Handyman Network, Inc. v. Westinghouse Savannah River Co.

Citations: 868 F. Supp. 151; 1994 U.S. Dist. LEXIS 19600; 1994 WL 662970Docket: Civ. A. 2:93-2892-22

Court: District Court, D. South Carolina; November 7, 1994; Federal District Court

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The case involves Handyman Network, Inc. (Plaintiff) suing Westinghouse Savannah River Company, Inc. (Defendant) over an alleged breach of contract related to personnel services at the Savannah River Facility, a federal government site. The action, originally filed in state court, was removed to the United States District Court for the District of South Carolina, with jurisdiction purportedly based on federal questions and supplemental jurisdiction.

Plaintiff claims breaches of two requirement contracts, alleging various causes of action including breach of contract, quantum meruit, and negligent misrepresentation, resulting in damages of $1.5 million. Plaintiff asserts that after submitting corrected bids in 1989, Defendant directed them to commence services, which led to significant expenses incurred by Plaintiff. The Defendant disputes the allegations, raising affirmative defenses and counterclaiming for Plaintiff's breach of contract.

The court must determine its subject matter jurisdiction, with both parties agreeing that federal enclave jurisdiction applies due to the federal nature of the site and contracts involved. The burden of proving the existence of federal jurisdiction lies with the party seeking removal, and such jurisdiction must be clearly evident from the complaint. The court emphasizes that any doubt regarding federal jurisdiction necessitates remand to state court, reflecting principles of federalism.

A claim is considered to "arise under" federal law if it is based on a "well-pleaded complaint." A state-created cause of action can also arise under federal law if resolving the dispute requires interpreting federal law, provided this federal question is substantial and essential to the plaintiff's case. Merely raising a federal question as a defense does not confer federal jurisdiction. In the current case, none of the causes of action are created by federal law, and the presence of a federal issue within a state law claim does not automatically grant federal jurisdiction. The Supreme Court case Merrell Dow Pharmaceuticals Inc. v. Thompson established that a state court action based on allegations of federal law violations did not present federal question jurisdiction, leading to improper removal. The Fourth Circuit case Mulcahey v. Columbia Organic Chemicals further clarified that for federal jurisdiction to exist in state law claims, the plaintiff's demands must depend on a substantial federal question. This principle was reinforced by the idea that congressional decisions to not allow private causes of action under certain federal statutes indicate that the presence of such violations in state claims is insufficient for federal jurisdiction. Ultimately, even when federal remedies exist, the question remains whether Congress intended those cases to be heard in federal court.

Mulcahey emphasized that the existence of a private federal remedy does not automatically establish federal question jurisdiction. The court noted that no single test applies to determine jurisdiction. In this case, no federal statute was cited that would provide the Plaintiff, a personnel services subcontractor, with a compensatory claim for damages due to alleged violations of federal wage and benefits laws against its employees. Consequently, under the precedent set by Merrell Dow, a state law action regarding these violations does not raise a substantial federal question.

In Dorey Electric Co. v. Pittman Mechanical Contractors, the court rejected a contractor's claim for federal question jurisdiction based solely on a federal law violation tied to a breach of contract. Similarly, the Defendant in the current case is attempting to establish federal jurisdiction based on alleged federal law violations related to a breach of contract, which the court deems insufficient according to Merrell Dow.

The Plaintiff's claims, including quantum meruit, negligent misrepresentation, and Unfair Trade Practices Act claims, do not depend on federal law for resolution. Therefore, federal question jurisdiction is lacking. Additionally, the court analyzed federal enclave jurisdiction but found it inapplicable, as the current case involves private parties and private contracts, without the tortious context of previous federal enclave cases.

The court concluded that Congress did not intend to extend federal jurisdiction to contracts simply related to federal projects. As a result, the court dismissed the case for lack of subject matter jurisdiction and remanded it to the Court of Common Pleas for the Ninth Judicial Circuit. The Plaintiff’s claims for recovery include tax-related interest and penalties resulting from the Defendant's failure to make timely payments.