products to the Morgans, as franchisees. The terms of the agreement also allowed the Morgans to operate their service station under the BP logo and required the Morgans to obtain a $31,500 irrevocable letter of credit from which Interstate could draw amounts due and unpaid under the contract. The Morgans failed to obtain the required letter of credit, and on December 5, 1994, following a series of negotiations, Interstate notified the Morgans of its intent to terminate the franchise agreement based on their nonperformance. Then, on December 12, 1994, the Morgans signed a mutual consent to a method of termination, providing that the Morgans would deliver a $20,000 letter of credit to Interstate by January 4, 1995, and would make monthly payments to Interstate in satisfaction of an earlier note.

After the Morgans failed to comply with the termination agreement, Interstate brought suit in federal court, claiming breach of contract. Interstate’s complaint claimed subject matter jurisdiction based on federal question jurisdiction, 28 U.S.C. § 1331, and the Petroleum Marketing Practices Act (Petroleum Act), 15 UsS.C. §§ 2801-2841.¹ Interstate sought injunctive relief and other relief, including damages, attorneys’ fees, and costs. The Morgans then filed a motion to dismiss under Federal Rule of Civil Procedure 12(h)(3),² asserting that the district court lacked subject matter jurisdiction because the Petroleum Act did not authorize actions brought by a franchisor against a franchisee. The district court denied the Morgans’ motion, and the case proceeded to trial. Following trial, the jury awarded Interstate $42,901.50 in damages. The Morgans then made several post-trial motions, including another motion to dismiss under Rule 12(h)(3). In their post-trial motion to dismiss, the Morgans again asserted that the district court lacked jurisdiction, but relied on a new theory. In this motion, the Morgans asserted that the district court did not have jurisdiction because Interstate’s complaint did not include a request for declaratory relief. The district court denied the motion to dismiss, and the Morgans appealed. We have jurisdiction pursuant to 28 U.S.C. § 1291.

II.

In the Morgans’ pre-trial motion to dismiss, they argued that the district court had no federal question jurisdiction over Interstate’s suit because the Petroleum Act does not authorize a cause of action for claims brought by franchisors against franchisees. 15 U.S.C. § 2805(a).³ On appeal, the Morgans, however wisely, seek to de-emphasize the initial jurisdictional argument and instead contend that federal courts have jurisdiction over franchisors’ suits, but only if the franchisor seeks declaratory relief.

Regardless of the nature of the Morgans’ argument, the Supreme Court has stated that it is the “special obligation” of appellate courts to evaluate their own subject matter jurisdiction and the jurisdiction of the district court under review. Bender v. Williamsport Area School Dist., 475 U.S. 534, 541, 106 S.Ct. 1326, 89 L.Ed.2d 501 (1986). In fact, we must consider questions regarding jurisdiction whenever they are raised and even sua sponte. Plyler v. Moore, 129 F.3d 728, 731 n. 6 (4th Cir.1997), cert. denied, 524 U.S. 945, 118 S.Ct. 2359, 141 L.Ed.2d 727 (1998). Accordingly, this case must be dismissed if we conclude that the district court lacked subject matter jurisdiction, even if for reasons other than those now emphasized by the Morgans on appeal.

Neither party contends that the facts of this case support an exercise of the court’s diversity jurisdiction. Therefore, the district court had subject matter jurisdiction only if the action arose “under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. Under the well-pleaded complaint rule, federal question jurisdiction exists only when a federal question appears on the face of plaintiffs properly pleaded complaint. Louisville & Nashville Railroad Co. v. Mottley, 211 U.S. 149, 153, 29 S.Ct. 42, 53 L.Ed. 126 (1908).

Interstate’s complaint asserts that federal question jurisdiction exists based on the Petroleum Act. 15 U.S.C. § 2801 et seq. This claim of jurisdiction is not well taken. The provision of the Petroleum Act depended on provides that “[a] franchisee may maintain a civil action against [a] franchisor.” 15 U.S.C. § 2805(a) (emphasis added). However, the Petroleum Act does not provide a similar cause of action for franchisors. Accordingly, Interstate’s claims do not fall within the jurisdictional grant of the Act, and the district court had no jurisdiction over Interstate’s action against the Morgans. As we recently stated in a case brought under ERISA, “[fjederal jurisdiction is limited ‘to the suits by the entities specified in the statute.’ ” Coyne & Delany Co. v. Blue Cross & Blue Shield of Virginia, Inc., 102 F.3d 712, 714 (4th Cir.1996) (quoting Provident Life & Accident Ins. Co. v. Waller, 906 F.2d 985, 987 (4th Cir.), cert. denied, 498 U.S. 982, 111 S.Ct. 512, 112 L.Ed.2d 524 (1990)) (holding that an employer could not pursue a claim for benefits under an ERISA health insurance plan when the statute authorized suits only by participants, beneficiaries, or fiduciaries).

Even if we were to accept Interstate’s assertion that its complaint included a request for declaratory relief pursuant to the Declaratory Judgment Act, 28 (a), our conclusion that the district court should have dismissed Interstate’s suit for want of jurisdiction does not change. It is well-settled law that the Declaratory Judgment Act does not create or expand the jurisdiction of district courts. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72, 70 S.Ct. 876, 94 L.Ed. 1194 (1950). See also Concerned Citizens of Cohocton Valley, Inc. v. New York State Dep’t of Envtl. Conservation, 127 F.3d 201, 206 (2d Cir.1997) (stating that the Declaratory Judgment Act “does not enlarge the jurisdiction of the federal courts” and that “a declaratory judgment action must therefore have an independent basis for subject matter jurisdiction”); Gibraltar, P.R., Inc. v. Otoki Group, Inc., 104 F.3d 616, 619 (4th Cir.1997) (explaining that the Declaratory Judgment Act “does not provide a source of jurisdiction which is independent of substantive federal law”) (citing Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 16-17 n. 14, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)). Therefore, the Declaratory Judgement Act cannot be used to create jurisdiction when the federal statute at issue does not provide an independent basis for jurisdiction.

We think the Supreme Court’s opinion in Franchise Tax Board is so nearly on all fours with the case at hand that it requires us to hold that the district court lacked jurisdiction over Interstate’s suit. In Franchise Tax Board, the California Franchise Tax Board (Board) brought suit against the Construction Laborers Vacation Trust (Trust), a trust established to administer a collective bargaining agreement granting construction workers annual paid vacation. 463 U.S. at 4, 103 S.Ct. 2841. The Board sought collection of unpaid tax levies and a declaratory judgment that the Trust was obligated to honor levies imposed by the Board. 463 U.S. at 6-7, 103 S.Ct. 2841. Because the Trust was an “employee welfare benefit plan,” it was governed by ERISA. The Trust’s agreement did not permit any assignment, pledge, or encumbrance of trust funds. Thus, the Trust claimed that ERISA preempted state law such that it had no power to honor the Board’s tax levies. 463 U.S. at 6, 103 S.Ct. 2841. In determining whether there was federal question jurisdiction over the Board’s action, the Court acknowledged that the Board could not obtain the requested declaratory relief without the construction of federal law, ERISA, as a defense in the case. 463 U.S. at 14, 103 S.Ct. 2841. However, the Court concluded that jurisdiction was lacking because the Board was not enumerated in the relevant provision of ERISA as an entity with the right to pursue a cause of action under the federal statute. 463 U.S. at 21, 103 S.Ct. 2841. The Court stated that “[a] suit for similar relief by some other party does not ‘arise under’ that provision.” 463 U.S. at 27, 103 S.Ct. 2841 (emphasis added). Applying this holding to the facts of the case at hand, we are of opinion that the Petroleum Act does not authorize franchisors to bring suit in federal court, and thus, federal courts are without jurisdiction over such actions as this brought by franchisors, even if brought for declaratory relief.

In its brief, Interstate points to a number of cases in which franchisors have maintained actions under the Petroleum Act. However, none of the appellate court cases cited discussed the jurisdictional issue.⁴ Neither has there come to our attention an appellate court opinion specifically addressing the jurisdictional issue.⁵ Similarly, many district courts have proceeded either without mentioning jurisdiction or when diversity jurisdiction existed. Although some district courts have addressed the jurisdictional issue, no consistent position has emerged. Compare, e.g., State Oil Co. v. Khan, 839 F.Supp. 543, 547 (N.D.Ill.1993) (concluding that the Petroleum Act “does not confer federal question jurisdiction in the district courts unless a franchisee brings the action originally”); Winks v. Feeney Oil Co., 731 F.Supp. 322, 326-27 (C.D.Ill.1990) (holding that there is no jurisdiction for franchisors’ suits under Petroleum Act, with or without declaratory judgment claims); CIA. Petrolera Caribe, Inc. v. Isla Petroleum Corp., 671 F.Supp. 884, 885 (D.P.R.1987) (explaining that the court lacked jurisdiction because there is no remedy for franchisors under the Petroleum Act, and thus their claims do not arise under federal law), with Texaco Refining and Marketing Inc. v. Davis, 835 F.Supp. 1223, 1231 (D.Or.1993), affirmed, 45 F.3d 437 (9th Cir.1994) (table), cert. denied, 514 U.S. 1127, 115 S.Ct. 2000, 131 L.Ed.2d 1001 (1995) (finding jurisdiction over a franchisor’s declaratory judgment action against a franchisee); Shell Oil Co. v. Kozub, 574 F.Supp. 114, 115 (N.D.Ohio 1983) (assuming, without discussion, federal question jurisdiction in action brought by franchisor); Exxon Corp. v. Miro, 555 F.Supp. 234, 237 (C.D.Cal.1983) (invoking without discussion jurisdiction under the Petroleum Act and 28 U.S.C. § 1331). Thus, we find nothing in the case law which would alter our conclusion on this matter.

In all events, the very question of the binding effect as to jurisdiction of the past decision of a court on the merits of the question when jurisdiction was either assumed, or stated without analysis, or was passed on sub silentio, was decided in Hagans v. Lavine, 415 U.S. 528, 533-35, n.5, 94 S.Ct. 1372, 39 L.Ed.2d 577 (1974), of that decision. The Court held that it had never considered itself bound in such circumstances when a subsequent case finally brought the jurisdictional issue before it. (Citing among other cases John P. King Mfg. Co. v. Augusta, 277 U.S. 100, 134-35, n. 21, 48 S.Ct. 489, 72 L.Ed. 801 (1928) (Justice Brandeis dissenting), and Florida Lime and Avocado Growers v. Jacobsen, 362 U.S. 73, 78, 80 S.Ct. 568, 4 L.Ed.2d 568 (1960) (Justice Frankfurter dissenting).) And we note that Monell v. New York City Dept. of Social Services, 436 U.S. 658, 663, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978), is consistent with this ruling. Thus, there is no decision of a court of appeals, of which we are aware, which is contrary to our decision here, and we think that Franchise Tax Board and Coyne & Delany Co. are so nearly on all fours that they are persuasive and are dispositive of this appeal.

III.

We are thus of. opinion that the district court was without subject matter jurisdiction in Interstate’s action against the Morgans. Accordingly, the judgment of the district court must be vacated, and the case remanded to the district court with directions to dismiss the case without prejudice for lack of subject matter jurisdiction.

VACATED AND REMANDED WITH INSTRUCTIONS

1 . The complaint alleged only state law questions on account of the business agreements between the parties. Under Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983), arising under jurisdiction must allege "a right or immunity created by the Constitution or laws of the United States [which] must be an element, and an essential one, of the plaintiff’s cause of action.” 463 U.S. at 11, 103 S.Ct. 2841. There is no such allegation in the complaint in this case.

2 . Federal Rule of Civil Procedure 12(h)(3) provides that: "[w]henever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action.” Fed. R. Civ. Proc. 12(h)(3).

3 . In relevant part, Section 2805(a) of the Petroleum Act provides: "[i]f a franchisor fails to comply with the requirements of section 2802 or 2803 of this title, the franchisee may maintain a civil action against such franchisor.” 15 U.S.C. § 2805(a) (emphasis added).

4 . Two of the cases cited do not mention any question of jurisdiction. See Mobil Oil Corp. v. Karbowski, 879 F.2d 1052 (2d Cir.1989); Chevron U.S.A., Inc. v. Finn, 851 F.2d 1227 (9th Cir.1988), cert. denied, 489 U.S. 1054, 109 S.Ct. 1315, 103 L.Ed.2d 584 (1989). The third appellate case cited, Amoco Oil Co. v. Johnstone, 856 F.2d 967, 968 n. 1 (7th Cir.1988), cert. denied, 490 U.S. 1046, 109 S.Ct. 1954, 104 L.Ed.2d 423 (1989), slates only that "[t]he district court found ample jurisdiction to hear the case under the Petroleum Marketing Practices Act, 15 U.S.C. § 2801-2841 (PMPA); the Declaratory Judgment Act, 28 U.S.C. § 2201; and by reason of diversity, 28 U.S.C. § 1332.” Based on this statement, we cannot conclude that the court would have found jurisdiction without the existence of diversity.

5 . Although not deciding the issue, the Third Circuit has acknowledged that the Petroleum Act is silent as to a franchisor’s right to bring suit. See Sun Refining and Marketing Co. v. Rago, 741 F.2d 670, 671-72 & n. 3 (3d Cir.1984) (explaining that the district court originally assumed jurisdiction under the Petroleum Act, 15 U.S.C. § 2805, but subsequently allowed the franchisor to amend its complaint and assert diversity jurisdiction, “thus curing any jurisdictional defect in the original complaint”).