October 20, 2017

Colorado Supreme Court: Colorado Human Smuggling Statute Preempted by Federal Immigration & Nationality Act

The Colorado Supreme Court issued its opinion in Fuentes-Espinoza v. People on Monday, October 9, 2017.

Alien Smuggling—Field Preemption—Conflict Preemption.

This case required the Colorado Supreme Court to determine whether Colorado’s human smuggling statute, C.R.S. § 18-13-128, is preempted by the federal Immigration and Nationality Act, 8 U.S.C. §§ 1101–1537 (2017) (INA). The court concluded that the INA preempts C.R.S. § 18-13-128 under the doctrines of both field and conflict preemption. In reaching this conclusion, the court agreed with a number of federal circuit courts that have reviewed the same INA provisions at issue here and have determined that those provisions create a comprehensive framework to penalize the transportation, concealment, and inducement of unlawfully present aliens and thus evince a congressional intent to occupy the field criminalizing such conduct. In addition, applying the analyses set forth in those federal decisions, the court concluded that C.R.S. § 18-13-128, like the state human smuggling statutes at issue in the federal cases, stands as an obstacle to the accomplishment and execution of Congress’s purposes and objectives in enacting its comprehensive framework. Accordingly, the court reversed petitioner’s judgment of conviction under C.R.S. § 18-13-128.

Summary provided courtesy of Colorado Lawyer.

Colorado Supreme Court: Controlled Substances Act Preempts State Medical Marijuana Redistribution Law

The Colorado Supreme Court issued its opinion in People v. Crouse on Monday, January 23, 2017.

Robert Crouse was arrested by the Colorado Springs Police Department for cultivating and possessing marijuana with the intent to manufacture. He was charged with one felony count of cultivation of more than thirty marijuana plants and one felony count of possession of between five and one hundred pounds of marijuana with intent to distribute. At trial, Crouse asserted that he was a registered medical marijuana patient, and that state law authorized his cultivation and possession of medical marijuana. The jury acquitted him of both charges.

After trial, Crouse requested that the court order the police to return the marijuana plants and marijuana pursuant to article XVIII, § 14(2)(e) of the Colorado Constitution, which provides that “marijuana and paraphernalia seized by state or local law enforcement officials from a patient . . . in connection with the claimed medical use of marijuana shall be returned immediately upon . . . the dismissal of charges, or acquittal.” The People opposed the motion, arguing the provision conflicts with the federal Controlled Substances Act (CSA) and is therefore preempted. The district court ruled in Crouse’s favor and ordered the return of the property.

The People appealed, and the Colorado Court of Appeals affirmed the district court in a split opinion. The court of appeals ruled that returning Crouse’s property would not violate the CSA because the statute expressly provides immunity for officers lawfully engaged in the enforcement of any law relating to controlled substances. The Colorado Supreme Court granted certiorari.

On appeal, the supreme court found that the return provision necessarily required officers to violate the CSA, and therefore it “positively conflicts” with federal law. The supreme court dismissed the court of appeals’ reasoning that the officers were exempted by the language in 21 U.S.C. § 885(d) only if they were “lawfully engaged” in the practice of law enforcement. The court reasoned that because distribution of marijuana is unlawful under the CSA, the exemption would not apply. The court relied on its prior opinion in Coats v. Dish Network, 350 P.3d 849 (Colo. 2015), for the premise that any activity that is unlawful under federal law, though it may be lawful under state law, is unlawful.

The supreme court reversed the court of appeals. Justice Gabriel dissented, joined by Chief Justice Rice and Justice Hood. In his thoughtful dissent, Justice Gabriel opined that the plain language of § 885 immunized the law enforcement officers, and therefore the Colorado Constitution was not preempted by the CSA.

Tenth Circuit: Kansas Law Requiring Documentary Proof of Citizenship Violates National Voter Registration Act

The Tenth Circuit Court of Appeals issued its opinion in Fish v. Kobach on Wednesday, October 19, 2016.

In this case, the Tenth Circuit resolved whether section 5 of the National Voter Registration Act (the “NVRA”), 52 U.S.C. § 20504, preempts a Kansas law requiring documentary proof of citizenship (“DPOC”) for voter registration, Kan. Stat. Ann. § 25-2309(l), as applied to the federally mandated voter-registration form that must be a part of any application to obtain or renew a driver’s license (the “motor voter” process). Section 5 of the NVRA mandates that states include a voter-registration form as part of the application for a driver’s license, and provides that this voter-registration form “may require only the minimum amount of information necessary to” prevent duplicate registrations and to “enable State election officials to assess the eligibility of the applicant and to administer voter registration and other parts of the election process.” 52 U.S.C. § 20504(c)(2)(B). Section 5 further mandates that motor voter forms include the following: a statement of the criteria for eligibility, “including citizenship”; an attestation that the applicant meets those criteria; and the applicant’s signature “under penalty of perjury.” § 20504(c)(2)(C).4

Granting a motion for a preliminary injunction against enforcement of Kansas’s DPOC requirements, the U.S. District Court for the District of Kansas held that the Plaintiffs-Appellees had made a strong showing that Kansas’s DPOC law was preempted by NVRA section 5, insofar as DPOC was more than the “minimum amount of information necessary” to achieve the purposes set forth by the statute. Defendant-Appellant Kansas Secretary of State Kris Kobach appealed from the district court’s entry of the preliminary injunction, which required him to register to vote any applicants previously unable to produce DPOC and to cease enforcement of Kansas’s DPOC requirement with respect to individuals who apply to register to vote at the Kansas Department of Motor Vehicles (“DMV”) through the motor voter process.

Exercising jurisdiction pursuant to 28 U.S.C. § 1292, the Tenth Circuit held that the district court did not abuse its discretion in granting the preliminary injunction because the NVRA preempts Kansas’s DPOC law as enforced against those applying to vote while obtaining or renewing a driver’s license. Specifically, section 5 of the NVRA provides that the state motor voter form “may require only the minimum amount of information necessary to . . . enable State election officials to assess the eligibility of the applicant and to administer voter registration and other parts of the election process.” 52 U.S.C. § 20504(c)(2)(B)(ii). Section 5 also requires motor voter forms to include a signed attestation under penalty of perjury that the applicant meets the state’s eligibility criteria, including citizenship. § 20504(c)(2)(C). The Tenth Circuit held that this attestation under penalty of perjury is the presumptive minimum amount of information necessary for state election officials to carry out their eligibility-assessment and registration duties. As it pertains to the citizenship requirement, the presumption ordinarily can be rebutted (i.e., overcome) only by a factual showing that substantial numbers of noncitizens have successfully registered to vote under the NVRA’s attestation requirement. Having determined that Secretary Kobach failed to make this showing, the Tenth Circuit concluded that the DPOC required by Kansas law is more than the minimum amount of information necessary and, therefore, is preempted by the NVRA.

The Tenth Circuit affirmed the grant of a preliminary injunction.

Tenth Circuit: Federal Health Insurance Contract’s Terms Preempt State Antisubrogation Statute

The Tenth Circuit Court of Appeals issued its opinion in Helfrich v. Blue Cross & Blue Shield Association on Thursday, October 29, 2015.

Lee Ann Helfrich is a federal employee enrolled in a federal-employee health insurance plan, the Blue Cross & Blue Shield Service Benefit Plan (Plan). In December 2012, she was involved in a car accident and suffered serious injuries. The Plan paid $76,561.88 in benefits for her injuries, and she settled with the other driver for his policy limits of $100,000. The Plan sought reimbursement of its benefits paid as a subrogated insurer. Helfrich filed a petition in Kansas state court against Blue Cross, arguing a state regulation prohibiting subrogation negated Blue Cross’s claims. Blue Cross removed to federal court and argued the Federal Employees Health Benefits Act of 1959 (FEHBA) preempted the federal regulation. Blue Cross moved for judgment on the pleadings, and the district court held that the Kansas antisubrogation law was preempted by 5 U.S.C. § 8902(m)(1). The district court granted Blue Cross’s motion and Helfrich appealed.

On appeal, the Tenth Circuit likened Helfrich’s situation to the situation presented in Boyle v. United Technologies Corp., 487 U.S. 500 (1988), in which the Supreme Court set forth a test to determine whether federal law preempts state law. The Tenth Circuit found that Blue Cross contracted with the federal government pursuant to FEHBA to provide insurance benefits for federal employees, and its federal contract required it to seek reimbursement of costs paid that were ultimately reimbursed by a third party. The Tenth Circuit noted that Boyle introduced the Federal Tort Claims Act’s discretionary-function standard as a test to determine whether there was a significant conflict between state law and the term of a government contract, noting that state law must yield if such a conflict exists. The Tenth Circuit found that conflict present here, since the contract between Blue Cross and the government and the provision of quality health care to government employees are matters of federal concern. The Tenth Circuit found the Plan’s reimbursement provision served important functions that were undermined by Kansas’ antisubrogation provision, and noted that here, state law outright forbids Blue Cross from fulfilling its contractual obligations. The Tenth Circuit held that the government’s strong interest in uniformity required federal preemption, since states without an antisubrogation provision would end up financing health care costs for claimants in states with such provisions if preemption did not apply.

Blue Cross also argued that FEHBA’s preemption provision provided another ground for overriding the Kansas antisubrogation provision, and the Tenth Circuit agreed. The Tenth Circuit analyzed the language of the provision and found that Blue Cross’s reimbursement rights arose at the payment of benefits; if Helfrich had not pursued reimbursement from the other driver, Blue Cross reserved the right to do so on her behalf. Analyzing case law from its circuit and others, the Tenth Circuit found strong support for Blue Cross’s preemption argument.

The Tenth Circuit affirmed the district court. Judge Lucero wrote a concurrence, agreeing with the conclusion but disagreeing with the majority’s application of federal common law preemption.

Colorado’s Lawful Activities Statute Does Not Protect Employees’ Medical Marijuana Use

Lipinsky-PrattBy Lino Lipinsky and Joel Pratt

On June 15, the Colorado Supreme Court ruled in Coats v. Dish Network, LLC, No. 13SC394, 2015 CO 44 (2015), that employers with a drug-free workplace policy have the right to take adverse action against employees who test positive for marijuana, even if the employees fully comply with the state’s medical marijuana laws, do not use marijuana at the workplace, and are not impaired on the job. This landmark decision affirms the right of employers to require that their employees comply with all federal drug laws, regardless of their states’ marijuana laws.

The plaintiff, Brandon Coats, a quadriplegic as a result of an automobile accident, failed a random drug test required by his employer, Dish Network. Mr. Coats argued that his use of medical marijuana was the only means by which he could control his leg spasms. Dish Network did not contest that Mr. Coats had no work-related problems other than the failed drug test. There was no dispute that Mr. Coats used marijuana only at home and had a valid Colorado medical marijuana card.

The court rejected the plaintiff’s argument that the Colorado lawful off-duty activities statute, Colo. Rev. Stat. § 24-34-402.5, protected his use of medical marijuana at home. That statute bars employers from taking adverse employment action against employers for “lawful” activities conducted away from work.

The Colorado Supreme Court narrowly focused on the definition of “lawful” in the statute and declined to reach any other issue. Mr. Coats’s attorney argued that the definition encompasses activities legal under state law, regardless of their status under federal law. Dish Network disagreed, arguing that the word “lawful” referred to activities legal under both state and federal law.

A unanimous court, with Justice Márquez not participating, agreed with Dish Network. The court held that the word “lawful” should be interpreted according to its generally accepted meaning, and that the Colorado legislature included no language indicating that the word should refer to state law alone. Colorado’s lawful activities statute thus only protects employees engaged in activities that are legal under both state and federal law.

Because the federal Controlled Substances Act lists marijuana as a Schedule I controlled substance and prohibits its possession, manufacture, sale, or use, medical marijuana remains illegal under federal law. Accordingly, Colorado’s lawful activities statute does not protect an employee using medical marijuana because such use is prohibited by federal law.

The trial court dismissed Mr. Coats’s claim against Dish Network. A split panel of the Colorado Court of Appeals affirmed the trial court’s decision, holding that Colorado’s lawful activities statute incorporated both state and federal law, and therefore, does not protect activity illegal under federal law. Judge Webb dissented, arguing that the reach of “lawful activities” should be determined exclusively by state law, under which marijuana use is considered lawful. The supreme court affirmed the court of appeals’ ruling.

The Coats decision reaffirms the right of employers to manage and to enforce drug-free workplaces. Employers will not have to make individualized decisions about whether a particular employee’s marijuana use is “lawful” under state law for bona fide medicinal purposes; instead, employers can institute and enforce broad drug-free workplace policies.

Further, the Coats decision avoids potential problems with the conflict between state and federal law. Colorado employers who contract with the federal government generally must comply with the federal Drug-Free Workplaces Act, which requires drug-free workplaces. Similarly, employers engaged in the transportation industry may be required to comply with the Omnibus Transportation Employee Testing Act of 1991, which mandates drug testing of certain transportation workers.

Had the court ruled in favor of Mr. Coats, employers subject to federal drug-free workplace regulations would have faced conflicting obligations. Colorado law would have demanded that employers tolerate certain employee drug use, while federal law would have demanded that employers take action against those same employees. The court avoided that problem by clarifying that Colorado law only protects employees engaged in activities that are lawful under state and federal law.

Employers also need to recognize the limits of this decision. Importantly, the court did not hold that employers have unfettered rights to fire or to discipline employees for the use of marijuana. Employers must still follow the law. Dish Network likely prevailed because it had adopted a clear and broad drug-free workplace policy, engaged in random drug testing, and applied its policies neutrally. An employer that selectively applies a policy could be vulnerable to discrimination claims.

Additionally, the Coats decision does not resolve the preemption issues surrounding Colorado’s medical and recreational marijuana amendments. A number of other pending cases, including Nebraska’s and Oklahoma’s challenge to Colorado’s marijuana laws filed in the U.S. Supreme Court, raise the preemption issue head-

Lino Lipinsky de Orlov is a litigation partner in the Denver office of McKenna Long & Aldridge, LLP.  He represents clients in all aspects of commercial litigation, mediation, arbitration, and appeals.  He has developed particular experience in complex business cases, particularly those involving creditor’s rights, real estate, trade secrets, and employment disputes.  Mr. Lipinsky also frequently speaks and writes on legal issues relating to technology, employment law, and ethics.   He is a member of the Colorado Bar Association’s Board of Governors and serves on the Board of the Colorado Judicial Institute.  He is a former President of the Faculty of Federal Advocates.  Among his honors, Chambers USA has recognized Mr. Lipinsky as one of Colorado’s leading general commercial litigators, and he has been included in The Best Lawyers in America.  He received his A.B. degree, magna cum laude, from Brown University and his J.D. degree from New York University School of Law, where he was a member of the New York University Law Review.

Joel M. Pratt is a member of McKenna Long & Aldridge’s Government Contracts Department in the Denver office. Mr. Pratt graduated, magna cum laude, from the University of Michigan Law School in 2014 where he served on the Michigan Law Review as the Executive Notes Editor and an Associate Editor. While earning his J.D., Mr. Pratt served as a judicial intern for the Honorable Alan M. Loeb, was a student attorney for the Michigan Unemployment Insurance Project and the Child Advocacy Law Clinic, and published several articles in legal academic journals across the country. Prior to joining the firm, Mr. Pratt worked as a law clerk for the Office of the Vice President and General Counsel of the University of Michigan. Mr. Pratt graduated with distinction in 2009 from the University of Colorado with a Bachelor of Arts in English Literature.  Mr. Pratt was also the winner of the University of Colorado Alumni Association Scholarship.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

Tenth Circuit: FAA Preempted State Law Compelling Arbitration

The Tenth Circuit Court of Appeals published its opinion in Thi of New Mexico at Hobbs Center v. Patton on Tuesday, January 28, 2014.

THI of New Mexico at Hobbs Center, LLC, and THI of New Mexico, LLC (collectively THI) operate a nursing home in New Mexico. When Lillie Mae Patton’s husband was admitted into the home, he entered into an arbitration agreement that required the parties to arbitrate any dispute arising out of his care at the home except claims relating to guardianship proceedings, collection or eviction actions by THI, or disputes of less than $2,500. After Mr. Patton died, Mrs. Patton sued THI for negligence and misrepresentation. THI then filed a complaint in the United States District Court for the District of New Mexico to compel arbitration. The district court initially ordered arbitration.

But the New Mexico Court of Appeals then held an identical arbitration agreement unconscionable in Figueroa v. THI of New Mexico at Casa Arena Blanca, LLC, 306 P.3d 480 (N.M. Ct. App. 2012), and the district court reversed its prior decision, granting a motion by Mrs. Patton under Fed. R. Civ. P. 60(b)(6). The district court further held that the Federal Arbitration Act (FAA) did not preempt the law set forth in Figueroa because the New Mexico appellate court applied generally applicable unconscionability law against grossly unreasonable one-sided contracts as allowed by the FAA. THI appealed.

Under New Mexico law, a compulsory-arbitration provision in a contract may be unconscionable, and therefore unenforceable, if it applies only, or primarily, to claims that just one party to the contract is likely to bring. The question before the court was whether the (FAA) preempted this state law.

With this background in mind, the court turned to an examination of the Figueroa rule. The New Mexico Court of Appeals held that the agreement in Figueroa (which is identical to the agreement here) was unconscionably unfair to nursing home residents because it permitted THI to litigate its most likely claims against the resident—guardianship, collection, and eviction claims—while requiring arbitration of the resident’s most likely claims against the nursing home—personal-injury claims and the like. The court assumed as true the state court’s factual premise that the claims most likely to be brought by residents were the ones that must be arbitrated, while the claims most likely to be brought by THI were to be litigated in court. The only way the arrangement could be deemed unfair or unconscionable was by assuming the inferiority of arbitration to litigation.

The Tenth Circuit held that New Mexico law was preempted and the arbitration clause must be enforced. Just as the FAA preempts a state statute that is predicated on the view that arbitration is an inferior means of vindicating rights, it also preempts state common law—including the law regarding unconscionability—that bars an arbitration agreement because of the same view. Thus, the Tenth Circuit held that the FAA preempted the New Mexico law set forth in Figueroa. THI was entitled to compel arbitration of Mrs. Patton’s claim.

The district court’s grant of the Rule 60(b)(6) relief was REVERSED and the case was REMANDED to the district court with instructions to reinstate its order compelling arbitration.

Colorado Court of Appeals: Colorado Constitution Protects Medical Marijuana Patient’s Cultivation of Plants and Controlled Substances Act Does not Preempt

The Colorado Court of Appeals issued its opinion in People v. Crouse on Thursday, December 19, 2013.

Medical Marijuana—Colo. Const. art. XVIII, § 14(2)(e)—Controlled Substances Act—Supremacy Clause.

During a search of defendant’s home, Colorado Springs police officers seized marijuana and marijuana plants. The prosecution charged defendant with one felony count of cultivation of more than thirty marijuana plants and one felony count of possession of between 5 and 100 pounds of marijuana with the intent to distribute. At trial, defendant raised an affirmative defense that Colo. Const. art. XVIII, § 14 (MM Amendment) expressly authorized his possession, because he was a medical marijuana patient and the marijuana that he possessed was medically necessary to treat his condition. The jury acquitted him of both charges.

Relying on § 14(2)(e) of the MM Amendment, defendant moved the trial court to order the police to return the seized marijuana plants and marijuana. Section 14(2)(e) requires the return of marijuana seized from a medical marijuana patient to the patient if a jury acquits the patient of state criminal drug charges arising from the seized marijuana (return provision). The trial court agreed and ordered the police to return the seized items, which they did.

On appeal, the prosecution contended that the Controlled Substances Act (CSA), 21 USC §§ 801 et seq., preempts the return provision. The Court of Appeals rejected this contention for three reasons. First, the CSA cannot be used to preempt a state law under the obstacle preemption doctrine. Second, even if obstacle preemption applies, CSA § 885(d), which prevents federal prosecution of “any duly authorized officer of any State . . . who shall be lawfully engaged in the enforcement of any law . . . relating to controlled substances,” would preclude applying prohibitions in other CSA sections to police officers complying with a court order issued under the return provision. Third, and making the same assumption, the recipient patient’s involvement in the return process also does not create obstacle preemption because the federal government could not commandeer state officials to seize and hold marijuana, and the MM Amendment does not require patients to either demand return or accept returned marijuana. Therefore, the trial court’s order was affirmed.

Summary and full case available here.

Tenth Circuit: Claims Against Drug Manufacturers Preempted, Time-Barred; State Law Would Not Impose a Duty to Consumers

The Tenth Circuit Court of Appeals published its opinion in Schrock v. Wyeth on Wednesday, August 28, 2013.

Susan and Steven Schrock filed suit against brand-name and generic manufacturers of the drug metoclopramide, alleging that Susan Schrock’s use of generic metoclopramide caused her to develop tardive dyskinesia, a neurological disorder characterized by involuntary body movements. The district court dismissed all claims in favor of the manufacturers in a series of orders. On appeal, the Schrocks challenged the dismissal of their claims against PLIVA USA, Inc. (“PLIVA”), Qualitest  Pharmaceuticals, Inc. (“Qualitest”), Schwarz Pharma, Inc. (“Schwarz”), and Wyeth, Inc. (“Wyeth”).

The court concluded that the Schrocks’ breach-of-warranty claims against PLIVA and Qualitest, the generic drug manufacturers, were preempted by federal law. The Schrock’s warranty claims were based on the theory that Qualitest provided improper descriptions or warnings in the labeling and packaging of metoclopramide or that the content of the metoclopramide Qualitest sold rendered it unreasonably dangerous or unmerchantable. In advancing their warranty claims, the Schrocks alleged that Qualitest had a duty under state law to alter either the composition or the labeling, as broadly defined by the FDA, of its generic metoclopramide. Because Qualitest could not have taken either action without violating federal law pursuant to Mutual Pharmaceutical Co., Inc. v. Bartlett, 133 S. Ct. 2466 (2013) and PLIVA, Inc. v. Mensing, 131 S. Ct. 2567, 2574 (2011), the court concluded these claims were preempted.

The Tenth Circuit also agreed with the district court that the Schrocks’ non-warranty claims against the generic manufacturers were barred by Oklahoma’s two year statute of limitations. Oklahoma follows the “discovery rule,” under which the statute of limitations in product liability cases does not begin to run until the plaintiff knows, or as a reasonably prudent person should know, that he has the condition for which his action is brought and that the defendant caused it. It was undisputed that in May of 2005 Susan Schrock’s doctor informed her that metoclopramide was “quite possibly” responsible for her symptoms. Yet the Schrocks did not file suit until April 30, 2008, nearly three years later.

With respect to the Schrocks’ claims against Schwarz and Wyeth, name-brand manufacturers of metoclopramide, the Tenth Circuit was in accord with the district court’s determination that Oklahoma tort law would not provide a remedy. Given prior Oklahoma precedent and the clear consensus of courts in other jurisdictions, the court predicted that Oklahoma would not impose a duty on brand-name drug manufacturers to consumers of a generic manufacturer’s products. Schwarz and Wyeth did not owe a duty to the Schrocks because Susan Schrock used only generic versions of metoclopramide.

The court recognized the catch-22 situation in which existing jurisprudence placed the Schrocks and similarly situated consumers of generic drugs. The court stated if consumers of generic drugs are to obtain federal relief, it must come from Congress.

AFFIRMED.

Tenth Circuit: Question of Jurisdiction Must First be Determined Before Issue of Interaction of Federal Banking and State Foreclosure Laws

The Tenth Circuit Court of Appeals published its opinion in Dutcher v. Matheson on Tuesday, August 13, 2013.

In 2011, Stuart T. Matheson, a Utah-based attorney, conducted a non-judicial foreclosure sale on behalf of ReconTrust against the Dutchers. After that sale, the Dutchers, along with the other named plaintiffs, filed a class-action lawsuit in Utah state court alleging that Matheson and his law firm, ReconTrust, and Bank of America violated Utah law as it applies to non-judicial foreclosures. The defendants sought to remove the case to federal court and filed a motion to dismiss based in part on federal preemption. The district court held that it had jurisdiction and dismissed the complaint for failure to state a claim.

Shortly thereafter, another district court in Utah concluded in a similar case that federal law did not preempt Utah state law. This led the plaintiffs in this case to file a motion for reconsideration. They also asked for leave to amend their complaint. The district court denied all motions. Plaintiffs appealed.

The central question was whether the court had subject matter jurisdiction to hear the case. A claim may be brought in federal court if the claim is one “arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. When determining whether a claim arises under federal law, the court examines the well pleaded allegations of the complaint and ignores potential defenses.

The plaintiffs’ complaint did not assert any cause of action premised upon a violation of a federal statute or the Constitution. But the doctrine of complete preemption provides an exception to the well pleaded complaint rule. When the federal statute completely preempts the state law cause of action, a claim that comes within the scope of that cause of action, even if pleaded in terms of state law, is in reality based on federal law. Complete preemption is rare.

In the Tenth Circuit, a claim of complete preemption demands a two-part analysis: the first question is whether the federal question at issue preempts the state law relied on by the plaintiff; and second, whether Congress intended to allow removal in such a case, as manifested by the provision of a federal cause of action. The court concluded, after reviewing the holdings of other circuits who have reviewed the issue, that the absence of a federal cause of action precluded the court from relying on complete preemption as a jurisdictional basis for the district court to act.

The district court held in the alternative that diversity jurisdiction provided a basis for its jurisdiction. In order to invoke diversity jurisdiction, a party must show that complete diversity of citizenship exists between the adverse parties and that the amount in controversy exceeds $75,000. Complete diversity is lacking when any of the plaintiffs has the same residency as even a single defendant. Here, the plaintiffs and some of the defendants—Matheson and his law firm—shared a state of residency: Utah. The court was not persuaded that some of the defendants had been fraudulently joined.

Accordingly, the Tenth Circuit VACATED the district court’s dismissal of this action and the denial of the plaintiffs’ motions for reconsideration and to amend. The court REMANDED with instructions for the district court to determine whether it has jurisdiction to act.