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Rains v. Criterion Systems Inc.

filed: March 26, 1996.

RANDOLPH S. RAINS, PLAINTIFF-APPELLANT,
v.
CRITERION SYSTEMS, INC., A CALIFORNIA CORPORATION; KAISER PERMANENTE HOSPITAL INC., A CALIFORNIA CORPORATION; ANTHON FREITAS, AND PAUL FICE, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Eastern District of California. D.C. No. CV-92-013-LKK GGH. Lawrence K. Karlton, District Judge, Presiding.

Before: Betty B. Fletcher, Stephen Reinhardt, and John T. Noonan, Jr., Circuit Judges. Opinion by Judge Reinhardt.

Author: Reinhardt

REINHARDT, Circuit Judge:

This appeal raises the question whether a plaintiff may allege a violation of Title VII of the Civil Rights Act of 1964's policy against religious discrimination as part of a state law cause of action without converting his claim into a Title VII action or an action that depends on a substantial federal question. We hold that he may, and that in this case he did. We therefore conclude that the district court lacked jurisdiction. Accordingly, we vacate the district court's order granting summary judgment against the plaintiff and direct that court to remand the case to state court.

Since our opinion turns on federal question jurisdiction, not the merits of plaintiff's claims, we will provide an abbreviated version of the facts and allegations underlying this lawsuit. In 1989, Criterion Systems, a California-based medical equipment consulting firm, hired Randolph Rains as a hospital equipment-planner. In the summer of 1990, Anthon Freitas, the owner of Criterion Systems, placed Rains in charge of a number of projects in San Diego for a major client, Kaiser Permanente.

On October 30, 1990, Rains became involved in a Discussion concerning religion with Paul Fice, the Kaiser employee responsible for monitoring Criterion's work on the San Diego projects. During the Discussion, the district court concluded that "Fice proselytized and preached to plaintiff concerning Jesus Christ and the need to be saved." One week later, Fice called Freitas. The defendants contend that Fice informed Freitas that he had received a phone call from a female Kaiser employee whom he did not name. Fice allegedly stated that the female employee had complained that "Rains had made advances of a personal nature towards her." Criterion states that as a result of Rains' alleged behavior toward the female employee, Fice "indicated that he did not want Randolph Rains on the Kaiser-San Diego project any more. Fice indicated that if Rains was not removed from the Kaiser-San Diego account, CRITERION would lose the Kaiser-San Diego business as well as other Kaiser business in southern California." Freitas states in his declaration that it was Fice's phone call that led him to decide to terminate Rains' employment.*fn1

Rains filed suit in California state court against Criterion Systems Inc., Kaiser Permanente, Freitas, and Fice. He alleged eight separate causes of action, only two of which are relevant here: (1) Freitas and Criterion committed the tort of wrongful termination in violation of public policy by terminating him "for refusing to adopt the said religious opinions of FICE." (2) Kaiser and Fice committed the tort of intentional interference with contractual relations by supplying Freitas with "false allegations." The case was removed to federal district court; the defendants moved for summary judgment on all counts; and the district court granted the motion. Rains appealed and raised several issues that we do not need to reach, because we determine that the district court lacked jurisdiction.

Rains did not contest the removal and did not challenge the district court's jurisdiction to hear his complaint until we ordered supplemental briefing on that issue. This court, however, must consider whether federal jurisdiction exists, even if no objection is made to removal, Harris v. Provident Life and Acc. Ins. Co., 26 F.3d 930, 932 (9th Cir. 1994), and even if both parties stipulate to federal jurisdiction, Washington Local Lodge No. 104 v. Intern. Broth. of Boilermakers, 621 F.2d 1032, 1033 (9th Cir. 1980); see also FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 229, 107 L. Ed. 2d 603, 110 S. Ct. 596 (1990) ("federal courts are under an independent obligation to examine their own jurisdiction"). Moreover, we must do so even though the district court has issued a judgment on the merits. Grubbs v. General Electric Credit Corporation, 405 U.S. 699, 702, 31 L. Ed. 2d 612, 92 S. Ct. 1344 (1972).

Once judgment has been entered in a case that was removed to federal court, the question a court of appeals must ask in determining whether jurisdiction was proper changes slightly. The issue becomes not whether the removal was proper, but whether the district court had jurisdiction at the time it issued its judgment. Id. at 705 ("the requirement that jurisdiction exist at the time of judgment . . . is satisfied here"). In this case, the question, both at the time the case was removed and at the time the district court entered its judgment, was whether either Rains' claim of wrongful termination or his claim of intentional interference with contractual relations arose under federal law.

There are three possible grounds for federal question jurisdiction in this case. The first is that Rains asserted a federal (Title VII) claim in his complaint, i.e., that federal law creates the cause of action he asserted. The second is that under the artful pleading doctrine, one or more of Rains' state law claims should have been recharacterized as a federal claim. The third is that one or more of Rains' state law claims necessarily turned on the construction of a substantial, disputed federal question. Merrell Dow Pharmaceuticals Inc. v. Thompson, 478 U.S. 804, 807-10, 92 L. Ed. 2d 650, 106 S. Ct. 3229 (1986); Franchise Tax Bd. of State of Cal. v. Construction Laborers Vacation Trust for Southern California, 463 U.S. 1, 7-12, 27-28, 77 L. Ed. 2d 420, 103 S. Ct. 2841 (1983). Since any of the three possible grounds for jurisdiction could establish that the court had jurisdiction when it entered its summary judgment order, we consider each in turn. We conclude that none constitutes a valid basis for federal question jurisdiction in this case.

A. Stating a Title VII Claim

Rains' complaint states at the outset that it arises under "the laws of the United States (42 U.S.C. 2000(e)-2) [Title VII], the laws of the State of California, (Gov. Code § 12940 et seq.), the rules, regulations, and directives implementing said statutes and common law." While the reference to the laws of the United States and specifically to Title VII suggests that Rains might be asserting at least one federal cause of action, the actual causes of actions stated in the complaint all sound in state law.*fn2 Moreover, during the course of the litigation, both the parties and the court consistently treated Rains' claims as state law claims. For example, the district court rejected defendants' assertion that plaintiff must actually prove a violation of Title VII or the FEHA to prevail on his claim for wrongful discharge in violation of public policy, noting that the state tort was a separate cause of action. There was also no inquiry as to whether Rains had exhausted his administrative remedies as is required before filing a Title VII claim.*fn3

One of Rains' claims cites Title VII directly, the other refers to it indirectly. Rains' first claim is for wrongful termination in violation of public policy. In order to prevail on such a claim under California law, a plaintiff must prove as one element that a fundamental public policy exists that is "delineated in constitutional or statutory provisions . . . ." Gantt v. Sentry Ins., 1 Cal. 4th 1083, 824 P.2d 680, 687-88 (Cal. 1992). To establish the basis for a public policy against religious discrimination in employment, Rains' complaint refers to the California Constitution, the California Fair Employment and Housing Act (CFEHA), and Title VII. The complaint states that the cited provisions "evince[ ]" the "fundamental premises of public policy of the United States and the State of California." In Rains's other claim, he alleges that the defendants interfered with his contractual relations in violation of the "public policy of the United States and the State of California and the objectives underlying these policies." It is state, not federal, law that creates the cause of action for wrongful discharge in violation of public policy. See Gantt, 824 P.2d at 683-84; Foley v. Interactive Data Corp., 47 Cal. 3d 654, 665-71, 254 Cal. Rptr. 211, 765 P.2d 373 (1988); Tameny v. Atlantic Richfield Co., 27 Cal. 3d 167, 164 Cal. Rptr. 839, 610 P.2d 1330 (1980). State law also creates the cause of action for tortious interference with contractual relations. See B.E. Witkin, Summary of California Law, Torts § 649 (9th ed. 1987). The direct and indirect references to Title VII in those two state law causes of action do not make those claims into federal causes of action. Rather, the complaint merely incorporates Title VII as one of several similar sources of public policy supporting defendant's state law claims.

If federal jurisdiction does not attach to Rains' wrongful termination action, it certainly does not attach to his tortious interference claim.*fn4 Thus we focus on Rains' wrongful termination claim in our analysis. That the same facts could have been the basis for a Title VII claim does not make Rains' wrongful termination claim into a federal cause of action. Rains chose to bring a state claim rather than a Title VII claim, and was entitled to do so. See Pan American Petro. Corp. v. Superior Court, 366 U.S. 656, 662-63, 6 L. Ed. 2d 584, 81 S. Ct. 1303 (1961) (stating that "the party who brings a suit is master to decide what law he will rely upon") (quoting Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25, 57 L. Ed. 716, 33 S. Ct. 410 (1913)). A plaintiff "may avoid federal jurisdiction by exclusive reliance on state law." Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 96 L. Ed. 2d 318, 107 S. Ct. 2425 ...


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