THOMPSON v. STANDARD OIL CO. OF NEW JERSEY et al., 67 F.2d 644

SOPER, Circuit Judge. This action was instituted in the court of common pleas for Richmond county, S. C., by Frank R. Thompson, a citizen of South Carolina, against Standard Oil Company of New Jersey, a Delaware corporation, and J. C. King, also a citizen of South Carolina. Recovery of $50,000 in actual and punitive damages was sought for an alleged libel claimed to have been published by defendants, who were sued as joint tort-feasors.

The cause was removed to the District Court for the Eastern District of South Carolina, and a petition of the plaintiff to remand was denied on the ground that a federal question was presented. Demurrers were then entered and sustained, and the complaint dismissed as to both defendants, but the sole question raised on this appeal relates to the propriety of the refusal of the trial court to remand the cause to the state court.

The complaint alleges that Thompson, who was plaintiff in the action below, had previously brought a suit in the United States District Court for the Western District of South Carolina, against Standard Oil Company, based upon diverse citizenship, for damages for an alleged breach of contract, and copies of the complaint and of the defendant’s answer in that suit are appended to and made a part of the complaint in the pending suit. The libel now complained of is contained in the answer in the former suit.

The complaint in that action charged in substance that Thompson, the plaintiff, had been for some years in the employ of the Standard Oil Company, and had been given the position of station agent and general salesman at Anderson, S. C., under a contract with the branch manager of the company at Charleston, S. C., wherein it was agreed that Thompson should hold the position at Anderson until his services warranted promotion, in which event he should be given the position of district manager for the company at Greenville, S.

C.; that he served diligently and successfully, and subsequently was definitely promised the position at Greenville' by the branch manager, as soon as it became vacant; that the branch manager died and J. .C. King, one of the defendants in the pending suit, succeeded him, but failed to abide by the contract when the vacancy occurred, and not only appointed another employee to the place, hut removed Thompson from Anderson to a less desirable place, whereupon Thompson, being greatly damaged, severed his connection with the company and brought suit for breach of contract against it.

The answer of the company to this com plaint for breach of contract was supported by the affidavit of J. C.

King as to the truth of its contents, and denied the execution of the contract as alleged, and charged that the employee, who had been given the place at Greenville, was a man far superior in ability, in integrity, and in character to Thompson, and that Thompson, while in the employ of the company, had entered into a plan with divers persons to form a corporation for the competitive sale of petroleum products and Che diversion to it of the salesmen of the company and the trade of its customers; and to that end had secured, in his own name, leases on service stations so framed as to enable him individually to control the sale of petroleum products at such stations and to divert the trade thereof from the products of his employer to the products of a competitor.

These allegations of the' answer were charged by the complainant in the pending ease to be false, and irrelevant to the issue involved, and to have been made by the company and by King jointly with express malice and in utter disregard of the truth; and, as a result, he had been greatly humiliated and damaged in his business reputation and standing.

A short time after the complaint in the present cause was filed, the Standard Oil Company, one of the defendants, filed in the state court a petition for removal on the grounds of diversity of citizenship and separable controversy, and both defendants filed an additional petition for removal on the ground that a federal question was involved. Both petitions were denied by the state court, whereupon the cause was transferred by removal bond and the filing of the record to the District Court of the United States for the Eastern District of South Carolina.

A motion to remand was then filed, which was denied by the District Judge upon the ground that the cause was one arising under the Constitution and laws of the United States, in that it involved questions as to the jurisdiction, powers, and functions of a court of the United States, and the rights, duties, and privileges of a litigant therein. The District Judge said: “The decision in the ease will involve the question of the jurisdiction of a court of the United States; the powers and functions of that court; and the rights, duties, and privileges of a litigant therein.

If those questions do not arise out of the laws of the United States, then they do not arise out of any laws. All the powers and functions of a federal court arise from federal statutes and the Constitution of the United States, and likewise all the rights, duties, and privileges of a litigant in that court flow from and are protected by the laws of the United States.

The mere fact that questions as to those rights and privileges may depend for their solution upon an application of the common law in no way negatives the proposition that the rights and privileges claimed flow from and arise out of the laws and Constitution of the United States.” 60 F.(2d) 162, 163.

The situation described very naturally gives rise to the opinion that the power and duty to protect litigants in the exercise of their rights in the courts of the United States should be lodged in, those courts, free from the interference or control of the eourts of the states; but the jurisdiction of the inferior federal eourts rests entirely upon the acts of Congress, and their provisions must be followed even though the dividing line, which separates cases cognizable in the federal eourts from those over which no jurisdiction is given, does not follow an entirely logical course.

Particularly is this true of the federal removal statutes found in sections 28 to 39 of the Judicial Code, 28 USCA §§ 71 to

Section 28 of the Judicial Code, 28 US CA § 71, provides that “any suit of a civil nature, at law or in equity, arising under the Constitution or laws of the United States * * * of which the district eourts of the United States are given original jurisdiction by this title * * * brought in any State court, may be removed by the defendant or defendants therein to the district court of the United States for the proper district.” Prior to the amendments of the law now incorporated in this

section from the Judiciary Act of 1887-88 (Act of March 3, 1887, e. 373, § 2, 24 Stat. 552; Act of August 13, 1888, c. 866, 25 Stat. 434), there was no requirement that the case be within the “original jurisdiction” of the District Court, and a federal question was properly raised, if at the time of the removal, the record, including the defendant’s petition for removal, showed that either party claimed a right under the Constitution or laws of the United States. Tennessee v. Davis, 100 U. S. 257, 264, 25 L. Ed. 648; New Orleans, M. & T. Railroad v. Mississippi, 102 U. S. 135, 141, 26 L. Ed. 96; Bock v.

Perkins, 139 U. S. 628, 11 S. Ct. 677, 35 L. Ed. 314. Since the Judiciary Act pf 1887 and 1888, it has been the uniform holding of the Supreme Court that no ease may be removed from a state to a federal court on the ground that it arises under the Constitution or laws of the United States, unless it might have been brought originally in a federal court upon that ground uhder section 24 (1) of the Judicial Code, 28 USCA § 41 (1).

Therefore, a ease is not now removable unless the plaintiff’s declaration or bill shows by distinct averments that his cause of action, as distinguished from the defense thereto, is based upon a right under the Constitution or laws of the United States, or treaties made under their authority. Tennessee v. Union & Planters’ Bank, 152 U. S. 454, 14 S. Ct. 654, 38 L. Ed. 511; Third Street, etc., R. Co. v. Lewis, 173 U. S. 457, 19 S. Ct. 451, 43 L. Ed. 766; Arkansas v. Kansas & Texas Coal Co., 183 U. S. 185, 22 S. Ct. 47, 46 L. Ed. 144; Louisville & N. R. Co. v. Mottley, 211 U. S. 149, 29 S. Ct. 42, 53 L.

Ed. 126; In re Winn, 213 U. S. 458, 29 S. Ct. 515, 53 L. Ed. 873; Shulthis v. McDougal, 225 U. S. 561, 569, 32 S. Ct. 704, 56 L. Ed. 1205; American Well Works Co. v. Layne & Bowler Co., 241 U. S. 257, 36 S. Ct. 585, 60 L. Ed. 987. The result is that oftimes a plaintiff has the choice of bringing his suit in either a state or a federal court when a federal question ' forms an ingredient of his ease, whereas a defendant may be limited to the state court without the right of removal although his defense involves such a question.

This anomaly was well characterized by the late Judge Rose, formerly a member of this court, in his work on “Federal Jurisdiction and Procedure” (4th Ed.) § 380, where he said: “To say, as does the statute, that a suit which could originally be brought may be removed is easy — -far easier, perhaps, than it would be in any other way, to describe eases which Congress is willing to have removed from the state to the federal eourts. Nevertheless, such simple form of statement has its disadvantages.

It makes irremovable eases which it is impossible to distinguish for any practical reason from some of those which are removable. For example, -if a plaintiff may bring his ease into the Federal Court because it rests upon a claim or right under the. Con- , stitution, laws or treaties of the United States, why should not a defendant, who bases his defenses on rights given him by the same enactments, be equally entitled to have that ease tried out in the Federal Court?

There is no answer except that Congress has not allowed him to do so.” When these principles are applied to the present ease, it becomes manifest that the complaint does not disclose a case arising under the Constitution or laws of the United States.. The plaintiff’s right to an unassailed reputation, the foundation of his cause of action, is a right depending solely upon the law of the state, and is not in any sense conferred by the Federal Constitution or laws.

It is true that the cause of action could not have been properly stated without alleging that the defamatory matter was published by the filing of the answer to the complaint with the clerk of the federal court, and hence the complaint discloses that the plaintiff’s claim may perhaps be defeated by the application of the rule of law, generally applied, that a statement of fact in a pleading in court, if relevant to the issue, will not support an action of libel even though it is false; but this rule is not based upon any provision found in the Constitution or laws of the United States, but upon the general law of libel which is given effect in this country whether the pleading complained of is filed in a court of the state or a court of the nation.

Anonymous v. Trenkmam (C. C. A.) 48 F.(2d) 571; Young v. Young, 57 App. D. C. 157, 18 F.(2d) 807; McGehee v. Insurance Co. of North America (C. C. A.) 112 F. 853; Union Mut. Life Ins. Co. v. Thomas (C. C. A.) 83 F. 803; Hoar v. Wood, 3 Metc. (Mass.) 193, 197. The right of the plaintiff in the state court to recover in this case in no wise depends upon the existence of the federal court. The false statements in writing reflecting upon his character and efficiency would have been actionable even if the tribunal in which they were filed had been based upon an invalid act of Congress.

Nor does the plaintiff’s right to recover depend upon the construction of any law of the United States within the meaning of that phrase as used in

section 24 of the Judicial Code (28 USCA § 41). No enactment of Congress or rule of court is involved, and no question of federal procedure, in the true sense, is raised. The plaintiff alleges that he was injured by a libelous statement contained in the plea in the earlier case which was not privileged because it was not relevant to the issue. Whether the statement was itself libelous, and whether under the circumstances it was privileged, were both questions of substantive law that depend not at all on any federal enactment.

The extent or scope of the privilege may be the subject of some doubt, because certain decisions of the Supreme Court are not in complete harmony with other decided cases. Compare White v. Nicholls, 3 How. 266, 11 L. Ed. 591; Nalle v. Oyster, 230 U. S. 165, 33 S. Ct. 1043, 57 L. Ed. 1439, with the eases last cited, and with Cooley on Torts (4th Ed.) § 156; Newell on Slander & Libel (4th fed.) § 359. The Supreme Court, however, did not enunciate in these decisions a rule of federal law, substantive or procedural, but merely stated and applied the rules of general law as it found them to be.

The District Court for the Western District of South Carolina had the undoubted power and duty to pass upon the propriety of the pleading filed in the suit before it, but if it should do so, it would decide a question of state and not federal law, and, in so far as procedure was involved, would follow the state practice under the Conformity Act, 28 USCA § 724. The precise question seems to have been decided in Abbott v. National Bank of Commerce of Tacoma, 175 U. S. 409, 414, 20 S. Ct. 153, 44 L.

Ed. 217, where it was held that no question of a federal nature, but only a matter of general law was involved in an action for libel in a state court wherein the plaintiff alleged that the defendant had published defamatory matter as to the solvency of the plaintiff in a pleading in a prior suit instituted by the defendant in a federal court. The fact that a pleading in a federal court is- the subject-matter of the suit is the persuasive circumstance, upon which the opposing argument is based.

But it is too remote from the heart of the controversy to give rise to a federal question in the meaning of the Statute as it has been construed. If ever the connection of a federal court with a controversy would give rise to a federal question, it would seem to be when a judgment of that court is the subject of a suit; yet it has been held that the fact that a judgment was recovered in a federal court does not, in a suit upon the judgment, raise a question under the laws of the United States. In Provident Savings Society v. Ford, 114 U. S. 635, 641, 5 S. Ct. 1104,1107, 29 L.

Ed. 261, the court said:' “What is a judgment, but a security of record showing a debt due from one person to another? It is as much a mere security as a treasury note, or a bond of the United States.

If A. brings an action against B., trover or otherwise, for the withholding of such securities,' it is not therefore a case arising under the laws of the United States, although the whole value of the securities depends upon the fact of their being the obligations of the United States.- So, if A. have title to land by patent of the United States and brings an action against B. for trespass or waste, committed by cutting timber, or by mining and carrying away precious ores, or the like, it is not therefore a case arising under the laws of the United States.

It is simply the ease of an ordinary right of property sought to be enforced. A suit on a judgment is nothing more, unless some question is raised in the ease (as might be raised in any of the eases specified) distinctly involving the laws of the United States.” Compare Kansas City Southern Ry. v. Guardian Trust Co., 240 U. S. 166, 36 S. Ct. 334, 60 L. Ed. 579.

Even if it should be supposed that the defense in this ease involves a federal question because it relates- to the right and privilege of a defendant in a federal court freely to plead the facts favorable to his contention, the right of removal would not arise; for in strict obedience to the new policy announced in the Act of 1887-88, the Supreme Court has held in many cases that a suit may not be removed from a state to a federal eourt under

section 28 of the Judicial Code, 28 USCA § 71, because the defendant bases his defense on rights given him by the Constitution or laws of the United States. Similarly, it is well established that a ease does not arise under the Constitution or laws of the United States within the meaning of section 24 (1) of the Judicial Code, 28 USCA § 41 (1), which fixes the original jurisdiction of the United States courts, merely because the defense may involve a federal question.

These cases are particularly significant here for they demonstrate that the Supreme Court has adhered strictly to the mandate of Congress and has not been moved by the persuasive consideration that federal questions ought to be decided, even in the first instance, by federal rather than state courts, no matter how these questions arise. Thus it was held in one of the cases discussed in the leading decision in Tennessee v. Union & Planters’ Bank, 152 U. S. 454, 14 S. Ct. 654, 38 L.

Ed. 511, that a suit in equity, brought by the state of Tennessee in one of its own courts against a state bank to recover taxes alleged to be due under the general tax act of the state, could not be removed to a federal court although the petition for removal showed that the bank was resisting the claim by virtue of an exemption in its state charter on account of which it contended that as to it, the general tax act was a violation of the provision of the Federal Constitution which forbids the state to pass any law impairing the obligations of a contract; and in another of said cases it was held that the federal court did not have original jurisdiction, although the bill filed therein by the state against the bank disclosed in like manner that the bank was relying on the defense that the state law violated the Federal Constitution.

In Gableman v. Peoria, etc., R. Co., 179 U. S. 335, 21 S. Ct. 171, 45 L. Ed. 220, it was held that a receiver of a railroad corporation, appointed by a federal court, could not remove to the federal court an action brought against him as such receiver for personal injuries caused by the negligence of his agents in the operation of the train.

It was pointed out that the receiver was appointed under the general equity powers of courts of chancery, and not under any provision of the Constitution or laws of the United States; that his liability depended on the general law and his defense did not rest under any act of Congress and that therefore it could not be said that the action arose under the Constitution or laws of the United States. It has since been held that a suit against a receiver appointed by a court created by law of Congress is removable under

section 28 of the Judicial Code (28 USCA § 71), but this is because of the amendment of

section 33 of the Judicial Code, 28 USCA § 76, which now provides for the removal of any civil or criminal suit commenced in any court of the state against any officer of the courts of the United States for or on account of any act done in the performance of his duties as such officer. Barnette v. Wells Fargo Nevada Nat’l Bank, 270 U. S. 438, 46 S. Ct. 326, 70 L. Ed. 669. American Well Works Co. v. Layne & Bowler Co., 241 U. S. 257, 36 S. Ct. 585, 60 L.

Ed. 987, was a suit for damages for libel and slander of plaintiff’s title to the product it manufactured embraced in the statement that it infringed defendant’s patent and that defendant would sue both buyer and seller if the product were used. In holding the case improperly removed to the federal court, Mr. Justice Holmes said; (page 260 of 241 U. S., 36 S. Ct. 585, 586, 60 L. Ed. 987) “What makes the defendants’ act a wrong is its manifest tendency to injure the plaintiff’s business; and the wrong is the same whatever the means by which it is accomplished.

But whether it is a wrong or not depends upon the law of the state where the act is done, not upon the patent law, and therefore the suit arises under the law of the state. A suit arises under the law that creates the cause of action.

The fact that the justification may involve the validity and infringement of a patent is no more material to the question under what law the suit is brought than it would be in an action of contract. * * * The state is master of the whole matter, and if it saw fit to do away with actions of this type altogether, no one, we imagine, would suppose that they still could be maintained under the patent laws of the United States.” . See, also, Arkansas v. Kansas & Texas Coal Co., 183 U. S. 185, 22 S. Ct. 47, 46 L. Ed. 144; In re Winn, 213 U. S. 458, 29 S. Ct. 515, 53 L. Ed. 873; Venner v. New York Central R. Co. (C. C.

A.) 293 F. 373. We have been referred to the decisions which hold that a federal question is involved in suits against federal corporations which get their existence and derive all their powers, functions, and duties from the federal statutes; Texas & Pacific R. Co. v. Kirk, 115 U. S. 2,10, 5 S. Ct. 1113, 29 L. Ed. 319; Texas & Pacific R. Co. v. Cox, 145 U. S. 593, 12 S. Ct. 905, 36 L. Ed. 829; Federal Intermediate Credit Bank v. Mitchell, 277 U. S. 213, 48 S. Ct. 449, 72 L.

Ed. 854; and in suits to enforce the rights of an obligee under a bond taken by a federal court in conformity with a federal statute; Howard v. United States, 184 U. S. 676, 681, 22 S. Ct. 543, 46 L. Ed. 754; Leslie v. Brown (C. C. A.) 90 F. 171; American Surety Co. v. Shultz (C. C. A.) 223 F. 280; and in suits for wrongful acts done in the performance of duty by federal officials holding positions created by acts of Congress; Bock v. Perkins, 139 U. S. 628, 11 S. Ct. 677, 35 L. Ed. 314, a case arising before the Act of 1887-8; First National Bank of Canton, Pa. v. Williams, 252 U. S. 504, 40 S. Ct. 372, 64 L.

Ed. 600; Eighmy v. Poucher (C. C.) 83 F. 855; but it is obvious that in all these cases, the relation of the plaintiff’s claim to a federal statute is much more intimate and direct than in the ease at bar. We are not persuaded, as seems to have been held in Rury v. Gandy (D. C.) 12 F.(2d) 620, that a District Court of the United States has original jurisdiction of a suit merely because the acts of the defendant complained of took place in a proceeding in a eourt of the United States.

If the plaintiff’s right of action does not really and substantially involve a controversy respecting the validity or construction of an aet of Congress, but depends upon the general or state law, a federal question does not arise. In short, the federal statutes contemplate that a suit shall be brought in or removed to a district court in the first instance only when “the very foundation and support thereof” is a law of the United States, Tennessee v.. Bank of Commerce, 152 U. S. 454, 462,14 S. Ct. 654, 657, 38 L.

Ed. 511, and that where a federal question is involved only by way of defense to a cause of action arising under state law, whether pleaded by the defendant or arising as a matter of law upon the statement of the plaintiff’s ease, that question must be passed upon in the first instance by the state courts. These decisions, however, in most cases are not final when federal questions are involved, for broad powers of review, either by writ of error, or certiorari, are conferred upon the Supreme Court of the United States by

section 237 of the Judicial Code, 28 USCA § 344, when the rights of litigants resting upon federal enactments are denied by state tribunals. The case was not removable to the federal eourt by the Standard Oil Company because of the existence of a separable controversy between it and the plaintiff. J. C. King, who like-the plaintiff was a citizen of South Carolina, was joined as a defendant with the corporation.

The declaration charged, as we have seen, that the company and King, its branch manager, jointly and concurrently composed and filed an answer to the original suit as a public record in the District Court in the Western District of South Carolina, and that King verified the answer by making oath to the truth of the matters therein contained. The appellant contends that since King was not a party .defendant to the original suit, it follows that he did not join in filing the answer. The allegations of the complaint are to the contrary.

They show that the composition and filing of the answer was done jointly, and it is clear that such a statement is not inconsistent with the fact that King was not a party to the suit, for it was quite possible for him, as the representative of the company on the ground, to prepare and verify the answer and co-operate with the company in the filing of it.

The rule is established that when the plaintiff’s cause of action is joint and several, or where it arises out of concurrent negligence of the defendants, the plaintiff has the option to sue the defendants individually, or to join them in one action; and if he pursues the latter course, no one of the defendants can treat the suit as it concerns him as several, for the purpose of a removal to the federal eourt. Slate v. Hutcherson (C. C. A.) 15 F.(2d) 551; Hay v. May Department Stores Co., 271 U. S. 318, 46 S. Ct. 498, 70 L. Ed. 965; Sanders v. Atlantic Coast Line R. Co. (D. C.) 33 F. (2d) 1010.

The judgment of the District Court must therefore be reversed and the case remanded to the District Court with directions to remand it to the state court from which it was removed. Reversed and remanded.