M. HANNAH LAUCK, District Judge.
This matter is before the Court on its sua sponte reconsideration of subject-matter jurisdiction. For the reasons that follow, the Court finds that it does not have subject-matter jurisdiction over this action. The Court will dismiss the action without prejudice.
The dispute in this case arises from Defendant Tetra Tech Tesoro, Inc.'s ("Tesoro") alleged breach of five subcontracts regarding five construction projects at three military bases (the "Military Base Projects").
Tesoro filed an answer, which included ten counterclaims. Tesoro alleged its own breach of contract claims against JAAAT as to the same five subcontracts. Tesoro also included an unjust enrichment or quantum meruit claim (Count 6), a constructive trust or breach of fiduciary duty claim (Count 7), an accounting claim (Count 8), a conversion claim (Count 9), and a fraud claim (Count 10). In its counterclaims, Tesoro seeks damages, costs and expenses, and pre- and post-judgment interest.
Two facts are crucial to the question of subject-matter jurisdiction here. First, each of the Military Bases is a federal enclave and is therefore governed not by simple state or federal law but, as discussed more fully later, by "federalized" state law. Second, each subcontract contains a choice-of-law clause stating that "all disputes under [the subcontracts] shall be determined and interpreted pursuant to the laws of the Commonwealth of Virginia." (Am. Compl., ¶ 54.) Thus, if no enforceable choice-of-law provision governs the parties' subcontracts, federalized state law would likely govern these claims.
The Court revisits subject-matter jurisdiction because federal question subject-matter jurisdiction exists when federal law creates the cause of action or when plaintiffs relief necessarily depends on the resolution of a substantial federal question. See Aegis Def Servs., LLC v. Chenega-Patriot Grp., LLC, 141 F.Supp.3d 479, 483-84 (E.D. Va. 2015) (citing Interstate Petroleum Corp. v. Morgan, 249 F.3d 215, 219 (4th Cir. 2001)). Neither circumstance exists here.
As a court of limited subject-matter jurisdiction, United States ex rel. Vuyvuru v. Jadhav, 555 F.3d 337, 347 (4th Cir. 2009) (citing Exxon Mobile Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552 (2005)), this federal court must determine whether it has jurisdiction over the claims at issue, see Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95 (1998) ("The requirement that jurisdiction be established as a threshold matter `spring[s] from the nature and limits of the judicial power of the United States' and is `inflexible and without exception.'" (quoting Mansfield, C. & L.MR. Co. v. Swan, 111 U.S. 379, 382 (1884))). "The objection that a federal court lacks subject-matter jurisdiction ... may be raised by a party, or by a court on its own initiative, at any stage in the litigation...." Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006) (citing Fed. R. Civ. P. 12(b)(1)). "Subject-matter jurisdiction cannot be conferred by the parties, nor can a defect in subject-matter jurisdiction be waived by the parties. Accordingly, questions of subject-matter jurisdiction may be raised at any point in the proceedings and may (or, more precisely, must) be raised sua sponte by the court." Brickwood Contractors, Inc. v. Datanet Engineering, Inc., 369 F.3d 385, 390 (4th Cir. 2004) (internal citations omitted); see also Fed. R. Civ. P. 12(h)(3) ("If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.").
Federal district courts commonly exercise jurisdiction over civil actions in two circumstances. First, federal district courts exercise jurisdiction in "federal question" cases-"civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. "[l]n order for federal question jurisdiction to exist[:] (i) federal law must create the cause of action[;] or[,] (ii) the plaintiffs right to relief must necessarily depend on the resolution of a substantial federal question." Aegis Def Servs., LLC, 141 F. Supp. 3d at 483-84 (emphasis added) (citing Interstate Petroleum Corp., 249 F.3d at 219). Second, federal district courts exercise jurisdiction in "diversity" cases-when the parties are, inter alia, citizens of different states and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a)(1).
Thus, in order to exercise jurisdiction over this case, the Court must find that one of three circumstances exists-either: (1) federal law creates JAAAT's cause of action; (2) JAAAT's right to relief necessarily depends on the resolution of a substantial federal question;
This apparently straightforward breach-of-contract case involves an unusual and knotty legal issue because the Military Bases qualify as federal enclaves and, therefore, would typically be governed by "federalized" state law. Under this doctrine, contract law in place in early 1900s North Carolina and Georgia-the time these Military Bases were ceded-would govern this dispute.
As this Court noted in its March 2016 Opinion, "[a] federal enclave is created when a state cedes jurisdiction over land within its border to the federal government and Congress accepts that cession." Allison v. Boeing Laser Tech. Servs., 689 F.3d 1234, 1235 (10th Cir. 2012). The federal enclave doctrine, which grants Congress the exclusive right to regulate properties acquired from state governments, arises from Article I, section 8, clause 17 of the United States Constitution (the "Federal Enclave Clause"):
In the absence of subsequent federal legislation displacing state law, "the [state] law in effect at the time of the transfer of jurisdiction [from the state to United States] continues in force" on the federal enclave. James Stewart & Co. v. Sadrakula, 309 U.S. 94, 100 (1940).
Thus, the law in force on federal enclaves, although derived from state law, becomes exclusively federal law once the enclave is ceded to the federal government.
In March 2016, the Court held, as a matter of first impression, that it had federal question subject-matter jurisdiction over the breach of contract claims at bar because federalized state law governed causes of action that arose on these federal enclaves and the parties could not "contract around" the Constitution. However, on review, the Court sees that it jumped the gun in relying on nonbinding dicta about federalized law operating as a choice-of-law doctrine from the United States Court of Appeals for the Tenth Circuit, see Allison, 689 F.3d at 1235, before fully analyzing, as a threshold matter, the effect of the parties' choice-of-law clause. See Fransmart, LLC v. Freshii Dev., LLC, 768 F.Supp.2d 851, 858 (E.D. Va. 2011) (explaining that "the choice-of-law question is a threshold issue"). Unlike this Court, the Allison court had no choice-of-law clause to evaluate in the first instance.
In March 2016, the Court mistakenly began with the "longstanding position" that the federal enclave doctrine requires courts to apply federalized state law to causes of action that arise on federal enclaves. See, e.g., Stokes v. Adair, 265 F.2d 662, 665-66 (4th Cir. 1959) (finding federal district court possessed jurisdiction over non-diverse parties for personal injuries on a federal enclave); accord Durham v. Lockheed Martin Corp., 445 F.3d 1247, 1250 (9th Cir. 2006) (finding removal proper where tort claims allegedly occurred on a federal enclave); Akin v. Ashland Chem. Co., 156 F.3d 1030, 1034 (10th Cir. 1998) (finding that "[p]ersonal injury actions which arise from incidents occurring in federal enclaves may be removed to federal district court as part of federal question jurisdiction"); Mater, 200 F.2d at 124-25 (finding that federal courts have jurisdiction over torts committed on federal enclaves). Relying on the wide body of law supporting that position, the Court concluded that "it is undisputed that `claims arising on a federal enclave provide a separate and independent basis for federal question jurisdiction.'" Id (footnote omitted) (quoting Federico v. Lincoln Military Hous., 901 F.Supp.2d 654, 663 n.2 (E.D. Va. 2012).
Misapplying dicta from a United States Court of Appeals for the Tenth Circuit opinion, the Court stated that the "`[f]ederal enclave doctrine operates as a choice of law doctrine that dictates which law applies to causes of action arising on these lands.'" March 2016 Opinion, at *6 (quoting Allison, 689 F.3d at 1235). Proceeding on this principle-that the federal enclave doctrine operates as a choice-of-law doctrine-the Court explained that "[i]n light of the Supremacy Clause [of the United States Constitution
The upshot of the Court's ruling that the parties' choice-of-law provision was invalid and it had subject-matter jurisdiction over JAAAT's breach of contract claims was the following: (1) federalized Georgia contract law (i.e., Georgia contract law as of 1917 or 1922) governed the cause of action that occurred on federal enclaves in Georgia; and, (2) federalized North Carolina contract law (i.e., North Carolina contract law as of 1919) governed the causes of action that occurred on federal enclaves in North Carolina. (See Sept. 26 Mem. O. 5, ECF No. 73.) But the parties did not see it that way.
After the Court found subject-matter jurisdiction through the federal enclave doctrine, Tesoro filed its answer and counterclaims. JAAAT then moved to dismiss Counts 7 through 10 of Tesoro's counterclaims, asserting, under current Virginia law, that the causes of action failed to state a claim for which relief can be granted. Tesoro responded, likewise relying on current Virginia law. Of course, as discussed, the basis for the Court's finding that it had subject-matter jurisdiction was the Court's conclusion that the parties' choice-of-law provision electing Virginia law was unenforceable, meaning that North Carolina and Georgia federalized state law governed the causes of action in this case. See March 2016 Opinion, at *5-7.
Sensing confusion from the parties regarding this novel and complex legal issue, the Court expressed a willingness to "reconsider its earlier holding upon briefing by the parties." (Sept. 26 Mem. 0. 5-6, ECF No. 73.) Reminding the parties that "a finding that Virginia law governs the substantive causes of action in this case would necessarily affect this Court's earlier holding that it has subject matter jurisdiction," the Court ordered additional briefing on the basis for this Court to exercise subject-matter jurisdiction over these contract disputes.
In federal cases, courts typically address the choice-of-law question-and particularly, the enforceability of a choice-of-law clause-as a threshold matter. See Fransmart, LLC, 768 F. Supp. 2d at 858 (explaining in a diversity case that "the choice-of-law question is a threshold issue"); see also Bunker Holdings, Ltd. v. Green Pacific AIS, 346 F. App'x 969, 972 (4th Cir. 2009) (beginning "analysis [in a maritime case] by determining whether the choice-of-law provisions set forth in the contracts ... are enforceable"). The March 2016 Opinion ill-advisedly skipped this preliminary level of analysis. Because needs for predictability and uniformity exist here with verve, the Court will assess the enforceability of the choice-of-law clause at bar before addressing other jurisdictional matters.
The United States Court of Appeals for the Fourth Circuit indicates that a court should first evaluate the enforceability of a choice-of-law clause. See Bunker Holdings, Ltd., 346 F. App'x at 972 (beginning "analysis by determining whether the choice-of-law provisions set forth in the contracts ... are enforceable"). Common sense suggests the same. Evaluating the parties' election to apply the law of their choosing encourages predictability and uniformity. More specifically, it could promote certainty and consistency in circumstances such as this, where the same parties are engaged in business across different federal enclaves that would, in the absence of choice-of-law clauses, involve the application of various federalized state laws.
Of course, to assess enforceability, the Court needs to determine the applicable choice-of-law rules it should use in order to evaluate enforceability. See Gulf Ins. Co. v. Davis, 65 F.3d 166 (4th Cir. 1995) ("The threshold issue that we must resolve is the appropriate choice of law rule."). Under these odd facts, identifying the law to utilize when undertaking the choice-of-law analysis is, in and of itself, no mean task.
Indeed, determining the applicable choice-of-law rules requires, at a minimum, creative reasoning. Here, we have a case in which a plaintiff invokes federal question jurisdiction, but otherwise claims that state law wholly governs the dispute. The defendant seems to agree with that incongruous procedural and substantive posture. No precedent applying these unique facts exists. Because the parties persist in claiming that federal question jurisdiction exists over what they acknowledge is a contract dispute wholly governed by Virginia state law, the Court undertakes a choice-of-law analysis under what it sees-in a most generous reading-as the three possible choice-of-law rules that could apply in this circumstance.
First, the Court could apply federal choice-of-law rules because, even if it did so improperly, JAAAT invoked federal question jurisdiction in the Amended Complaint. Some courts have explained that "[w]here federal question jurisdiction is invoked, ... federal courts generally apply federal common law principles to resolve choice of law disputes." See, e.g., Nat'l Fair Hous. All., Inc. v. Prudential Ins. Co. of Am., 208 F.Supp.2d 46, 62 (D.D.C. 2002) (emphasis added) (citing Alvarez-Machain v. United States, 266 F.3d 1045, 1061 (9th Cir. 2001); A.I. Trade Finance, Inc. v. Petra Int'l Banking Corp., 62 F.3d 1454, 1458, 1463-64 (D.C. Cir. 1995)).
Second, the Court conceivably could employ Virginia choice-of-law principles because this Court sits in Virginia or because the parties agreed to apply Virginia law. But the Court sees no basis for applying Virginia choice-of-law rules for either of those reasons. The holding in Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496 (1941), which requires federal courts to apply the choice-of-law rules of the state in which the court sits, pertains only to those courts exercising diversity jurisdiction. Were the Court to apply Klaxon here, it would be stuck predicting how the Supreme Court would extend Klaxon under the facts of this non-diverse federal matter.
Third, the Court could utilize the federalized state law choice-of-law rules from the states relevant in this contract dispute-the choice-of-law rules in North Carolina and Georgia as they existed at the time the United States acquired those federal enclaves in the early 1900s.
As it turns out, this Court need not reach the issue of which jurisdiction's choice-of-law rules should apply to determine the enforceability of the choice-of-law clause. As the Court will explain below, each inquiry garners the same result: favoring the enforceability of the parties' choice-of-law clause and, consequently, their election to apply Virginia law.
Unfortunately, such a result then deprives this Court of jurisdiction. The parties' choice-of-law clause seeks to apply Virginia law to all pending causes of action, meaning that this case does not "aris[e] under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. The Court cannot exercise federal question jurisdiction over the claims before it because federal law would not create the causes of action and the parties' relief would not necessarily depend on the resolution of a substantial federal question. See Aegis Def Servs., LLC, 141 F. Supp. 3d at 483-84 (citing Interstate Petroleum Corp., 249 F.3d at 219). Because the parties are not diverse, the Court cannot exercise diversity jurisdiction over the claims before it. Thus, for the reasons explained below, the Court will dismiss the action without prejudice for lack of subject-matter jurisdiction.
Were the Court to apply federal choice-of-law rules, the parties' choice-of-law clause would be enforceable and Virginia law would apply. "Federal common law follows the approach of the Restatement (Second) of Conflicts of Laws." Pyott-Boone Elecs. Inc. v. IRR Trust for Donald L. Fetterolf, 918 F.Supp.2d 532, 541 (W.D. Va. 2013) (quoting Paul Bus. Sys., Inc. v. Canon U.S.A., Inc., 397 S.E.2d 804, 807 (Va. 1990)). Under§ 187 of the Second Restatement of Conflict of Laws, a choice-of-law provision will not be enforced if either of the following two conditions is satisfied:
Restatement (Second) of Conflict of Laws § 187 (1971). Here, the chosen state-Virginia-certainly has a substantial relationship to the parties, which are both domiciled there. (Am. Compl. ¶¶ 1, 2.) For the same reason, a reasonable basis exists for the parties' choice. Moreover, applying Virginia law would not "be contrary to a fundamental policy" of any other state that may have an interest in the outcome of this case. Upon review of the record before the Court, only North Carolina and Georgia appear to have a relationship to the parties or the transaction and only because those states serve as the location of the federal enclaves on which the causes of action arose. Given that in the absence of a choice-of-law provision, federalized state law would apply (and not North Carolina or Georgia law), the Court cannot discern how the application of Virginia law would be contrary to the policies of either North Carolina or Georgia. Accordingly, under federal choice-of-law rules, the parties' choice-of-law provision likely would be enforceable, and Virginia law would govern this action.
Were the Court to apply Virginia choice-of-law rules, the parties' choice-of-law clause would be enforceable and Virginia law would apply. Federal courts exercising diversity jurisdiction must apply the choice-of-law rules of the state in which the court is sitting. Klaxon, 313 U.S. at 496. While no diversity jurisdiction exists here, if the Court extended the Klaxon holding to this non-diverse case, this Court would look to Virginia's choice-of-law rules.
If the Court were to apply the law of the federal enclave on which the contracts were performed to determine whether the parties' choice-of-law provision is enforceable, either North Carolina law at the time of cession or Georgia law at the time of cession would govern the subcontracts. As discussed earlier, North Carolina law as it existed on or before 1919 would govern the claims for work that occurred on two of the project sites on Fort Bragg, and North Carolina law as it existed between 1919 and 1940 would govern the claims for work that occurred on the third project site on Fort Bragg. Georgia law as it existed in 1917 would govern the claims for work that occurred on Fort Gordon, and Georgia law as it existed in 1927 would govern the claims for work that occurred on Fort Benning. Even under those federalized state laws, the parties' choice-of-law provision likely would be enforceable.
As early as 1907, it was "well settled" in North Carolina that, absent some statute providing otherwise, "the parties may agree upon the place of the contract." Williams v. Mut. Reserve Fund Life Ass'n, 58 S.E. 802, 803 (N.C. 1907). In that timeframe, situations existed in which courts declined to enforce choice-of-law provisions, but the Court sees none analogous to the situation at bar. Given the "well settled" rule in North Carolina that, absent some statute providing otherwise, "the parties may agree upon the place of the contract," Williams, 58 S.E. at 803, and the absence of any of the traditional rules for declining to enforce choice-of-law provisions, the parties' choice-of-law provision likely would be enforceable under North Carolina law as it existed on or before 1919 and between 1919 and 1940.
Even a 1906 North Carolina decision refusing to apply the parties' choice-of-law provision does not countermand such a finding. In Blackwell v. Mutual Reserve Fund Life, 53 S.E. 833 (N.C. 1906), a North Carolina resident attempted to recover premiums under a life insurance contract. The insurance contract provided that "this contract shall be governed by, subject to, and construed only according to the laws of the state of New York." Id at 835. The 1906 Blackwell court found that the contract provision "[wa]s void so far as the courts of [North Carolina] are concerned" because it left the plaintiff, who "entered into a contract of insurance with a corporation having no capital or assets within reach of the courts of his state, and with but little, if any, substantial guaranties of compliance with its contract." Id. at 835. The Blackwell court refused to enforce the choice-of-law provision in the contract because it would have left the North Carolina plaintiff with insufficient redress. See id. At most, Blackwell instructs that, in 1906, North Carolina courts could refuse to enforce choice-of-law provisions that were contrary to a fundamental policy of the state, which is consistent with other general exceptions to honoring parties' choice-of-law provisions. See, e.g., Restatement (Second) of Conflict of Laws § 187(b) (1971) (stating that a choice-of-law provision will not be honored if "application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue"). Blackwell does not, however, suggest that North Carolina courts would have declined to recognize a choice-of-law provision electing to apply Virginia law to a contract dispute involving two Virginia companies. Therefore, if the Court were to apply the federalized state law that governs the three projects on Fort Bragg, the parties' choice-of-law provision likely would be enforceable.
In 1898, the Supreme Court of Georgia stated that Georgia would enforce parties' choice-of-law provisions "so far as that can be done without violating the law of this state or its established policy." Mass. Ben. Life Ass'n v. Robinson, 30 S.E. 918, 931 (Ga. 1898) ("Whenever a contract made in a place outside of the territorial jurisdiction of this state is sought to be enforced in this state, courts here will enforce the contract, and give effect to the laws of the place in which it was executed, so far as that can be done without violating the law of this state or its established policy."). The court in Robinson held that the parties' choice-of-law provision declaring "that the place of the contract is the city of Boston, and that [the contract] is to be governed and construed only according to the laws of the state of Massachusetts," was enforceable, and because nothing in the contract was "violative either of the law or the public policy of this state, ... this court will deal with the same as a Massachusetts contract." Id.
The Court sees nothing in the parties' contract that is "violative either of the law or the public policy" of Georgia, and nothing indicating that Georgia changed its choice-of-law rules between 1898 and 1917, the date Georgia ceded Fort Gordon to the United States, or 1927, the date Georgia ceded Fort Benning to the United States. Therefore, if the Court were to apply the federalized state law that governs the projects on Fort Gordon and Fort Benning, the parties' choice-of-law provision would be enforceable.
The Court next addresses why it should honor the parties' decision to apply state law to their dispute, even though federalized state law would apply absent their choice-of-law provision. In the context of federal enclaves, this presents a matter of first impression, and the parties have directed the Court to no case law providing otherwise.
Permitting parties to apply the law of their choosing provides certainty and consistency in circumstances such as this, where the same parties are engaged in business across different federal enclaves. The absence of a choice-of-law provision would result in the application of a patchwork of federalized state laws to substantially similar causes of action. The analysis undertaken above, see supra Section I.D, plainly demonstrates that the application of federalized state law, by its very nature, would do anything but assure uniformity because different laws would apply in each federal enclave. Nor would it promote judicial efficiency. Thus, the Court sees no policy basis for rejecting the parties' effort to ensure predictability in their dealings.
Because Virginia law applies to the pending causes of action, this Court lacks federal question jurisdiction. JAAAT, however, suggests that the use of federal common law in the Court's choice-of-law determination necessarily means that this is a federal case for jurisdictional purposes. JAAAT's argument does not persuade.
JAAAT invokes 28 U.S.C. § 1331 as the basis for this Court's jurisdiction. Section 1331 provides: "The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. "[I]n order for federal question jurisdiction to exist[:] (i) federal law must create the cause of action[;] or[,] (ii) the plaintiffs right to relief must necessarily depend on the resolution of a substantial federal question." Aegis Def Servs., LLC v. Chenega-Patriot Grp., LLC, 141 F.Supp.3d 479, 483-84 (E.D. Va. 2015) (emphasis added) (citing Interstate Petroleum Corp. v. Morgan, 249 F.3d 215, 219 (4th Cir. 2001)); see also Interstate Petroleum Corp., 249 F.3d at 219 ("Congress has given the lower federal courts jurisdiction to hear `only those cases in which a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiffs right to relief necessarily depends on resolution of a substantial question of federal law.'" (quoting Franchise Tax Bd. v. Const. Laborers Vacation Trust, 463 U.S. 1, 27 (1983))).
Because the parties' choice-of-law provision is enforceable, Virginia law governs the claims at bar. As such, the pertinent causes of action were necessarily created under the law of Virginia, not federal law. A complaint that asserts "causes of action that are exclusively state law claims" does not depend on federal law. See Aegis Def Servs., LLC, 141 F. Supp. 3d at 484. "This alone is typically sufficient" to preclude the exercise of federal question jurisdiction. Id. Also, the right to relief under Virginia contract claims does not depend on the resolution of a substantial question of federal law because "the right to relief [does not depend] upon the construction or application of the Constitution or laws of the United States." Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 199 (1921). JAAAT does not argue otherwise. See, e.g., Int'l Longshoremen's Ass'n v. Va. Int'l Terminals, Inc., 914 F.Supp. 1335, 1338 (E.D. Va. 1996) (citing McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189 (1936)).
Thus, because the parties' choice-of-law clause, which provides that Virginia law applies to any contract disputes, is enforceable, Virginia law applies to JAAAT's breach of contract claims. As a consequence, the suit necessarily "aris[es] under" Virginia law, not federal law, see Interstate Petroleum Corp., 249 F.3d at 222 ("The cause of action in this case was created under the law of West Virginia, so the suit arises under that law, not federal law."), and the Court lacks subject-matter jurisdiction over the claims.
The Court will vacate the March 2016 Opinion and accompanying order, and dismiss this case for lack of subject-matter jurisdiction.
For the foregoing reasons, the Court will vacate the March 2016 Opinion and the accompanying order, (ECF Nos. 32, 33), and will dismiss, without prejudice, this case for lack of subject-matter jurisdiction. The Court will deny as moot the following outstanding motions: (I) JAAAT's Motion to Quash Subpoena Duces Tecum, (ECF No. 70); (2) Tesoro's Motion to Compel, (ECF No. 71); and, (3) Tesoro's Motion to Strike Testimony of Eddie Cummings, (ECF No. 77).
An appropriate Order shall issue.
"In recent years, the Supreme Court has brought greater clarity to what it describes as a traditionally `unruly doctrine,' emphasizing its `slim contours.'" Flying Pigs, LLC v. RRAJ Franchising, LLC, 757 F.3d 177, 182 (4th Cir. 2014) (quoting Gunn, 568 U.S. at 258). Specifically, under Grable and Gunn, "federal jurisdiction over a state law claim will lie [only] if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress." Gunn, 568 U.S. at 258. "Where all four of these requirements are met, ... jurisdiction is proper because there is a `serious federal interest in claiming the advantages thought to be inherent in a federal forum,' which can be vindicated without disrupting Congress's intended division of labor between state and federal courts." Id (quoting Grable, 545 U.S. at 313-14). The parties here do not contend that this case fits within the "`special and small category' of cases" contemplated by the standard set forth in Grable and Gunn.
This circumstance rightly has drawn criticism. See, e.g., Chad Deveaux, Trapped in the Amber: State Common Law, Employee Rights, and Federal Enclaves, 77 Brook. L. Rev. 499, 503 (2012) ("With respect to legal areas neglected by Congress, federal enclaves have devolved into jurisprudential Jurassic Parks, `sanctuar[ies] for the obsolete restrictions of the common law.'" (quoting Capetola v. Barclay-White Co., 48 F.Supp. 797, 800 (E.D. Pa. 1943))).
Allison, 689 F.3d at 1237.
U.S. Const. art. VI, cl. 2.
This means that, under the federal enclave doctrine, Georgia law as it existed in 1917 would govern the breach of contract claims for work that occurred on Fort Gordon; Georgia law as it existed in 1927 would govern the breach of contract claims for work that occurred on Fort Benning; North Carolina law as it existed on or before 1919 would govern the breach of contract claims for work that occurred on two of the project sites on Fort Bragg; and North Carolina law as it existed between 1919 and 1940 would govern the breach of contract claims for work that occurred on the third project site on Fort Bragg.
Bundy v. Commercial Credit Co., 157 S.E. 860, 863 (N.C. 1931), involved a contract for the loan of money to a North Carolina citizen, executed in the state of Maryland, and containing a provision that all aspects of the contract would be controlled by Delaware law, 157 S.E. at 862. The plaintiff argued that the contract was void because the choice-of-law provision was included to avoid the anti-usury laws of North Carolina. Id. The Supreme Court of North Carolina ultimately found the contract stipulation as to Delaware law "immaterial" because nothing in the case involved Delaware. Id at 863. Bundy thus teaches that, in 1931, North Carolina courts could refuse to honor a choice-of-law provision that applied the law of a state with no connection to the parties or the transaction or occurrence at issue. This exception is consistent with other exceptions to the application of choice-of-law provisions. See, e.g., Restatement (Second) of Conflict of Laws§ 187(a) (1971) (stating that a choice-of-law provision will not be honored if "the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice"). And the need to refuse to honor a choice-of-law provision would not exist here. Two Virginia companies chose to employ Virginia law, thereby demonstrating a kind of connection absent from the Bundy case.
Recognizing the sui generis nature of federal maritime law, the Court will not extend the maritime rule to a non-maritime context. That said, the Court acknowledges that, even in federal maritime law, where uniformity in the law has long been favored, courts honor choice-of-law provisions.
