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FARMER v. PHILADELPHIA ELEC. CO.

March 29, 1963

Eugene FARMER
v.
PHILADELPHIA ELECTRIC CO.



The opinion of the court was delivered by: LUONGO

This is a civil action to recover damages. The complaint alleges that the United States and the defendant entered into a written contract; that the defendant undertook and agreed not to discriminate against any employee because of race, creed, color or national origin; that the anti-discrimination provision of the contract was required by and inserted pursuant to an Executive Order; *fn1" and that defendant discriminated against the plaintiff in his employment solely because of his race. On the foregoing plaintiff claims the right, as a third party beneficiary, to recover damages for breach of the contract between the defendant and the United States. Before me is the defendant's motion to dismiss (a) for lack of jurisdiction, or (b) for failure to state a claim upon which relief may be granted.

It is possible to interpret the complaint as asserting either (1) a common law action for breach of contract, or (2) a cause of action created by an Executive Order promulgated by the President of the United States. Under either view the complaint must be dismissed.

 (a) Jurisdiction:

 There is no diversity of citizenship between the parties. Plaintiff does not rely on the special statutory basis for federal jurisdiction in civil rights cases contained in 28 U.S.C.A. § 1343. Jurisdiction is claimed solely on the basis that this suit arises under the Constitution and laws of the United States within the meaning of 28 U.S.C.A. § 1331. *fn2"

 The fact that federal 'law' may be involved in the interpretation of a contract does not constitute a claim 'under the Constitution, laws or treaties of the United States.' As stated in Gully v. First Nat. Bank, 299 U.S. 109, at page 112, 57 S. Ct. 96, at page 97, 81 L. Ed. 70, a case relied on by both parties:

 '* * * To bring a case within the statute, a right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action. * * * The right or immunity must be such that it will be supported if the Constitution or laws of the United States are given one construction or effect, and defeated if they receive another. * * *' Also see Pan Am. Petroleum Corp. v. Superior Court, 366 U.S. 656, 81 S. Ct. 1303, 6 L. Ed. 2d 584 (1961); Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 70 S. Ct. 876, 94 L. Ed. 1194 (1950).

 Viewing the complaint as stating a cause of action under common law contract principles and applying the test of Gully, the Executive Order does not create a right which is an essential element of plaintiff's cause of action. Plaintiff's right, if any, is dependent on common law contract principles and the Executive Order serves only to explain why the anti-discrimination clause is included in the contract and, perhaps, to shed some light on whether the contracting parties intended to create rights in third persons. Whether plaintiff is a third party beneficiary to the contract between defendant and the United States, whether that contract has been breached, whether and to what extent he will be entitled to recover damages, are all questions to be resolved by the application of common law principles, not by the interpretation of an Executive Order, or 'law' of the United States.

 The principle was stated thus, under somewhat analogous facts, by Mr. Justice Jackson in Montana-Dakota Utilities Co. v. Public Service Co., 341 U.S. 246, at page 252, 71 S. Ct. 692, at page 695, 95 L. Ed. 912 (1951):

 'If the petitioner's grievance arises from active fraud and deceit, it gains nothing from the Federal Act. Such an action would have been maintainable if no Federal Power Act had been enacted. Before the Act, petitioner would have had no statutory right to a reasonable rate, but it did have a common-law right not to be defrauded into paying an excessive or unreasonable one. The Federal Act adds nothing to fraud as an actionable wrong, and, therefore, to find a cause of action of this character would only be to dismiss it for want of diversity.'

 Paraphrasing Mr. Justice Jackson's expression, it can be said of this case, viewed as a contract claim, that if plaintiff's claim is based on contract principles, it gains nothing from the Executive Order. Such an action would have been maintainable on such a contract if no Executive Order had been promulgated.

 The case of Shell v. Schmidt, 126 Cal.App.2d 279, 272 P.2d 82 (1954) cited by plaintiff does not require a contrary result. In that case plaintiffs elected to forego a specially created federal statutory cause of action (on which the Statute of Limitations had expired) in favor of a common law contract action in the state court. In the instant case I do not question plaintiff's claim as a third party beneficiary under common law contract principles, he is perfectly free to make such a claim, but if he does so he may not make it in this court because of the absence of diversity of citizenship between him and the defendant.

 As stated earlier, however, it is possible to construe the complaint, not as one based on common law contract principles, but as claiming a cause of action created by an Executive Order. Under this latter view, applying the principles enunciated in Montana-Dakota Co. v. Pub. Serv. Co., supra, (and see Bell v. Hood, 327 U.S. 678, 66 S. Ct. 773, 90 L. Ed. 939 (1946)) plaintiff manages to get over the jurisdictional hurdle, for simply by asserting that he has a cause of action under a 'law' of the United States, he has created jurisdiction in this court to ...


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