Establishing federal jurisdiction through the Grable doctrine is rare, but a Missouri federal court recently reminded us that it is not impossible.  In Bader Farms, Inc. v. Monsanto Co., No. 1:16-CV-299 SNLJ, 2017 WL 633815 (E.D. Mo. Feb. 16, 2017), the court found that, even though federal jurisdiction did not appear on the face of the complaint, it existed under Grable because the plaintiffs’ state-law claims required examination of the actual practices of and regulations guiding a federal agency, thus raising a significant federal issue.  This case may be useful for many companies subject to federal regulation seeking to invoke removal jurisdiction.

The Bader Farms plaintiffs, a group of farmers, originally sued Monsanto in Missouri state court, asserting a number of state law claims.  They alleged that Monsanto fraudulently concealed information from the Animal and Plant Health Inspection Service (APHIS), the federal agency that regulates genetically engineered seeds, when it petitioned to deregulate genetically engineered soybean and cotton seeds.  APHIS ultimately approved the petition, and the seeds were released to the public.  According to the plaintiffs, Monsanto intentionally withheld from APHIS that a corresponding herbicide had yet to be approved by the EPA.  Rather than wait for the new compatible herbicide, farmers who bought the new seeds treated their crops with an old, illegal herbicide that drifts onto nearby farms and kills non-genetically-engineered crops.  The Bader Farms plaintiffs were farmers whose crops were allegedly damaged by this drifting herbicide.

Monsanto removed the case to federal court.  The complaint had only state-law claims against a non-diverse defendant, which almost always defeats federal jurisdiction.  Yet Monsanto defeated the farmers’ motion to remand.  How?

The answer lies in the “Grable doctrine,” a rarely successful basis for federal question jurisdiction.  Under the well-pleaded complaint rule, federal question jurisdiction must appear on the face of the complaint and cannot be created by a federal defense.  This typically means that state-law claims cannot create federal question jurisdiction.  In Grable & Sons Metal Prod., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005), however, the Supreme Court established a narrow doctrine under which federal question jurisdiction exists if a state-law claim “raise[s] a federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state responsibilities.”  Id. at 314.

The Bader Farms court relied on Grable in finding that federal jurisdiction existed.  According to the court, the farmers’ allegations directly questioned the actual practices of and regulations governing APHIS—for example, whether APHIS would have deregulated the genetically engineered seeds had Monsanto not allegedly concealed the truth.  The case ultimately posed a “collateral attack on the validity of APHIS’s decision to deregulate the new seed.”  Bader Farms Inc., 2017 WL 633815, at *3.  Thus, the court concluded that the question raised a substantial federal issue under Grable.

This outcome might seem straightforward, but it actually marks a significant victory for defendants.  Efforts to establish federal jurisdiction through Grable have rarely succeeded.  Indeed, courts routinely reject Grable arguments even where state-law claims clearly implicate federal issues and regulations.  (We recently discussed one such case here.)[1]  Bader Farms might give some defendants a leg up in trying to avoid that result.  Under Bader Farms, if a plaintiff alleges that (1) a defendant concealed from a federal agency information that it had a duty to disclose, (2) the information was material, and (3) the concealment prevented the agency from performing its regulatory duties, the defendant may be able to remove based on a significant federal issue.  This precedent will be useful for companies in regulated industries who wish to litigate in federal court.

[1] William O’Connor, Joanna Simon, Andrew Barr, In A Victory for the “Drone Slayer,” Federal Judge Rejects Pilot’s Attempt to Create Federal Question Jurisdiction, Class Dismissed (Mar. 28, 2017), http://classdismissed.mofo.com/aviation-drones/in-a-victory-for-the-drone-slayer-federal-judge-rejects-pilots-attempt-to-create-federal-question-jurisdiction/

[View source.]