Does a federal circuit court have jurisdiction under the federal-question statute over a suit in which the plaintiff's own cause of action is based on state-law contract rights, and the federal constitutional or statutory question arises only as an anticipated defense?

Mottley and his wife (plaintiffs) were injured in a railroad accident while passengers on the Louisville and Nashville Railroad Company (defendant). In settlement of their claims against the railroad, the company agreed to give them free passes for life. The railroad honored the passes for years. After Congress enacted the act of June 29, 1906, which prohibited the giving of free passes and the collection of any compensation for transportation different from that specified in the filed tariff, the railroad refused to renew the passes, taking the position that the act forbade performance of the contract. The Mottleys brought suit seeking specific performance of the contract. Their bill alleged that the 1906 act, properly construed, did not prohibit the railroad from honoring the passes, and that if it did, the act violated the Fifth Amendment. There was no diversity of citizenship between the parties. The only asserted ground of federal jurisdiction was that the suit arose under the Constitution and laws of the United States.

The Mottleys filed suit in the United States Circuit Court for the Western District of Kentucky seeking specific performance of the free-pass contract. The railroad demurred to the bill. The Circuit Court overruled the demurrer, entered a decree for the Mottleys, and granted the relief sought. The railroad appealed directly to the United States Supreme Court. Neither party questioned the Circuit Court's jurisdiction, but the Supreme Court raised the issue on its own motion.

(Moody, J.)

No. A suit does not arise under the Constitution or laws of the United States merely because the plaintiff anticipates that the defendant will raise a federal defense. The Supreme Court did not reach the merits of the statutory or Fifth Amendment questions because the Circuit Court lacked jurisdiction. The Court has a duty to ensure that lower federal court jurisdiction, which is defined and limited by statute, is not exceeded, and it performs that duty on its own motion even when the parties do not raise the issue. Mansfield, &c. Railway Co. v. Swan, 111 U.S. 379 (1884).

There was no diversity of citizenship, so jurisdiction depended on the Act of August 13, 1888, which granted jurisdiction over suits arising under the Constitution and laws of the United States. The settled interpretation is that a suit arises under federal law only when the plaintiff's statement of his own cause of action shows that it is based on federal law. It is not enough that the plaintiff alleges an anticipated defense and asserts that the defense is invalid under federal law. Such allegations may show that a federal question will likely arise during the litigation, but they do not show that the plaintiff's original cause of action arises under federal law.

The rule is supported by Tennessee v. Union & Planters' Bank, 152 U.S. 454 (1894), where a state's suit to collect taxes was held outside federal jurisdiction even though it alleged that the defendant would assert a charter immunity that violated the Contract Clause. It is also supported by Boston & Montana Consolidated Copper & Silver Mining Co. v. Montana Ore Purchasing Co., 188 U.S. 632 (1903), which held that a plaintiff must be confined to a statement of its own cause of action and leave the defendant to plead its defense. The Mottleys' cause of action was a state-law claim on a contract. The federal questions arose only through their anticipation of the railroad's defense under the 1906 act. Under this rule, the Circuit Court lacked jurisdiction, and the judgment is reversed with instructions to dismiss for want of jurisdiction.