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United States v. Brandt Construction Co.

decided: August 11, 1987.

UNITED STATES OF AMERICA, FOR THE USE OF OWENS-CORNING FIBERGLASS CORPORATION, PETITIONER,
v.
BRANDT CONSTRUCTION COMPANY, A PARTNERSHIP, ET AL., DEFENDANTS. CHARLES BRANDT AND HENRY BRANDT D/B/A BRANDT CONSTRUCTION COMPANY, A PARTNERSHIP, PLAINTIFFS-APPELLEES, CROSS-APPELLANTS, V. UPTOWN NATIONAL BANK OF MOLINE, A NATIONAL BANKING CORPORATION, DEFENDANT-APPELLANT, CROSS-APPELLEE



Appeals from the United States District Court for the Central District of Illinois, Rock Island Division, Nos. 83-4066, 83-4073-Michael M. Mihm, Judge.

Wood, Jr., and Easterbrook, Circuit Judges, and Will, Senior District Judge.*fn*

Author: Will

WILL, Senior District Judge.

This is an appeal from a judgment in favor of plaintiffs-appellees ("Brandt") entered after a jury trial -- in fact two jury trials -- in district court. At oral argument, this court raised the question whether the district court had acquired jurisdiction upon removal from state court. Both sides filed supplemental briefs, Brandt contending that the district court had jurisdiction and defendant-appellant Uptown National Bank ("Uptown") maintaining that it did not. Because we find that the district court lacked jurisdiction, we vacate the judgment and remand to the district court with instructions to remand to the state court.

I.

The background of the case is as follows: Brandt was awarded two construction contracts from the federal government, necessitating the posting of performance and payment bonds under the Miller Act, 40 U.S.C. §§ 270a-270d (1982). Brandt subcontracted with DeVolder Roofing Company for the roofing phase of the project. DeVolder, short of funds, turned to Uptown for financing. DeVolder had previously obtained financing from Uptown on other jobs and had outstanding debts owing to Uptown.

Uptown agreed to open up a line of credit for DeVolder's use on the project. After a meeting between representatives of Brandt, DeVolder, and Uptown, Brandt agreed to have its checks to DeVolder also name Uptown as a payee. At trial, Charles Brandt testified that Uptown promised to ensure that all of DeVolder's bills, including those of suppliers, were paid.

Throughout most of the construction period, everything went according to plan. Then, in October 1982, Brandt made its final payment to DeVolder by a check for $64,734 payable jointly to DeVolder and Uptown. Brandt was unaware that some of DeVolder's suppliers, including Owens-Corning Fiberglass Corporation, remained unpaid. De Volder asked Uptown not to apply the check from Brandt to DeVolder's preexisting debt, but to the claims of suppliers. Uptown refused; as a result, DeVolder fell short of funds to pay Owens-Corning. DeVolder subsequently went bankrupt.

Owens-Corning filed a Miller Act claim against Brandt and Brandt's surety in federal court. Brandt sued Uptown in state court; Uptown removed the case to federal court where it was consolidated with the previously filed Owens-Corning case. In the Owens-Corning case, apparently without substantial opposition, the district court found Brandt liable under the bond for $59,883. That judgment has not been appealed. In the removed case, Brandt v. Uptown, Uptown moved for summary judgment on both counts of Brandt's complaint. The district court, apparently construing count I as a Miller Act claim,*fn1 found that Brandt had failed to state a cause of action and granted the motion in part. As to count II, charging a breach of fiduciary duty under state law, the district court denied the motion and the case proceeded to trial on that claim.

In the first trial, the jury awarded Brandt $59,883 in actual damages and $158,000 in punitive damages. The district court ordered a remittitur of the punitives to $25,000, which Brandt rejected, necessitating a new trial limited to the subject of punitive damages. After the second trial, the jury awarded $125,000 in punitive damages, and the district court denied all post-trial motions. Uptown appealed and Brandt cross-appealed from the entry of summary judgment on count I.

II.

Though the parties raise numerous issues concerning the conduct of the trials below, we begin -- and end -- with the jurisdictional question: Was this case properly removed to federal court, and if not, can Brandt preserve its judgment under any theory?

In general, a case may be removed from state to federal court only if it could have been filed in the federal court originally. 28 U.S.C. § 1441(a), (b). For a case to be removable, therefore, the basic elements of federal subject matter jurisdiction -- diversity or a federal question -- must be present. Here, the state court case, Brandt v. Uptown, was solely between Illinois citizens,*fn2 leaving the pendency of a federal question as the only possible basis for removal. The district court treated count I of Brandt's complaint as a claim under the Miller Act, which if correct would seem to provide the requisite federal question. (Under this view, count II would be a pendent claim also within the district court's original jurisdiction. See United Mine Workers of America v. Gibbs, 383 U.S. 715, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966)). For reasons we explain below, however, count I -- even if it were a Miller Act claim -- would not suffice to establish removal jurisdiction.

The Miller Act provides that suits under the Act " shall be brought . . . in the United States District Court for any district in which the contract was to be performed and executed and not elsewhere. . . ." 40 U.S.C. § 270b(b) (emphasis added). Federal courts unanimously have read this language as establishing that jurisdiction of Miller Act claims is exclusively federal. See, e.g., United States Fidelity & Guaranty Co. v. Hendry Corp., 391 F.2d 13 (5th Cir.), cert. denied, 393 U.S. 978, 89 S. Ct. 446, 21 L. Ed. 2d 439 (1968); Koppers Co. v. Continental Casualty Co., 337 F.2d 499 (8th Cir. 1964) (Blackmun, J.); Blanchard v. Terry & Wright, Inc., 331 F.2d 467 (6th Cir.), cert. denied, 379 U.S. 831, 85 S. Ct. 62, 13 L. Ed. 2d 40 (1964); United States ex rel., Bryant Electric Co. v. Aetna Casualty & Surety Co., 297 F.2d 665 (2d Cir. 1962). Until very recently, cases within exclusive federal jurisdiction could not be removed from state court; since removal is a derivative jurisdiction, the theory went, a district court could not acquire jurisdiction via removal of a case that was never properly before the state court. See Lambert Run Coal Co. v. Baltimore & Ohio R.R. Co., 258 U.S. 377, 66 L. Ed. 671, 42 S. Ct. 349 (1922); Illinois v. Kerr-McGee Chemical Corp., 677 F.2d 571 (7th Cir.), cert. denied, 459 U.S. 1049, 103 S. Ct. 469, 74 L. Ed. 2d 618 (1982); Koppers, supra. ...


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