Plaintiff, in opposing defendant's motion to dismiss, contends that 42 U.S.C. § 4053 does not confer exclusive jurisdiction upon the federal district court but, at best, concurrent jurisdiction; that since concurrent jurisdiction does exist, if the case was properly removed, which plaintiff disputes, this court has jurisdiction; therefore the court should not dismiss the case for want of subject matter jurisdiction.
Both defendant and the magistrate
rely heavily on a prior Middle District case, Dunkle v. National Flood Insurers Association, 432 F.Supp. 489 (M.D.Pa.1977), as well as a recent case in the Central District of Illinois, Schultz v. Director, Federal Emergency Management Agency , 477 F.Supp. 118 (C.D.Ill.1979). The cornerstone of the Dunkle decision, which was adopted by the court in Schultz, was the interpretation of the word "may" in 42 U.S.C. § 4053. The court in Dunkle held:
A fair and reasonable reading of the language contained in Section 4053 indicates that the word "may" was intended to characterize and qualify the institution of suit by the claimant rather than the forum in which the claim could be brought. Under this construction, where a claimant elects to institute suit pursuant to the provision of the Act, he is required under the special jurisdictional grant included in Section 4053 to file his action in the federal district courts. Id . at 490.
The court went on to analogize 42 U.S.C. § 4053 with 15 U.S.C. § 15,
which has been interpreted to confer exclusive jurisdiction upon the federal courts. The court concluded a "similar and consistent result should be reached," holding claims under the National Flood Insurance Act may be litigated only in federal courts. Id . at 491.
This court does not agree with the result nor the reasoning in Dunkle, particularly in light of plaintiff's arguments and contrary case law, both in and out of this district. Plaintiff contends that the interpretation given in Dunkle should not be applied in the instant case for the following reasons:
1. The statute itself does not expressly state that exclusive jurisdiction lies with the federal courts.
2.The legislative history of the statute expressly, although parenthetically, provides for remedies in state courts.
3. The Code of Federal Regulations has been amended to eliminate any implication of exclusive jurisdiction.
4. The general rules of interpretation dictate that "may" is permissive while "shall" is directive.
5. Cases have already held that the federal courts do not have exclusive jurisdiction.
In a case very similar to the one sub judice , the Supreme Court held that § 301(a) of the Labor Management Act, 1947, which confers on federal courts jurisdiction over suits for violations of contracts between employers and certain labor organizations, did not divest state courts of jurisdiction of such suits.
Charles Dowd Box Co., Inc. v. Courtney , 368 U.S. 502, 82 S. Ct. 519, 7 L. Ed. 2d 483 (1962). The Court stated:
On its face § 301(a) simply gives the federal district courts jurisdiction over suits for violation of certain specified types of contracts. The statute does not state nor even suggest that such jurisdiction shall be exclusive. It provides that suits of the kind described may be brought in the federal district courts, not that they must be. Id . at 506, 82 S. Ct. at 522. (emphasis added).
The Court went on to describe the situations wherein exclusive federal jurisdiction should be applied:
We start with the premise that nothing in the concept of our federal system prevents state courts from enforcing rights created by federal law. Concurrent jurisdiction has been a common phenomenon in our judicial history, and exclusive federal court jurisdiction over cases arising under federal law has been the exception rather than the rule. This Court's approach to the question of whether Congress has ousted state courts of jurisdiction was enunciated by Mr. Justice Bradley in Claflin v. Houseman, 93 U.S. 130 [23 L. Ed. 833], and has remained unmodified through the years. The general question, whether State courts can exercise concurrent jurisdiction with the Federal courts in cases arising under the Constitution, laws, and treaties of the United States, has been elaborately discussed, both on the bench and in published treatises... [and] the result of these discussions has, in our judgment, been... to affirm the jurisdiction, where it is not excluded by express provision, or by incompatibility in its exercise arising from the nature of the particular case. 93 U.S., at 136. See Robb v. Connolly , 111, U.S. 624 [4 S. Ct. 544, 28 L. Ed. 542]; Second Employers' Liability Cases, 223 U.S. 1, 56-59 [32 S. Ct. 169, 177-178, 56 L. Ed. 327]; State of Missouri ex rel. St. Louis, B. & M. R. Co. v. Taylor, 266 U.S. 200 [45 S. Ct. 47, 69 L. Ed. 247]; Garrett v. Moore-McCormack Co., 317 U.S. 239, 245 [63 S. Ct. 246, 250, 87 L. Ed. 239]; Brown v. Gerdes, 321 U.S. 178, 188 [64 S. Ct. 487, 492, 88 L. Ed. 659] (concurring opinion). To hold that § 301(a) operates to deprive the state courts of a substantial segment of their established jurisdiction over contract actions would thus be to disregard this consistent history of hospitable acceptance of concurrent jurisdiction. Id . at 507-508, 82 S. Ct. at 522-23 (footnote omitted) (emphasis added).
Hence, unless the statute expressly provides for exclusive federal jurisdiction or an interpretation granting concurrent jurisdiction would be incompatible with the nature of the particular case, jurisdiction is concurrent. Section 4053 does not state or suggest that the federal courts have exclusive original jurisdiction, nor would concurrent jurisdiction be incompatible with the purpose of the Act. An interpretation of exclusive federal jurisdiction, therefore, is not warranted.
As pointed out by plaintiff, the legislative history attendant to § 4053 suggests concurrent jurisdiction. The relevant portion of the legislative history provides:
[Any] claimant, upon disallowance or partial disallowance of a claim, to institute an action, within one year after notice of the disallowance was mailed, in the U.S. District Court for the district in which the insured property or other major portion of it was situated. Jurisdiction would be conferred on the district court without regard to the amount in controversy. (Claimants could, of course, also avail themselves of legal remedies in state courts.) U.S.Code Cong. & Admin. News, 1968, Vol. 2, p. 3022, § 1133.
Although the court agrees with defendant that the parenthetical note is not determinative of whether or not jurisdiction is concurrent, it may, nevertheless, not be ignored. Muniz v. Hoffman, Regional Director, National Labor Relations Board, 422 U.S. 454, 468, 95 S. Ct. 2178, 2186, 45 L. Ed. 2d 319 (1975). The use of legislative history is of particular benefit, and in fact may only be referred to, when the plain meaning of the statute is not clear. Jopek v. New York Central Railroad Co., 353 F.2d 778 (3rd Cir. 1965). The split in authority over the interpretation to be given to the word "may" in § 4053 is indicative that its meaning is not clear.
The clear meaning of the language in the parenthetical in the legislative history is that claimants, such as the plaintiff, can also avail themselves of legal remedies in state courts. No restriction is placed upon the type of remedies that may be sought in state courts and clearly, a breach of contract action has historically been a proper action in a state forum.
Plaintiff distinguishes the Dunkle decision in another manner. At the time Dunkle was decided, 24 C.F.R. § 1912.22 (1977) provided in pertinent part:
Upon the disallowance of the Association or its agents of any claim... the claimant... may, pursuant to 42 U.S.C., section 4053, institute an action on such claims against the association, only in the U.S. District Court for the district in which the injured property... shall have been situated.... (emphasis added).
Although the court in Dunkle did not point to 24 C.F.R § 1912.22 as supportive of its position, it should be noted that § 1912.22 was amended the following year, deleting the word "only". 24 C.F.R. § 1912.22 (1979). Presently, § 1912.22 does not contain the word only. The court is aware that the Code of Federal Regulations is not the law, is not determinative of the jurisdictional issue, and is merely advisory; nonetheless, it is a variable to be considered.
Plaintiff points to favorable case law emanating from two cases heard in the Northern District of Oklahoma, namely Burrell v. Turner Corp. of Oklahoma, 431 F.Supp. 1018 (N.D.Okla.1977) and Mason v. National Flood Insurance Assn ., 431 F.Supp. 1021 (N.D.Okla.1977), which address the connotation of the words "shall" and "may". The court in Burrell and Mason espoused the widely accepted interpretation that the word "shall" is construed as mandatory or directive, while the word "may" is construed as merely permissive or discretionary. This, like the discussion involving the C.F.R., is not determinative but only a background factor to be considered.
Finally, and most importantly, plaintiff points to cases which have held that federal district courts do not have exclusive jurisdiction of claims against flood insurers under the Act. Burrell, supra; Mason, supra; Bains, supra; Gibson v. Secretary of Housing and Urban Development, 479 F.Supp. 3 (M.D.Pa.1978), aff'd , 601 F.2d 574 (3rd Cir. 1979). Most persuasive is the Gibson case. Although the issue of jurisdiction was not expressly addressed, the court, by implication, found concurrent jurisdiction existed in claims again insurers under the Act.
In Gibson , the insured brought an action against a flood insurer in the state courts. Following removal, HUD was substituted as sole defendant. The court held that although jurisdiction was originally based upon diversity, it subsequently rested upon general federal question jurisdiction after the substitution of HUD as sole defendant. Implicit in this finding is that the case was properly removed and, therefore, that concurrent jurisdiction, rather than exclusive federal jurisdiction, existed. Although no motion to dismiss for lack of subject matter jurisdiction was filed by defendant in Gibson , the court has an affirmative duty to raise jurisdiction sua sponte. Kenosha v. Bruno , 412 U.S. 507, 93 S. Ct. 2222, 37 L. Ed. 2d 109 (1973); Carlsberg Resources Corp. v. Cambria Savings and Loan Assn ., 554 F.2d 1254 (3rd Cir. 1977). The Supreme Court has held that even where no motion to dismiss or denial of jurisdiction exists, the court has a duty to act sua sponte to exercise sound judicial discretion to assure that jurisdiction is proper. Saint Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 287-8, n.10, 58 S. Ct. 586, 589-590, n.10, 82 L. Ed. 845 (1938). See also Dunkle, supra . (jurisdiction raised sua sponte ). The Court went on to hold that "even an appellate court must notice the absence of the elements requisite to original jurisdiction or to a removal." St. Paul Indemnity Co., supra . (emphasis added). This latter statement becomes even more significant in light of the fact that the result in Gibson was affirmed by the Third Circuit Court of Appeals.
The court finds, after careful consideration of the above factors, that concurrent jurisdiction does exist in claims arising under the National Flood Insurance Act. Initiation of a case in a state court, therefore, will not preclude removal to a federal court, assuming a proper basis for removal exists. This result is not only supported by case law but is justified by policy considerations.
To hold otherwise, permitting a party to effect removal and then successfully move to dismiss, is to sanction a miscarriage of justice, which can only breed contempt for the entire judicial system.