Opinion
01 Civ. 2599 (LAP).
January 30, 2002
MEMORANDUM AND ORDER
Petitioner The Board of Trustees of the Huntington Free Library and Reading Room ("HFL" or the "Library") originally filed a Verified Petition for cy pres relief (the "Petition") under Section 8-1.1 of the New York Estates, Powers, and Trusts Law ("EPTL") in the Supreme Court of the State of New York, Bronx County. The Smithsonian Institution (the "Smithsonian"), cited as a party in the Petition, removed the action to this Court and filed Objections and a Cross-Petition for Partial Summary Judgment. The Library then moved to remand or, alternatively, for partial summary judgment. The Smithsonian opposed the Library's motion to remand and filed a Cross-Motion for Partial Summary Judgment. For the reasons set forth below, petitioner's motion to remand to the Supreme Court of the State of New York, Bronx County, is granted, and the parties' motions for cy pres relief and partial summary judgment are denied without prejudice for lack of jurisdiction.
I. BACKGROUND
In 1930, the Museum of the American Indian, Heye Foundation ("MAI"), transferred, in trust, a collection of materials regarding Native American history and culture (the "Collection") to the Huntington Library because the MAI lacked the facilities and finances required to maintain the Collection. (Trust Indenture dated May 27, 1930 (the "Trust"), at 1-2). In return, the Library agreed to "house, stack, catalogue, care for and maintain" the Collection "for use and study by those who are interested in the study of the anthropology of the aboriginal peoples of the Americas, and particularly the Members of the [MAI] and of the Staff thereof." (Id. at 6). To fulfill this purpose, the Library received additional resources in the form of monetary grants and grants of real property. (Id. at 4-5).
Under the terms of the Trust, members of the MAI and its staff had the specific privilege
of withdrawing on loan and using at the Museum's own buildings such of the said books, periodicals, brochures and other pieces as the Museum, its Members, or the Members of the Staff thereof, may, under reasonable regulations, deem necessary or desirable for ready reference or for use in connection with the carrying out of the Museum's functions.
(Id. at 6-7). According to the Supplemental Indenture to the Foundation Deed of the MAI (the "Supplemental Indenture"), such a transfer was "most desirable from the [MAI's] standpoint" because the Collection would be available to the MAI "for all time" without further expense to the MAI, while remaining accessible to the public. (Supplemental Indenture dated May 27, 1930, at 4). The Collection has doubled in size since its transfer to the Library, growing from approximately 20,000 volumes in 1930, id. at 5, to its current size of approximately 40,000 books, journals, and other items. (Petition ¶ 12).
The MAI and the Smithsonian entered into a Memorandum of Understanding, dated May 8, 1989 (the "MOU"), under which the MAI agreed to transfer most of its assets to the Smithsonian. (MOU at 3, 11). In 1989, pursuant to the National Museum of the American Indian Act, Congress authorized the establishment of the National Museum of the American Indian ("NMAI") within the Smithsonian with the general purpose of advancing the study of Native Americans. 20 U.S.C. § 80q-1(b) (1989). The implementing legislation also authorized the transfer of the MAI's assets to the Smithsonian and specifically referred to the Collection, noting that the MAI "has more than 1,000,000 art objects and artifacts and a library of 40,000 volumes relating to the archaeology, ethnology, and history of Native American peoples." 20 U.S.C. § 80q(3). The MOU was effectuated in 1990 by an Implementation Agreement and Bill of Sale (collectively, the "Transfer Agreement"). Ultimately, the MAI conveyed all of its
right, title and interest in and to its entire collection of books, objects, works of art, its endowment and all other assets, properties and rights owned by the [MAI] or in which the [MAI] has an interest . . . including without limitation all of the [MAI's] right, title and interest in and to . . . those books, manuscripts, archives and other papers constituting the library of the [MAI] held by the [HFL] and related endowment funds.
(Bill of Sale dated June 24, 1990, at 1-2).
In January 1990, the MAI commenced an action in New York State Supreme Court to recover the Collection in preparation for the transfer of its assets to the Smithsonian. The MAI argued that the 1930 Indenture created an express trust with the sole purpose of benefitting the MAI and that, as a result of its Transfer Agreement with the Smithsonian, the Library could not equitably continue to possess the Collection. See Museum of the American Indian v. Huntington Free Library and Reading Room, 610 N.Y.S.2d 488, 493 (1st Dep't 1994) (the "1994 Decision"). The trial court granted summary judgment to the MAI, but the Appellate Division reversed. See id. at 501. Although the Appellate Division did not decide whether an express trust was created in 1930 or whether the Smithsonian could assert a claim as a particular beneficiary under the Trust Indenture, it found that "even if there was a trust, and it failed, it is clear that . . . the consequence of such failure would not be the return of the trust corpus to the plaintiff." Id. at 494-95. The court further held that the cy pres doctrine, under which a court may alter a charitable disposition if literal compliance with the trust's terms is impracticable or impossible, could not properly be invoked. Id. at 501;see also N.Y. EPTL § 8-1.1(c) (1992). Despite the MAI's transfer to the Smithsonian, the court reasoned, the Collection at the Library remains available to members of the public and to the MAI (and the Smithsonian as its successor-in-interest), in keeping with the Trust disposition. Museum of the American Indian, 610 N.Y.S.2d at 497-98.
The court stated,
[a]lthough there would appear to be some question whether the Smithsonian, as successor-in-interest to the Museum, may assert a claim as a particular beneficiary under the [1930] Transfer Indenture, that is not an issue which has been pursued on appeal, nor is it one whose resolution is necessary to a proper appellate disposition.Id. at 493 n. 7.
On March 1, 2001, the Library brought this action for cy pres relief under Section 8-1.1(c) of the EPTL in the Supreme Court of the State of New York, Bronx County. The Library seeks, inter alia, an order authorizing the transfer of the Collection to the New York State Historical Association ("NYSHA") in exchange for $2.5 million. (Petition ¶¶ 6, 37). The HFL is no longer financially able to maintain the Collection and therefore argues that cy pres applies here because the circumstances have changed to render compliance with the Trust Indenture "impracticable or impossible." (Id. ¶ 41). The Attorney General of the State of New York ("NYAG") is cited in the Petition as a necessary party to this action because by law, the NYAG must represent the interests of the people of the State of New York in proceedings involving charitable trusts. See id. ¶ 14; EPTL § 8-1.1(f). At the request of the NYAG, the Library also provided notice of the proceeding to various parties who have expressed an interest in obtaining the Collection — the NYSHA, the American Museum of Natural History ("AMNH"), Cornell University ("Cornell"), and the Smithsonian. (Petition ¶¶ 7, 16-18, 43).
The Library also seeks to transfer, in trust, one quarter of its Book Purchase Fund to the American Numismatic Society and to amend the Library's Foundation Deed, but these proposals are not the subject of the present dispute.
On March 27, 2001, the Smithsonian removed the action to this Court under 28 U.S.C. § 1441 because the National Museum of the American Indian Act, 20 U.S.C. § 80q-2, provides that "[t]he United States District Court for the Southern District of New York shall have original and exclusive jurisdiction over any cause of action arising under the agreement" between the Smithsonian and the MAI for the transfer of the MAI's assets. (Smithsonian's Notice of Removal, Objections, and Cross-Petition for Relief ("Notice of Removal") ¶ 7). The Smithsonian also alleges that removal is proper under 28 U.S.C. § 1331 because the instant action "arises under" the provisions of 20 U.S.C. § 80-q. (Id.). In response, on May 22, 2001, the Library moved to remand the action to the state court, arguing that this Court lacks subject matter jurisdiction to determine the Library's request for cy pres relief because its Petition does not raise any issues of federal law and could not originally have been brought in federal court. (See Morgan Aff. in Support of Petitioner's Motion to Remand or for Partial Summary Judgment dated May 22, 2001, ¶ 9). Respondents NYSHA and the NYAG join in the HFL's contentions that this Court lacks jurisdiction over the HFL's Petition and therefore agree that the case should be remanded to state court. (See Letter from NYAG to the Court dated May 5, 2001, at 1-3; Letter from NYSHA to the Court dated June 4, 2001, at 4; Letter from NYAG to the Court dated July 10, 2001, ¶¶ 7, 9).
Additionally, the Smithsonian objects to the Library's proposed transfer of the Collection, alleging that it constitutes a breach of the Library's fiduciary duty as a trustee. (Id. ¶ 11, 14-15). Finally, the Smithsonian argues for cy pres relief and requests that the Court transfer the Collection to the Smithsonian, either permanently or on indefinite loan. (Id. at 6).
The Library also moved, in the alternative, for partial summary judgment regarding the Smithsonian's Cross-Petition, alleging that the Smithsonian's requests for relief are precluded by the 1994 Appellate Division Decision. (Id. ¶ 6). Because I must first address the motion to remand, I do not address either of the parties' motions for cy pres or summary judgment here.
II. DISCUSSION
I must examine the Library's motion to remand before any other matter because this Court cannot act in the absence of subject matter jurisdiction. See Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 94-95 (1998); W.G. v. Senatore, 18 F.3d 60, 64 (2d Cir. 1994) (citations omitted).
An action filed in state court may be removed to federal court if it is a "civil action . . . of which the district courts of the United States have original jurisdiction." 28 U.S.C. § 1441(a) (1994); Rivet v. Regions Bank of La., 522 U.S. 470, 474 (1998). Pursuant to 28 U.S.C. § 1331, the district courts have original jurisdiction of "all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331 (1993). An action may present a federal question, or "arise under" federal law, in two ways. If federal law creates the cause of action, then federal question jurisdiction exists. W. 14th St. Commercial Corp. v. 5 W. 14th Owners Corp., 815 F.2d 188, 192 (2d Cir. 1987). If, on the other hand, state law creates the cause of action, then removal is proper only if the cause of action raises a "substantial federal question."Id. (citing Smith v. Kansas City Title Trust Co., 255 U.S. 180, 201 (1921)); see also Schaeffer v. Cavallero, 29 F. Supp.2d 184, 185 (S.D.N.Y. 1998).
The instant case falls squarely into the second category, for Section 8-1.1(c) of the New York EPTL created this cause of action for cy pres relief. Additionally, however, the National Museum of the American Indian Act, 20 U.S.C. § 80q-2, provides that "[t]he United States District Court for the Southern District of New York shall have original and exclusive jurisdiction over any cause of action arising under the [Transfer] agreement" between the MAI and the Smithsonian. Accordingly, the determinative issue on the present motion to remand is whether the HFL's Petition for cy pres relief raises a substantial federal question and therefore sufficiently "arises under" the Transfer Agreement to support removal.
To determine whether removal was proper in this case, I must apply the well-pleaded complaint rule, which is the "basic principle marking the boundaries of the federal question jurisdiction of the federal district courts." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987) (citing Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 9-12 (1983)). Federal question jurisdiction only exists when the plaintiff's well-pleaded complaint, not an anticipated defense, raises issues of federal law. Id. at 63 (citing Gully v. First National Bank, 299 U.S. 109 (1936); Louisville Nashville R. Co. v. Mottley, 211 U.S. 149 (1908)). Furthermore, as previously noted, the federal issue raised must be "substantial," for "the mere presence of a federal issue in a state cause of action does not automatically confer federal question jurisdiction." Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 813 (1986).
Here, the Library challenges this Court's removal jurisdiction on the basis that its Petition, as filed in state court, does not invoke federal law and was therefore improperly removed to federal court. Indeed, no federal issue arises on the face of the Library's well-pleaded complaint, which requests judicial authorization under Section 8-1.1(c) of the New York EPTL to sell the Collection. (Petition ¶¶ 41-42). The Smithsonian, however, argues that the HFL "artfully pleaded" its claims to avoid removal by improperly framing a truly federal claim as a state law issue. See Smithsonian Br. in Opp'n to Motion for Remand at 10-11; Marcus v. ATT Corp., 138 F.3d 46, 55 (1998) (describing artful pleading doctrine as a "corollary" to the well-pleaded complaint rule); Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 397 n. 2 (1981) (stating that a plaintiff may not use artful pleading to "close off defendant's right to a federal forum" and that the removal court may therefore look to whether the "real nature" of plaintiff's claim is federal, regardless of how it is characterized in the complaint) (citations omitted). Specifically, the Smithsonian maintains that analysis of the Library's Petition for relief requires the determination of a substantial federal question, namely, what the Smithsonian's legal interests are in the Collection. (See Smithsonian Br. in Opp'n to Motion for Remand at 11-14). According to the Smithsonian, answering this question requires interpretation of the 1990 Transfer Agreement, and the Library's Petition therefore "necessarily presents questions that `arise under' it." (Id. at 12).
The Smithsonian's argument is unpersuasive. Federal law is not a "pivotal issue" in determining the instant conflict, Still v. DeBuono, 927 F. Supp. 125, 128 (S.D.N.Y. 1996) (citing Gully v. First National Bank, 299 U.S. 109, 112-13 (1936)), aff'd, 101 F.3d 888 (2d Cir. 1996), and this case does not present a situation "where the vindication of a right under state law necessarily turn[s] on some construction of federal law," Franchise Tax Board, 463 U.S. at 9. Contrary to the Smithsonian's contention, the 1990 Agreement need not be interpreted. The present dispute does not arise out of the terms of the transfer from the MAI to the Smithsonian, but instead originates in and will be determined by the original transfer in 1930. The 1930 Indenture and the 1990 Agreement are wholly separate documents involving different parties, and they must not be confused.
Under the 1990 Transfer Agreement, the MAI conveyed its "right, title and interest" in the Collection to the Smithsonian, "to the full extent that the [MAI] has the legal power and authority to do so." (Bill of Sale dated June 24, 1990, at 1). The parties agree that, by the Transfer Agreement, the Smithsonian received whatever rights the MAI had in the Collection; what they contest is the nature and scope of those rights. In 1990, the Smithsonian stepped into the shoes of the MAI as a potential beneficiary under the original 1930 Trust Indenture. Determining the exact nature of the Smithsonian's beneficial interest, however, requires that a court construe the 1930 Trust Indenture, not the 1990 Transfer Agreement. If, as the Smithsonian argues, the Library's cy pres proceeding requires that the legal relationship between the Library, the MAI, and the Smithsonian be defined, nothing in the 1990 Agreement will assist in answering the question of what interest in the Collection, if any, the MAI conveyed to the Smithsonian. See, e.g., Schepis v. Local Union No. 17, 989 F. Supp. 511, 517 (S.D.N.Y. 1998) (granting plaintiff's motion to remand when interpretation of federal law was not required to address plaintiff's claims, and defendant failed to show that the state law claims were "inextricably intertwined" with federal law considerations). The 1990 Agreement simply provides that the MAI transferred its assets to the Smithsonian, whatever those assets might be. It is a separate agreement between the MAI and the Smithsonian to which the Library was not a party. Only the 1930 Trust Indenture, which does not implicate federal law, can define what the MAI's assets were when it transferred them. Accordingly, analysis of the Library's Petition for cy pres does not raise a substantial federal question, and the present dispute does not arise under the Transfer Agreement or its enabling legislation.
The cases on which the Smithsonian relies are inapposite. In Marcus v. ATT, the Court of Appeals upheld removal because the appellants alleged breach of warranties contained in agreements that arose under federal law. 138 F.3d at 55-56. In Marcus, however, federal law enumerated the rights of the parties under the agreements, which is not the case here, because it is the 1930 Trust Indenture that defines what rights the parties have to the Collection. In Derrico v. Sheehan Emergency Hospital, the plaintiff "pleaded in his complaint that he relied in part on federal labor doctrine" and the law that created the cause of action was federal. 844 F.2d 22, 28 (2d Cir. 1988). As previously discussed, the Library did not rely on federal law in its Petition, and the cause of action for cy pres is created by state law. Similarly, the petition inStill v. DeBuono referred to a federal statute on its face, and deciding the claim required that a term in the federal statute be defined, which could only be done by referring to federal law. 927 F. Supp. at 128-29. In W. 14th St., also relied on by the Smithsonian, corporations affiliated with the developer of a condominium sought to enjoin the condominium owners' association from terminating commercial, garage and laundry leases between the condominium and the corporations. Because the basis asserted for the termination was a federal statute authorizing termination of self-dealing contracts, the Court of Appeals found a substantial federal question. 815 F.2d at 196. Here, as noted above, only the Trust Indenture, not the Transfer Agreement, can define what legal interests the Smithsonian received under the 1990 Agreement. Simply put, the "vindication of rights and definitions of relationships created by federal law" in this case does not depend on the resolution of a substantial federal question. Id.
III. CONCLUSION
For the reasons stated above, this Court lacks subject matter jurisdiction over this action. Accordingly, petitioner's motion is granted, and this action is remanded to New York Supreme Court, County of Bronx. The remaining motions and cross-motions are denied without prejudice because of lack of jurisdiction.
SO ORDERED