13-266-cv
Fracasse v. People’s United Bank


                         UNITED STATES COURT OF APPEALS

                                    FOR THE SECOND CIRCUIT
                                        _____________________

                                          August Term, 2013

                     (Argued: August 19, 2013           Decided: March 27, 2014)

                                          Docket No. 13-266-cv
                                        _____________________


                                   TRACY FRACASSE AND K. LEE BROWN,

                                                              Plaintiffs-Appellants,

                                                 -v.-

                                        PEOPLE’S UNITED BANK,

                                                              Defendant-Appellee.

                                       _______________________

Before:           LEVAL, WESLEY, AND HALL, Circuit Judges.
                                  _______________________

        Appeal from a judgment of the United States District Court for the District of
Connecticut dismissing plaintiffs’ complaint for failure to state a claim. Because the district
court lacked subject matter jurisdiction in this action, we do not reach the merits of the appeal.
We VACATE the judgment of the district court and REMAND with instructions to the district
court to remand the case to the Connecticut Superior Court.
                                   _______________________

                  Kevin C. Shea, Clendenen & Shea, LLC, New Haven, Connecticut, for Plaintiffs-
                  Appellants.

                  Paul DeCamp (William J. Anthony, David R. Golder, on the brief, Jackson Lewis
                  LLP, Hartford, Connecticut), Jackson Lewis LLP, Reston, Virginia, for
                  Defendant-Appellee.

                                       _______________________
PER CURIAM:

       Plaintiffs-Appellants Tracy Fracasse (“Fracasse”) and K. Lee Brown (“Brown”) appeal

from a judgment of the United States District Court for the District of Connecticut (Janet C. Hall,

J.) dismissing their claims. On May 3, 2012, Fracasse and Brown, formerly employed as

mortgage underwriters by People’s United Bank (“People’s” or “the Bank”), filed a suit in

Connecticut Superior Court for the District of New Haven asserting state law claims for unjust

enrichment, negligent infliction of emotional distress, wrongful termination in violation of public

policy, and breach of the covenant of good faith and fair dealing. Defendant-Appellee People’s

removed the state court action to federal court and filed a Federal Rule of Civil Procedure

12(b)(6) motion to dismiss the complaint for failure to state a claim. Holding that the Fair Labor

Standards Act preempted plaintiffs’ common law claims, the district court dismissed the

complaint. Plaintiffs appealed, arguing that the Fair Labor Standards Act does not preempt their

state common law claims.

       We hold that the district court lacked subject matter jurisdiction over this action, and we

remand with instructions to remand the case to the Connecticut Superior Court for New Haven.

                                          Background

       Collectively, Fracasse and Brown claim that People’s violated state law by failing to

compensate them for work performed in excess of forty hours per week. They allege that once

they were placed in fixed-salary positions, People’s withheld overtime compensation to which

they were entitled. Fracasse received a fixed salary from August of 2006 until the time of her

resignation in January of 2012, which she asserts was due to increased stress and anxiety.

During that time, People’s did not compensate her for overtime hours. Brown was initially hired

as a temporary employee paid an hourly wage. In May 2010, she became a permanent employee


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paid a fixed salary; she did not receive additional compensation for hours worked in excess of

forty hours per week. Brown alleges that the stressful work environment and inadequate

compensation caused her to be placed on medical leave and constructively terminated in January

2012. As examples of public policy considerations underlying their state law claims, the

plaintiffs cited the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201 et seq., and the

Connecticut Minimum Wage Act, Connecticut General Statutes (“CMWA”) §§ 31-58 et seq.

       At the same time Fracasse and Brown filed the underlying action in the Connecticut

Superior Court, they also brought suit in federal court based on the same underlying conduct and

asserting direct violations of the Fair Labor Standards Act and the Connecticut Minimum Wage

Act.

       People’s removed the Connecticut Superior Court action to federal court on the basis that

federal jurisdiction existed under 28 U.S.C. § 1331 because the action “involve[d] claims that

related to the laws of the United States—specifically, the Fair Labor Standards Act.” Notice of

Removal ¶ 3, June 8, 2012, ECF No. 1. People’s contended that notwithstanding plaintiffs’

decision not to assert any federal claims in the state court complaint, the “artful pleading

doctrine” permitted removal on this basis. There is no diversity jurisdiction, see 28 U.S.C.

§ 1332, over the removed claims, nor is there supplemental jurisdiction, see 28 U.S.C. § 1367, as

the removed action was not part of the separately filed, albeit related, federal case. Plaintiffs did

not move to remand the action to the Connecticut Superior Court. The district court did not

discuss subject matter jurisdiction.

                                             Discussion

       For federal subject matter jurisdiction to exist in this case, the causes of action asserted in

the complaint must “aris[e] under the . . . laws . . . of the United States.” 28 U.S.C. § 1331. We


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“conduct an independent inquiry” into whether we have jurisdiction over a matter before we

proceed to address questions on the merits. New York v. Shinnecock Indian Nation, 686 F.3d

133, 138 (2d Cir. 2012). “If subject matter jurisdiction is lacking and no party has called the

matter to the court’s attention, the court has the duty to dismiss the action sua sponte.” Durant,

Nichols, Houston, Hodgson & Cortese-Costa P.C. v. Dupont, 565 F.3d 56, 62 (2d Cir. 2009).

         We requested the parties to provide us supplemental briefing on the issue of subject

matter jurisdiction. In response, Fracasse and Brown argue that there is no federal question

jurisdiction because the claims involve rights and remedies under state law. People’s counters

that plaintiffs’ claims all arose under the FLSA and federal subject matter jurisdiction therefore

exists over the claims. We are not persuaded by People’s argument.

         In their complaint, Fracasse and Brown cite to the FLSA in their causes of action for (1)

wrongful termination and (2) breach of covenant of good faith and fair dealing.1 Their wrongful

termination claims reference the FLSA as an example of “numerous important public policies

embodied in statutory provisions concerning payment of wages,” including “[29 U.S.C.]

§ 207(a)(1), which prohibits an employee from working in excess of forty (40) hours per week

unless she receives compensation for excess hours at a rate not less than one and one-half times

the regular rate at which she is employed.” In pleading their breach of covenant of good faith

and fair dealing causes of action, plaintiffs again reference the FLSA, asserting that it provides a

basis for their reasonable expectations of defendant’s contractual obligations. Plaintiffs contend


1
  Under Connecticut law, an action for wrongful termination requires a former at-will employee to “prove a
demonstrably improper reason for dismissal, a reason whose impropriety is derived from some important violation
of public policy.” Sheets v. Teddy’s Frosted Foods, Inc., 179 Conn. 471, 475 (1980). “An action for breach of the
covenant of good faith and fair dealing requires proof of three essential elements: first, that the plaintiff and the
defendant were parties to a contract under which the plaintiff reasonably expected to receive certain benefits;
second, that the defendant engaged in conduct that injured the plaintiff’s right to receive some or all of those
benefits; and third, that when committing the acts by which it injured the plaintiff’s right to receive benefits he
reasonably expected to receive under the contract, the defendant was acting in bad faith.” Franco v. Yale Univ., 238
F. Supp. 2d 449, 455 (D. Conn. 2002).
                                                          4
that they “reasonably expected that the Defendant would comply with federal and state wage

laws, including the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq., including

§ 207(a)(1) . . . .” Contrary to People’s contention, these references to the FLSA, pled as public

policy considerations attendant to the common law claims, do not provide a basis for federal

subject matter jurisdiction.

        Three situations exist in which a complaint that does not allege a federal cause of action

may nonetheless “aris[e] under” federal law for purposes of subject matter jurisdiction: first, if

Congress expressly provides, by statute, for removal of state law claims as it did in the Price-

Anderson Act, 42 U.S.C. §§ 2011 et seq.,2 see Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 8

(2003); second, if the state law claims are completely preempted by federal law, such as those

that must be brought under the Labor Management Relations Act, 29 U.S.C. §§ 141 et seq., the

Employee Retirement Income Security Act, 29 U.S.C. §§ 1001 et seq., or the National Bank Act,

12 U.S.C. §§ 21 et seq., see, e.g., Sullivan v. Am. Airlines, Inc., 424 F.3d 267, 272, 272 n.6 (2d

Cir. 2005); and third, in certain cases if the vindication of a state law right necessarily turns on a

question of federal law, see, e.g., Merrell Dow Pharma. Inc. v. Thompson, 478 U.S. 804, 808–10

(1986)). The only plausible basis for federal jurisdiction in this case would be the third option,

which we now analyze in the context of the pleadings before us.

        People’s argues that the federal court does, in fact, have subject matter jurisdiction

because “the vindication of . . . right[s] under state law necessarily turn[] on some construction

of federal law.” Merrell Dow Pharm. Inc., 478 U.S. at 808. The Supreme Court recently

discussed this basis for subject matter jurisdiction in Gunn v. Minton, 133 S. Ct. 1059, 1064

(2013), in which the Court articulated the contours of this “extremely rare exception[].” The


2
  The Price-Anderson Act, 42 U.S.C. §§ 2011 et seq., governs liability, including private insurance and
indemnification, for federal licensees in the event of a nuclear incident.
                                                         5
Court explained that “federal jurisdiction over a state law claim will lie 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.” Id. at 1066.

       Examining whether the plaintiffs’ complaint satisfies the requirements announced in

Gunn, we conclude that the “federal issue” arising in these state law claims is not substantial, and

the district court, therefore, lacked subject matter jurisdiction. In Gunn, the Court explained that,

to demonstrate substantiality, “it is not enough that the federal issue be significant to the

particular parties in the immediate suit” because “that will always be true when the state claim

‘necessarily raise[s]’ a disputed federal issue.” Id. Rather, the “substantiality inquiry . . . looks

instead to the importance of the issue to the federal system as a whole.” Id.; see Grable & Sons

Metal Products, Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 313 (2005) (“It has in fact become a

constant refrain . . . that federal jurisdiction demands not only a contested federal issue, but a

substantial one, indicating a serious federal interest in claiming the advantages thought to be

inherent in a federal forum.”); see also MDS (Canada) Inc. v. Rad Source Technologies, Inc.,

720 F.3d 833, 842 (11th Cir. 2013) (“First, a pure question of law is more likely to be a

substantial federal question. Second, a question that will control many other cases is more likely

to be a substantial federal question. Third, a question that the government has a strong interest in

litigating in a federal forum is more likely to be a substantial federal question.”(internal citations

omitted)).

       Here, even were we to assume that plaintiffs’ state common law claims could raise a

federal issue as pled, the federal issue is at best insubstantial. Neither the federal government nor

the federal system as a whole has a pressing interest in ensuring that a federal forum is available

to defendants in state tort suits that include passing references to a federal statute cited only as an


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articulation of public policy. This is so, if for no other reason, because employees—those whom

the FLSA was enacted to protect—will in any event have direct access to a federal forum to

assert their rights under the FLSA. Nor, in the circumstances presented here, do the federal

courts cede an opportunity to establish binding precedent affecting the interpretation of the

FLSA. The FLSA needs no interpretation in connection with the state tort claims that have been

pled. The federal interest in a federal forum for state tort claims linked tangentially to public

policy underlying a federal statute is de minimis when compared, for example, to the federal

government’s interest in ensuring that federal courts hear cases that determine the validity of

federal liens or the validity of subsequent title to property seized to satisfy federal tax

delinquencies—examples cited by the Court in Gunn. See Gunn, 133 S. Ct. at 1066. To quote

the Court in Gunn: “[S]omething more, demonstrating that the question is significant to the

federal system as a whole, is needed. That is missing here.” Id. at 1068.

        Were we to adopt People’s reasoning to conclude that the district court did have subject

matter jurisdiction, then every state law claim that adverts in any part to a proposition of federal

law would satisfy the “substantiality” requirement. Such an interpretation would render inquiry

as to whether the claims “arise under” federal law meaningless and clearly fly in the face of the

Supreme Court’s test in Gunn.

        For the foregoing reasons, the federal courts are without subject matter jurisdiction in this

case. We therefore VACATE the judgment of the district court and REMAND with instructions

that the district court remand the case to Connecticut Superior Court for the New Haven Judicial

District.




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