Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing

Facts

In 1994, the Internal Revenue Service seized Michigan real property that belonged to Grable & Sons Metal Products, Inc., to satisfy Grable's federal tax delinquency. A federal statute, 26 U.S.C. § 6335, required the IRS to give notice of the seizure. No one disputed that Grable received actual notice by certified mail before the IRS sold the property to Darue Engineering & Manufacturing. Grable also received notice of the sale itself. Grable did not exercise its statutory right to redeem the property (buy it back) within 180 days of the sale. After that period passed, the Government gave Darue a quitclaim deed (a deed that passes whatever interest the grantor holds). Five years later, Grable sued Darue in state court in a quiet title action, a suit to settle who owns land. Grable claimed Darue's record title was invalid because the IRS had not notified Grable of the seizure in the exact manner § 6335(a) requires. Grable said the statute required personal service, not certified mail. Michigan court rules required Grable's complaint to state the facts showing its claim was superior, and Grable rested its claim on the IRS's failure to give adequate notice as federal law defines it. The meaning of the federal notice statute appeared to be the only legal or factual issue contested in the case.

Issues

1. Does the lack of a federal cause of action for Grable's claim of title to land obtained at a federal tax sale prevent removal of a state action to federal court?
2. Does a state-law quiet title claim that depends on the meaning of a federal tax notice statute fall within federal-question jurisdiction, even though the parties are not diverse?

Holding

Federal-question jurisdiction existed over Grable's state quiet title action. Its outcome turned on the disputed meaning of a federal tax notice statute, the federal interest was substantial, and a federal forum would barely disturb the state-federal division of labor. The lack of a federal cause of action did not preclude removal.