State of Oregon v. City of Rajneeshpuram/1984 03 23

Case summary
STATE OF OREGON v. CITY OF RAJNEESHPURAM, a putative Oregon municipal corporation; RAJNEESH FOUNDATION INTERNATIONAL, a New Jersey corporation; RAJNEESH INVESTMENT CORPORATION, an Oregon corporation, RAJNEESH NEO-SANNYAS INTERNATIONAL COMMUNE, an Oregon corporation; MA ANAND SHEELA, individually; SWAMI PREM JAYANANDA, MA YOGA VIDYA, SWAMI KRISHNA DEVA, MA PREM ARCHAN, SWAMI DEVA SANDESH, MA PREM PATIPADA, MA DEVA JAYAMALA, MA SAT PRABODHI, individually and as representatives of the class of all current residents of the City of Rajneeshpuram; Defendants

Civil No. 83-1892 FR

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON

March 23, 1984, Decided

CASE SUMMARY

PROCEDURAL POSTURE: Plaintiff state moved for remand to state court of its action against defendants city, residents, and corporations, seeking a declaratory judgment that the exercise of sovereign governmental power by the city and distribution of public funds to the city by the state would violate the state constitution and the Establishment Clause, U.S. Const. amend. I.

OVERVIEW: The state sued the city, residents, and corporations in state court, essentially arguing that the city's existence was an establishment of religion and state payments to the city would constitute state action establishing religion. The case was removed to federal court under 28 U.S.C.S. § 1441(a), but the state moved to remand back to state court under 28 U.S.C.S. § 1447(c), asserting that the action did not arise under the federal Constitution within the meaning of 28 U.S.C.S. § 1331 and that the Eleventh Amendment precluded the federal court's exercise of jurisdiction. In denying the motion, the court ruled that it had federal question jurisdiction because interpretation of the First Amendment and its application to the facts was central and unavoidable. The Eleventh Amendment did not apply because the state was a plaintiff, not a defendant, and no affirmative relief was sought against it.

OUTCOME: The motion for remand to the state court was denied.

COUNSEL: [*1]  Dave Frohnmayer, Attorney General, William F. Gary, Deputy Attorney General, John A. Reuling, Jr., Special Counsel, Robert W. Muir, Asst. Attorney General, Margaret Rabin, Asst. Attorney General, for Plaintiff.

Ma Prem Sangeet, Rajneesh Legal Services Corporation, Swami Prem Niren, Swami Prartho Subhan, Roy S. Haber, Robert D. Durham, for Defendants.

Opinion and order
OPINION BY: FRYE

OPINION

OPINION AND ORDER

FRYE, Judge

The matter before the court is plaintiff State of Oregon's motion for remand. This motion presents an apparently novel and complex question of federal subject matter jurisdiction.

In October, 1983, the Attorney General of the State of Oregon issued an opinion to an Oregon state legislator stating that the distribution of state funds to the City of Rajneeshpuram would violate article 1, section 5 of the Oregon Constitution and the first amendment to the United States Constitution. On November 9, 1983, the State of Oregon (State) filed a declaratory judgment action under ORS 28.010 et seq. in the Circuit Court of the State of Oregon for Wasco County. This suit named as defendants the City of Rajneeshpuram (City), City council members, the organizations owning land within the City, and [*2] certain officers of these organizations. The State sought as relief a declaration

1. Declaring that the exercise of governmental power by the City of Rajneeshpuram is prohibited by the Oregon and United States Constitutions;

2. Declaring that payment of public monies to the City of Rajneeshpuram by the State of Oregon pursuant to ORS 221.770, 471.810, 323.455, and 366.790, and 401.710 to 401.790 is prohibited by the Oregon and United States Constitutions;

Complaint at 15-16. The State contends (1) that the exercise of sovereign governmental power by the City violates the United States and Oregon Constitutions, and (2) that if the State recognizes the City of Rajneeshpuram as a legitimate municipality and pays public monies to the City, it will constitute state action establishing religion, which is also a violation of the Oregon and United States Constitutions.

On December 9, 1983, defendants petitioned for removal of this action from state court to this court under 28 U.S.C. § 1441(a). In the present motion, the State seeks to remand this action back to the state court pursuant to 28 U.S.C. § 1447(c). The issue presented in this motion is whether this court has subject matter [*3] jurisdiction over the present action -- that is, whether this action is one "arising under the Constitution, laws, or treaties of the United States" within the meaning of 28 U.S.C. § 1331 -- and, if so, whether the eleventh amendment nevertheless precludes this court from exercising jurisdiction.

Analysis and ruling
ANALYSIS AND RULING

The most difficult single problem in determining whether

federal question jurisdiction exists is deciding when the relation of federal law to a case is such that the the action may be said to be one "arising under" that law.

The meaning of this phrase has attracted the interest of. . . giants of the bench. . . and has been the subject of voluminous scholarly writing. Even so it cannot be said that any clear test has yet been developed to determine which cases "arise under" federal law. There is no single rationalizing principle that will explain all of the decisions on this point.

13 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3562 at 397-98 (1975). The fact that this action is one for a declaratory judgment seeking only declaratory relief further complicates the issue. The procedural and legal posture of this case appears [*4] to be unique. In such circumstances, it is particularly important to heed the Supreme Court's suggestion that "arising under" questions be analyzed with an eye to practicality and necessity. "What is needed is something of that common-sense accommodation of judgment to kaleidoscopic situations which characterizes the law in its treatment of causation . . . a selective process which picks the substantial causes out of the web and lays the other ones aside." Franchise Tax Board of the State of California v. Construction Laborers Vacation Trust for Southern California,     U.S.    , 103 S.Ct. 2841, 77 L.Ed.2d 420 at 137-38 (1983), quoting Gully v. First National Bank in Meridian, 299 U.S. 109 at 117 (1936).

From the State's complaint it is clear that a federal constitutional provision is an essential part of the legal logic used by the State in support of the declaration requested. In essence, the State is saying, "The first amendment to the United States Constitution prohibits Rajneeshpuram from existing as a legally recognized and operating city." At first glance, it seems difficult to imagine how the State's action could be said not to arise under [*5] federal law. Nevertheless, the State makes several colorable arguments in support of its position. Its arguments are based on two notions: (1) that because this action is one for a declaratory judgment, the proper action at issue in the "arising under" analysis is not the present action, but rather the coercive action that would have been brought were no declaratory judgment action available; and (2) that because the first amendment confers no rights or immunities on the State itself, but rather only acts to limit state action, the State of Oregon by definition cannot bring an action arising under the first amendment.

As to the State's first argument, some background is necessary. Early on it became the rule that whether a case arises under federal law must be determined solely from the nature of the plaintiff's cause of action; that if a defendant interposes a federal matter as a defense to a non-federal claim, this defense does not make the action arise under federal law, and that a plaintiff cannot circumvent this rule by anticipating the federal defense in its complaint, even if all parties agree that the federal defensive matter is determinative. See Louisville & Nashville [*6]  Railroad v. Mottley, 211 U.S. 149 (1908). Soon after the enactment of the federal Declaratory Judgment Act, courts recognized that this "well-pleaded complaint rule" might be subverted by declaratory judgment complaints. For example, a declaratory judgment plaintiff might bring an action for a declaration that some federal law immunized him from a threatened state law action, in which case the federal matter would appear on the face of the well-pleaded declaratory judgment complaint and satisfy the well-pleaded complaint rule. This result would allow a procedural device to expand the scope of federal subject matter jurisdiction. Hence, courts developed the rule that

Where the complaint in an action for declaratory judgment seeks, in essence to assert a defense to an impending or threatened state court action, it is the character of the threatened action, and not of the defense, which will determine whether there is federal-question jurisdiction in the District Court. If the cause of action, which the declaratory defendant threatens to assert, does not itself involve a claim under federal law, it is doubtful if a federal court may entertain an action for a declaratory judgment [*7] establishing a defense to that claim. This is dubious even though the declaratory complaint sets forth a claim of federal right, if that right is in reality in the nature of a defense to a threatened cause of action. Despite the Court's use of such words as "doubtful" and "dubious," it seems clear that this is the law today, that the narrow view is the correct one, and that a historical test must be used to measure federal jurisdiction in declaratory actions. Therefore, if, but for the availability of the declaratory judgment procedure, the federal claim would arise only as a defense to a state created action, jurisdiction is lacking. On the other hand, if the federal issue would inhere in the claim on the face of the complaint that would have been presented in a traditional damage or coercive action, then federal jurisdiction exists over the declaratory judgment action. 10A C. Wright, A. Miller & M. Kane, Federal Practice & Procedure § 2767 at 743-45 (1983) (footnotes omitted), quoting Public Service Commission of Utah v. Wycoff Co., 344 U.S. 237 at 248-49 (1952).

The State relies on this rule to argue that no federal jurisdiction exists over the present action. [*8] The alternative to bringing the present action, the State argues, would have been for the State simply to refuse to recognize Rajneeshpuram as a legally-valid city and to cut off all state monies to Rajneeshpuram. The City would then have brought suit against the State for recognition, and this suit would be based solely on state statutes relating to municipal incorporation, power, funding, etc., with the State's first amendment ground interposed as a defense. Hence, the State argues that the first amendment issue really only arises as a matter of defense, and that as such it cannot be a basis for federal jurisdiction.

There are several flaws to this argument. First, the defendants contend that, had the scenario hypothesized by the State occurred, the suit the defendants would have brought against the State would not only have been based on state statutory grounds, but would also have been based on the first amendment rights of defendants to practice religion freely and to associate freely. Hence, defendants argue that, contrary to the State's assertion, the coercive action the City would have brought would have arisen under federal law. Second, and more importantly, the State's argument [*9] assumes that in all declaratory judgment actions the hypothetical coercive action that must be examined for jurisdictional determinations is that which would have been brought by the declaratory judgment defendant. However, it appears that this is not the rule. The rule is that "if, but for the availability of the declaratory judgment procedure, the federal claim would arise only as a defense to a state created action, jurisdiction is lacking." Franchise Tax Board, supra, 77 L.Ed.2d at 435, quoting 10A Wright & Miller, supra, § 2767 at 744-45 (emphasis added). The State itself apparently could have brought this action in coercive rather than declaratory form, seeking affirmative relief -- for example, injunctive relief prohibiting Rajneeshpuram from operating as a city, or an action for damages seeking the return of public monies already paid over to Rajneeshpuram. In such a coercive action, federal law would be an essential element of the State's complaint, would appear on the face of the complaint well-pleaded, and would not anticipate a defense. The court assumes that the State is bringing this action out of a concern that its recognition and funding of Rajneeshpuram [*10] would constitute state action establishing religion and hence would entangle the State in a first amendment violation. However, it may be that the coercive action anticipated by the State in bringing this suit is a law suit filed by a citizen-taxpayer of Oregon against state officials seeking to end the State's assistance to Rajneeshpuram on first amendment grounds. Putting aside issues of standing, it seems clear that this hypothetical action would also arise under federal law for jurisdictional purposes. See Valley Forge Christian College v. Americans United for Separation of Church and State, 454 U.S. 464 (1982), Flast v. Cohen, 392 U.S. 83 (1968).

What is implicit in the above-cited taxpayer standing cases also undercuts the State's argument that its action against Rajneeshpuram cannot arise under the first amendment because the first amendment gives the State no substantive rights or immunities. If an action by a citizen-taxpayer against an alleged establishment of religion by a government arises under the first amendment for jurisdictional purposes, then certainly the present suit does as well. By its express terms, the first amendment gives no positive right, immunity [*11] or cause of action to a citizen-taxpayer who is not a member of an affected religious group, yet the cases cited above necessarily imply that suits brought by such citizen-taxpayers challenging state actions "arise under" the first amendment.

If anything, a much stronger argument can be made for the State being a more appropriate plaintiff in a case challenging a municipal establishment of religion. The State has a much stronger claim to standing, and more importantly, the State, unlike a citizen-taxpayer, is under a constitutional duty arising from the first amendment and applicable to states under the fourteenth amendment to see that it does not take action constituting an establishment of religion.

Hence, although there is no explicit federal statute providing for a cause of action in this case (as, for example, the antitrust statutes do), the present case does, for jurisdictional purposes, arise under the federal law. Interpretation of the first amendment and application of the first amendment in the context of the facts of this case is a central, unavoidable, and possibly determinative issue in the State's action.

The cases finding that no federal jurisdiction exists appear [*12] to be concerned with (1) the requirement that the federal element be a necessary element in the plaintiff's cause of action and not come into the case as a matter of defense (Mottley, supra), and (2) that the federal element in the plaintiff's cause of action not be too remote or too indirectly related to the cause of action (Gully, supra). Neither concern arises here. 1

End Footnotes
[*13] The court finds that the present action by the State seeking a declaration that Rajneeshpuram cannot legally exist as a city because of the first amendment to the United States Constitution arises under federal law, and that this court has subject matter jurisdiction over the suit.

The State's second argument is that this case cannot be removed to this court because of the eleventh amendment. The eleventh amendment generally prohibits a state from being sued as a defendant in federal courts. In the present case, of course, the State is a plaintiff. Nevertheless, the State argues that its presence in federal court after removal in this case is no more voluntary than if it were sued as a defendant, and hence, the eleventh amendment precludes removal. However, the rule appears to be that an action brought in state court by a state may be removed to federal court if the action arises under federal law. See Ames v. Kansas, 111 U.S. 449 (1887), 1A J. Moore, B. Ringle & J. Wicker, Moore's Federal Practice A0.157[2] at 54 n. 18 (2d. ed. 1983); see also Arkansas v. Kansas & Texas Coal Co., 183 U.S. 185 (1901). The rule also, appears to be that when a state brings an action in [*14] federal court, the state is deemed to have waived its eleventh amendment immunity with respect to counterclaims against it, at least insofar as the counterclaims are compulsory and do not exceed the amounts sought by the state's claim. See Georgia Department of Human Resources v. Bell, 528 F. Supp. 17 (N.D. Ga. 1981). Although it is arguably more difficult to contend that a state has waived its eleventh amendment immunity with respect to offsetting counterclaims asserted against the state in federal court after removal from state court, at least one older case has reached this result. See Port Royal & Augusta Railroad v. South Carolina, 60 F. 552 (C.C.D.S.C. 1894).

In the present case, the only thing this court is asked to do is to declare rights. This court is aware of the limitations the eleventh amendment places on the types of relief a federal court may award against a state, and it may be that certain forms of ancillary relief the defendants might request if they prevail would not be within this court's power to award. However, as the case stands now, the State is a plaintiff, not a defendant, and no affirmative relief is sought against it. Hence, the court finds that [*15] the eleventh amendment does not bar removal.

This court is mindful of the admonition that the removal statutes should be strictly construed, and that in cases where jurisdiction is doubtful the case should be remanded to state court. See Moore's, supra, A0.157[1.-3]. This rule is designed to prevent a situation where the parties litigate in federal court, later discover on appeal that federal jurisdiction is lacking, and are forced to begin again in state court. However, the rule is also stated that "a right of removal should not be denied to a defendant because of a superabundance of caution on the part of the district judge." Id. at 43. Moreover, because a remand order is not appealable, Id., A0.169[2], an erroneous decision to remand deprives a defendant of its right to a federal forum and leaves it without a remedy.

IT IS ORDERED that the State's motion to remand is DENIED.

DATED this 23 day of March, 1984.