In the
United States Court of Appeals
For the Seventh Circuit

No. 00-3823

City of Beloit,

Plaintiff-Appellant,

v.

Local 643 of the American Federation of State,
County and Municipal Employees, AFL-CIO,

Defendant-Appellee.



Appeal from the United States District Court
for the Western District of Wisconsin.
No. 00 C 220--Barbara B. Crabb, Judge.


Argued March 26, 2001--Decided April 20, 2001



      Before Flaum, Chief Judge, and Bauer and Rovner,
Circuit Judges.

      Flaum, Chief Judge. The city of Beloit
("Beloit") appeals the dismissal of its
declaratory judgment action against Local 643,
American Federation of State, County and
Municipal Employees, AFL-CIO ("Local 643"). This
action seeks to determine whether Beloit is
required to arbitrate a grievance filed by Local
643. Beloit challenges the district court’s
determination that federal subject matter
jurisdiction over its suit is absent. For the
reasons stated herein, we affirm.

I.   Background

      Beloit receives grants from the federal
government to fund its public transit system as
provided in the Urban Mass Transit Act ("UMTA"),
49 U.S.C. sec. 5301, et seq. Beloit and Local 643
have what is known as a sec. 13(c) agreement,
named after a section of the original UMTA. This
section, now codified at 49 U.S.C. sec. 5333(b),
requires a recipient of financial assistance
under the UMTA to arrange for the protection of
employees who are involved in the public transit
system.

      The sec. 13(c) agreement between Beloit and
Local 643 provides that no employee represented
by Local 643 can be laid off or otherwise have
his or her employment condition worsened as a
result of the receipt of federal funds. Another
part of the agreement states that its protections
do not apply to changes in business brought about
by causes other than Beloit’s use of the federal
assistance. An unexecuted addendum to the sec.
13(c) agreement states that if a dispute under
the agreement is not resolved, Local 643 can file
a written notice with the Wisconsin Employment
Relations Commission ("WERC") and have the
dispute submitted to arbitration.

      The number of people using Beloit’s mass
transit system has declined every year since
1992, while the costs of operating the system
have risen. Because of the financial difficulties
caused by these trends, Beloit decided to lay off
two part-time employees and not to fill a vacancy
created by another worker who left the city’s
employ. Local 643’s representative sent a
grievance form to Beloit, claiming that the sec.
13(c) agreement required Beloit to notify the
union of any layoffs. Beloit responded that the
matter was not grievable because the reduction in
force was caused by external economic conditions
not related to the receipt of federal assistance.
Local 643 then filed a notice with the chairman
of WERC and demanded binding arbitration.

      Beloit then filed a declaratory judgment action
in federal court seeking a determination that its
employment decisions were not covered by the sec.
13(c) agreement and thus it was not required to
submit to arbitration. Local 643 responded with
a motion to dismiss for lack of subject matter
jurisdiction under Federal Rule of Civil
Procedure 12(b)(1). The district court dismissed
Beloit’s suit, finding no basis for federal
jurisdiction.

II.   Discussion

      Beloit’s primary argument to this court is
based on 49 U.S.C. sec. 5333(b)(1), which states
"As a condition of financial assistance . . . ,
the interests of employees affected by the
assistance shall be protected under arrangements
the Secretary of Labor concludes are fair and
equitable" (emphasis added). The "arrangements"
described in this section are provisions that
would be included in a sec. 13(c) agreement. 49
U.S.C. sec. 5333(b)(2). Beloit contends that the
language of sec. 5333(b)(1) indicates that such
arrangements apply only when employees are
negatively "affected by the assistance" of
federal funding. It claims that this statutory
language of the UMTA requires a nexus between the
receipt of any federal funds and an adverse
employment action before the protections of a
sec. 13(c) agreement can be invoked. This
interpretation of the UMTA presents a federal
question, and thus the federal courts have
subject matter jurisdiction under 28 U.S.C. sec.
1331.

      We review de novo the district court’s
dismissal for lack of subject matter
jurisdiction. Sapperstein v. Hager, 188 F.3d 852,
855 (7th Cir. 1999). The only possible basis for
subject matter jurisdiction in this case would
appear to be federal question jurisdiction. The
well-pleaded complaint rule requires a federal
question to be evident from the face of the
plaintiff’s complaint for jurisdiction under 28
U.S.C. sec. 1331 to exist. Rivet v. Regions Bank
of La., 522 U.S. 470, 475 (1998); see also
Louisville & Nashville R.R. Co. v. Mottley, 211
U.S. 149 (1908). In a declaratory judgment
action, the well-pleaded complaint rule requires
this court to determine whether a federal
question would be present on the face of a
complaint by the declaratory defendant in a
presumed suit against the declaratory plaintiff,
unless the declaratory defendant is a government
entity. Norfolk S. Ry. Co. v. Guthrie, 233 F.3d
532, 535 (7th Cir. 2000); Northeast Ill. Reg’l
Commuter R.R. Corp. v. Hoey Farina & Downes, 212
F.3d 1010 (7th Cir. 2000) ("Metra").

      Because Local 643, the declaratory defendant, is
a private entity, we examine whether federal
question jurisdiction would have existed over any
claims it could have raised in a suit against
Beloit. As described in Beloit’s complaint, Local
643 contends that the sec. 13(c) agreement
requires the city to send a formal notice to the
union regarding any layoffs of transit workers,
but Beloit refused to provide this notice. Thus,
an action by Local 643 would be premised on a
breach of the sec. 13(c) agreement. A claim that
a sec. 13(c) agreement has been violated does not
state a cause of action on which relief can be
granted in a federal court, Jackson Transit Auth.
v. Local Div. 1285, Amalgamated Transit Union,
457 U.S. 15 (1982), and so the union’s suit would
be dismissed. In this presumed action, Beloit’s
argument based on the lack of a nexus between the
federal funds and the adverse employment action
asserted to be required by the UMTA would be
raised only as a defense, and so would not
satisfy the well-pleaded complaint rule. Rivet,
522 U.S. at 475. Thus, even if interpretation of
the UMTA would be required, this would not be
evident from the face of the union’s complaint
and we would lack jurisdiction in this putative
suit. Because federal jurisdiction would be
absent in a suit by Local 643 against Beloit, we
also lack jurisdiction to consider Beloit’s
declaratory action against Local 643.
      Beloit has a few responses to this line of
reasoning, but these are unsuccessful. The
initial two concern substantive arbitrability,
that is, the question of whether a party can be
required to arbitrate a dispute. Beloit’s first
contention is that the putative suit filed by
Local 643 could have been a declaratory action
asking a federal court to find that the sec.
13(c) agreement provided for arbitration, rather
than a simple breach of contract suit. Beloit
conjectures that the union might have done this
because, according to its complaint, the only
mention of arbitration is contained in an
unexecuted addendum to the sec. 13(c) agreement,
and Local 643 could have had concerns about
whether Beloit could be forced into arbitration
on this basis. The second claim is that under
federal law whether an employer must arbitrate a
dispute with a union is a matter for a court
rather than an arbitrator.

      The problem with both of Beloit’s related
contentions is that an issue of substantive
arbitrability standing alone does not present a
federal question; rather, some other basis for
jurisdiction must present. Moses H. Cone Mem’l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25
n.32 (1983); Caudle v. American Arbitration
Ass’n, 230 F.3d 920, 922 (7th Cir. 2000). Thus,
Beloit’s first argument would not establish
jurisdiction because the mere fact that Local 643
might wish to determine whether it could force
the city to arbitrate would not cause the union’s
suit to arise under federal law. Such a suit by
Local 643 would raise questions only of
interpreting the sec. 13(c) agreement to
determine what it requires. Under Jackson
Transit, 457 U.S. at 29, such issues are to be
decided by state courts rather than federal ones.

      Regarding Beloit’s second argument, the city is
correct that under federal law substantive
arbitrability is usually an issue for the courts.
E.g., AT&T Techs., Inc. v. Communications Workers
of Am., 475 U.S. 643, 649 (1986). However, as
stated above, a question of substantive
arbitrability does not establish a basis for
federal jurisdiction. Since no foundation for
jurisdiction is present in this case, we lack the
power to determine whether Beloit should be
required to arbitrate. By comparison, in all of
the cases cited by Beloit for the principle that
substantive arbitrability is a matter for the
courts, federal jurisdiction was based on 29
U.S.C. sec. 185(a), which provides for subject
matter jurisdiction for "[s]uits for violation of
contracts between an employer and a labor
organization." See, e.g., AT&T Techs., 475 U.S.
at 646 & n.4. However, as noted by the district
court, "employer" is defined as excluding "any
State or political subdivision thereof." 29
U.S.C. sec. 152(2). Thus, Beloit cannot take
advantage of this provision to establish
jurisdiction.

      Beloit’s last argument is based on case law,
but the decisions it cites are distinguishable
because of the nature of the defendants in those
suits. Two of these, United Transp. Union v.
Brock, 815 F.2d 1562 (D.C. Cir. 1987) and
Amalgamated Transit Union Int’l v. Donovan, 767
F.2d 939 (D.C. Cir. 1985), each involved a
challenge to the Secretary of Labor’s
("Secretary") decision to certify a sec. 13(c)
agreement. The Secretary’s approval of a sec.
13(c) agreement is required by what is now 49
U.S.C. sec. 5333(b)(1), and in each case a union
was claiming that the Secretary erred in granting
certification because the agreement in question
did not adequately protect the interests of
transit workers. Neither case discusses subject
matter jurisdiction, but a basis for such is
readily apparent. Suits against federal officers
or agencies arise under the laws of the United
States, unless a statute precludes judicial
review, and thus 28 U.S.C. sec. 1331 provides a
basis for subject matter jurisdiction. See
Califano v. Sanders, 430 U.S. 99, 105 (1977). In
both United Transportation and Amalgamated
Transit, the plaintiff unions were suing the
Secretary, no statute precluded review,/1 and
thus each action raised a federal question. By
contrast, Beloit is suing a private organization
rather than a federal agency or officer, and so
cannot rely on the same basis for jurisdiction
that was present in the D.C. Circuit cases.

      The final case relied on by Beloit is City of
Independence, Mo. v. Bond, 756 F.2d 615 (8th Cir.
1985). This case involved the interpretation of
an agreement formed pursuant to a provision in
the Job Training Partnership Act ("JTPA")/2
rather than a sec. 13(c) agreement under the
UMTA, but Beloit argues that the two situations
are analogous. Even if the two statutes are
similar, City of Independence cannot aid Beloit.
As explained in Metra, 212 F.3d 1015-16, when a
declaratory action is filed against a state
government entity, the complaint of the
declaratory plaintiff determines whether the
well-pleaded complaint rule is satisfied. City of
Independence was a declaratory judgment action
naming the governor of Missouri, the executive of
a county, and the county itself, which are all
government entities or officers, as declaratory
defendants. 756 F.2d at 616. Thus, the
declaratory complaint, rather than a presumed
complaint by the declaratory defendant, would
have been examined to determine whether a federal
question was well pleaded. The plaintiff city’s
complaint raised the need to interpret the JTPA
on its face, id. at 617-18, and so jurisdiction
arose under 28 U.S.C. sec. 1331. By contrast,
Local 643 is a private organization and so, as
discussed earlier, different principles for
determining whether federal question jurisdiction
exists over a declaratory judgment action apply
and differentiate this case from City of
Independence.

III.   Conclusion

      Under Jackson Authority, federal jurisdiction
would not exist over a suit by Local 643 against
Beloit for a breach of the sec. 13(c) agreement.
For this reason and because Local 643 is a
private organization, we lack jurisdiction to
entertain a declaratory judgment action by Beloit
seeking to preempt Local 643’s attempt to require
the city to arbitrate the alleged breach.
Therefore, the district court’s dismissal of this
action because of the absence of subject matter
jurisdiction is Affirmed.

/1 In Amalgamated Transit, the Secretary argued that
the Administrative Procedure Act shielded his
actions from judicial scrutiny, but this
contention was rejected by the D.C. Circuit. 767
F.2d at 944-46.

/2 The JTPA has since been superseded by the
Workforce Investment Act of 1998, 29 U.S.C. sec.
2801, et seq. See 29 U.S.C. sec. 2940(b).
