Will the Legal Malpractice Case Be Heard in Federal or State Court?
Jurisdiction in US District Court is a serious matter, and may be based (in general) upon diversity or upon federal question jurisdiction. When a legal malpractice case is based upon some uniquely federal issue, ERISA or a FDA issue or a patent issue, does that allow the action to be brought in District Court? We've argued in the past that mere incantation of the word "patent" does not allow a defendant to remove the case to District Court. In Gunn v. Minton, 133 S.Ct. 1059 (Feb. 20, 2013) the US Supreme Court agreed.
Well, perhaps it did not agree with us, but an article in today's NYLJ talks about the decision. Scheinfeld and Bagley write that "The Supreme Court, however, held unanimously in Gunn, that state courts indeed may hear legal malpractice claims involving federal patent questions, reversing the Texas Supreme Court's decision that federal courts had exclusive jurisdiction."
"Gunn originated in Texas state court, as the fallout from an underlying patent litigation in which respondent Vernon Minton sued Nasdaq for patent infringement in the Eastern District of Texas. That action was dismissed when the court there invalidated the patent in suit for violating the on-sale bar of 35 U.S.C. 102(b). Allegedly, the lawyers representing Minton neglected to assert the experimental use exception to the on-sale bar, and the decision was upheld on appeal.
Minton responded by filing a malpractice suit in Texas state court, alleging that the lawyer's negligent failure to timely raise the experimental use exception to the on-sale bar cost him the opportunity of winning his federal patent infringement litigation. The trial court dismissed the action for lack of evidence, and Minton appealed to the state appellate court in Fort Worth. While the appeal was pending, the U.S. Court of Appeals for the Federal Circuit issued its opinions in Air Measurement v. Akin Gump1 and Immunocept v. Fulbright,2 holding that when a state-law malpractice case arises from a substantive issue of patent law, federal courts have jurisdiction over such claims. Minton then moved to dismiss his own case for lack of subject matter jurisdiction, hoping to re-file the malpractice suit in federal court. The appeals court was unmoved, however, and instead affirmed the trial court's ruling dismissing the suit with prejudice.
On appeal to the Texas Supreme Court, Minton prevailed: The court held that, purportedly under U.S. Supreme Court precedent, Minton's malpractice case belonged exclusively in federal court, and granted the motion to dismiss. The court agreed that because his legal malpractice claim was based on an alleged error in a patent case, it "aris[es] under" federal patent law for purposes of 28 U.S.C. §1338(a). And because, under §1338(a), no "state court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents," the Texas court lacked subject matter jurisdiction to decide the case.
The Supreme Court disagreed, relying on its precedent set in Grable & Sons Metal Products v. Darve Engineering & Mfg., 545 U.S. 308, 314 (2005):
Does the "state-law claim necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities?" Grable, 545 U.S., at 314, 125 S.Ct. 2363. That is, federal jurisdiction over a state law claim will lie if a federal issue is (1) necessarily raided, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress. Where all four of these requirements are met we held, 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., at 313-314, 125 S.Ct. 2363.
Applying Grable's inquiry, the Supreme Court found that this particular legal malpractice claim does not "arise" under federal patent law and, indeed, state legal malpractice claims based on underlying patent matters will "rarely, if ever," arise under federal patent law for purposes of 1338(a).
In Minton's case, although a federal patent question (i.e., whether the experimental use exception to an on-sale bar factually applied) was "necessarily raised," and "actually disputed," the federal issue, the court concluded, was "not substantial in the relevant sense:"
As our past cases show, however, it is not enough that the federal issue be significant to the particular parties in the immediate suit; that will always be true when the state claim "necessarily raises[s]" a disputed federal issue, as Grable separately requires. The substantiality inquiry under Grable looks instead to the importance of the issue to the federal system as a whole. [emphasis in original]"