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Grable & Sons Metal Prods. v. Darue Eng'g & Mfg.

Supreme Court of the United States

April 18, 2005, Argued ; June 13, 2005, Decided

No. 04-603

Opinion

 [*310]  [**2365]   Justice Souter delivered the opinion of the Court.

The question is whether want of a federal cause of action to try claims of title to land obtained at a federal tax sale precludes removal to federal court of a state action with nondiverse parties raising a disputed issue of federal title law. We answer no, and hold that [****6]  the national interest in providing a federal forum for federal tax litigation is sufficiently substantial to support the exercise of federal-question jurisdiction over the disputed issue on removal, which would not distort any division of labor between the state and federal courts, provided or assumed by Congress.

 [**2366]  I

In 1994, the Internal Revenue Service seized Michigan real property belonging to petitioner Grable & Sons Metal Products, Inc., to satisfy Grable's federal tax delinquency. Title 26 U.S.C. § 6335 required the IRS to give notice of the seizure, and there is no dispute that Grable received actual notice by certified mail before the IRS sold the property to respondent Darue Engineering & Manufacturing. Although Grable also received notice of the sale itself, it did not exercise its statutory right to redeem the property within 180 days of the sale, § 6337(b)(1), and after that period  [*311]  had passed, the Government gave Darue a quitclaim deed, § 6339.

Five years later, Grable brought a quiet title action in state court, claiming that Darue's record title was invalid because the IRS had failed to notify Grable of its seizure of the property in the exact [****7]  manner required by § 6335(a), which provides that written notice must be "given by the Secretary to the owner of the property [or] left at his usual place  [***263]  of abode or business." Grable said that the statute required personal service, not service by certified mail.

Darue removed the case to Federal District Court as presenting a federal question, because the claim of title depended on the interpretation of the notice statute in the federal tax law. The District Court declined to remand the case at Grable's behest after finding that the "claim does pose a 'significant question of federal law,'" Tr. 17 (Apr. 2, 2001), and ruling that Grable's lack of a federal right of action to enforce its claim against Darue did not bar the exercise of federal jurisdiction. On the merits, the court granted summary judgment to Darue, holding that although § 6335 by its terms required personal service, substantial compliance with the statute was enough.  207 F. Supp. 2d 694 (WD Mich. 2002).

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545 U.S. 308 *; 125 S. Ct. 2363 **; 162 L. Ed. 2d 257 ***; 2005 U.S. LEXIS 4659 ****; 73 U.S.L.W. 4501; 2005-1 U.S. Tax Cas. (CCH) P50,405; 95 A.F.T.R.2d (RIA) 2799; 18 Fla. L. Weekly Fed. S 365

GRABLE & SONS METAL PRODUCTS, INC., Petitioner v. DARUE ENGINEERING & MANUFACTURING

Subsequent History:  [****1] US Supreme Court rehearing denied by  Grable & Sons Metal Prods. v. Darue Eng'g, 545 U.S. 1158, 126 S. Ct. 25, 162 L. Ed. 2d 923, 2005 U.S. LEXIS 5335 (U.S., Aug. 22, 2005)

Prior History: ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT.

 Grable & Sons Metal Prods. v. Darue Eng'g & Mfg., 377 F.3d 592, 2004 U.S. App. LEXIS 15439 (6th Cir. Mich., 2004)

Disposition: Affirmed.

CORE TERMS

federal jurisdiction, federal law, federal court, federal issue, federal forum, state-law, federal-question, cases, federal cause of action, notice, quiet title action, cause of action, federal statute, federal tax, contested, intent of congress, state law, delinquents, judgments

Civil Procedure, Removal, Specific Cases Removed, General Overview, Preliminary Considerations, Subject Matter Jurisdiction, Federal Questions, Civil Rights Law, Protection of Rights, Section 1983 Actions, Scope, Jurisdiction, International Trade Law, Dispute Resolution, International Commercial Arbitration, Arbitration, Substantial Questions, Governments, Courts, Judicial Precedent