Merely Litigating a Federal Issue is not Sufficient to Satisfy the "Well-Pleaded-Complaint" Rule

Can pleading state law claims that require the resolution of a federal issue be enough to fulfill the “well pleaded complaint” rule and establish federal

subject matter jurisdiction under § 1331? The Fifth Circuit recently decided NO on December 30th in Venable v. Louisiana Workers' Comp. Corp., No. 12-30965 (5th Cir. Dec. 30, 2013).In this case the plaintiff entered into a settlement agreement with a representative for a third party insurance company of the employer, Louisiana Workers Compensation Corp., (LWCC). LWCC orally consented to the terms of the settlement agreement but did not provide written approval. LWCC later refused to sign the settlement agreement.In an amended complaint against LWCC, plaintiffs alleged various state law claims that included detrimental reliance, intentional misrepresentation and making impossible a condition of settlement. Further, plaintiffs sought a finding that LWCC had waived the written-approval requirement for settlements under § 933(g) of the Longshore Act. LWCC moved to dismiss for lack of subject matter jurisdiction, but the district court denied this motion andfound that the issue of whether or not LWCC had actually waived the written-approval requirement of § 933(g) raiseda substantial federal issue that conferred subject matter jurisdiction.On appeal, the Fifth Circuit disagreed and held that while § 933 preserves a maritime worker’s right to pursue negligence claims against third parties, it does not create a private right of action for claims unrelated to the original cause of action for negligence. According to the “well-pleaded-complaint rule,” a plaintiff cannot establish federal subject matter jurisdiction by pleading state law causes of action while also asserting that federal law deprives the defendant of defenses he may later raise. Further, even if the parties may in fact litigate a federal issue, this does not necessarily mean that the plaintiff’s alleged cause of action independently confer subject matter jurisdiction under § 1331.The court also rejected plaintiffs’ argument that subject matter jurisdiction existed by virtue of a federal court’s authority to enforce a settlement agreement. Because the agreement in this case had not been finalized, the courtheld that a federal court couldn’t exercise ancillary jurisdiction to compel a third party to consent to a proposed, but un-finalized settlement.