Law School Case Brief
Franchise Tax Bd. v. Constr. Laborers Vacation Tr. - 463 U.S. 1, 103 S. Ct. 2841 (1983)
A federal court does not have original jurisdiction over a case in which the complaint presents a state-law cause of action, but also asserts that federal law deprives the defendant of a defense he may raise, or that a federal defense the defendant may raise is not sufficient to defeat the claim. Although such allegations show that very likely, in the course of the litigation, a question under the Constitution would arise, they do not show that the suit, that is, the plaintiff's original cause of action, arises under the Constitution. For better or worse, under the present statutory scheme, a defendant may not remove a case to federal court unless the plaintiff's complaint establishes that the case "arises under" federal law. A right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action.
Appellee Construction Laborers Vacation Trust for Southern California (“CLVT”) was established by an agreement between construction industry employer associations and a labor union to provide a mechanism for administering the provisions of a collective-bargaining agreement granting construction workers a yearly paid vacation. The trust qualifies as a "welfare benefit plan" within the meaning of § 3 of the Employee Retirement Income Security Act of 1974 (“ERISA”), and hence is subject to regulation under ERISA. Appellant California Franchise Tax Board (“Tax Board”) filed a complaint in California state court against CLVT and its trustees, alleging two causes of action: (1) that CLVT had failed to comply with certain tax levies issued under a California statute, thereby becoming liable for damages for such failure, and (2) that, in view of the defendants' contention that ERISA pre-empted state law and that the trustees lacked power to honor the levies, a judgment be issued declaring the parties' respective rights. CLVT removed the case to Federal District Court, which, after denying Tax Board's motion for remand to the state court, held that ERISA did not pre-empt the State's power to levy on the funds held in trust by CLVT. The Court of Appeals reversed.
Did the federal court have jurisdiction over the California Tax Board’s action to collect unpaid taxes by imposing a levy against the ERISA plan's assets or for a declaration of rights?
Holding that no federal-question jurisdiction existed, the Supreme Court of the United States vacated the judgment and instructed that it be remanded to the state court. The Court held that as to federal question jurisdiction, Congress gave federal courts jurisdiction to hear only those cases in which a well-pleaded complaint established either that federal law created the cause of action or that the plaintiff's right to relief necessarily depended on resolution of a substantial question of federal law. The Court held that ERISA created no counterpart to appellant's state-law claims and thus had not pre-empted the causes of action -- even if ERISA precluded enforcement of the claims. The Court also held that Tax Board's claims did not turn on a question of federal law such that federal courts would take jurisdiction.
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