1. Where a federal court has jurisdiction of a case, though
solely by diversity of citizenship, the difficulties of
ascertaining what the state courts may thereafter determine the
state law to be do not, in themselves, afford a sufficient ground
for declining to exercise the jurisdiction. P.
320 U. S.
234.
So held in respect of a suit instituted in a federal district
court in Florida, the decision of which was concerned solely with
the extent of the liability of a Florida municipality upon its
refunding bonds.
2. In the absence of some recognized public policy or defined
principle guiding the exercise of the jurisdiction conferred, which
would in
Page 320 U. S. 229
exceptional cases warrant its nonexercise, it has from the first
been deemed to be the duty of the federal courts, if their
jurisdiction is properly invoked, to decide questions of state law
whenever necessary to the rendition of judgment. When such
exceptional circumstances are not present, denial of that
opportunity by the federal courts merely because the answers to the
questions of state law are difficult or uncertain or have not yet
been given by the highest court of the State would thwart the
purpose of the jurisdictional act. P. 234.
134 F.2d 202 reversed.
Certiorari, 319 U.S. 736, to review a judgment which, in a suit
based on diversity of citizenship, directed dismissal without
prejudice to the plaintiff's right to proceed in the state
court.
MR. CHIEF JUSTICE STONE delivered the opinion of the Court.
Petitioners sought a judgment granting equitable relief in the
District Court below, whose jurisdiction rested solely on diversity
of citizenship. The question is whether the Circuit Court of
Appeals, on appeal from the judgment of the District Court, rightly
declined to exercise its jurisdiction on the ground that decision
of the case on the merits turned on questions of Florida
constitutional and statutory law which the decisions of the Florida
courts had left in a state of uncertainty.
Petitioners brought this suit in the District Court for Southern
Florida, alleging by their bill of complaint that they are owners
and holders of General Refunding Bonds issued in 1933 by
respondent, the City of Winter Haven, Florida; that, by their
terms, the bonds are callable by the city on any interest date on
tender of their principal
Page 320 U. S. 230
amount and accrued interest, including a specified amount
(depending on the date of call) of the interest payable upon the
deferred interest coupons attached to the bonds; that the city is
about to call and retire the bonds without providing for payment of
the deferred interest coupons. The bill of complaint prayed a
declaration that this could not lawfully be done and an injunction
restraining the city from doing it.
In the event that the court should determine that the obligation
of the deferred interest coupons is unenforceable, then it was
prayed that the court declare that petitioners are entitled to
enforce the obligation for payment, principal and interest, of the
amount of the original bonded indebtedness of the city which was
refunded by the General Refunding Bonds now held by petitioners,
and that the court enjoin the city and its officials, respondents
here, from failing or refusing to pay the interest due on such
refunded bonds, as provided by the resolution of the city
commissioners authorizing the issue and sale of the General
Refunding Bonds in 1933.
The District Court granted respondents' motion to dismiss the
complaint on the grounds that it failed to state a cause of action
and that the questions of law involved had been determined
adversely to petitioners by the Supreme Court of Florida. The Court
of Appeals, without passing on the merits, reversed and directed
that the cause be dismissed without prejudice to petitioners' right
to proceed in the state courts to secure a determination of the
questions of state law involved. 134 F.2d 202.
The Court of Appeals agreed with petitioners that the bill of
complaint presented a justiciable controversy requiring
determination, that they were entitled to a judgment declaring the
law of Florida with respect to the validity of the deferred
interest coupons, and that, if petitioners' contentions were
sustained, they were entitled
Page 320 U. S. 231
to a declaration in their favor and an injunction implementing
the declaration. But, upon an examination of the Florida decisions,
the court concluded that the applicable law of Florida was not
clearly settled and stable, but was quite the contrary, citing
Sullivan v. City of Tampa, 101 Fla. 298, 134 So. 211;
Commissioners of Columbia County v. King, 13 Fla. 451;
State ex rel. Nuveen v. Greer, 88 Fla. 249, 102 So. 739,
37 A.L.R. 1298;
Humphreys v. State ex rel. Palm Beach Co.,
108 Fla. 92, 145 So. 858;
Alta-Cliff Co. v. Spurway, 113
Fla. 633, 152 So. 731;
Lee v. Bond-Howell Lumber Co., 123
Fla. 202, 166 So. 733, and
Andrews v. City of Winter
Haven, 148 Fla. 144, 3 So. 2d 805. It expressed doubt as to
what the Florida law, applicable to the facts presented, now is or
will be declared to be, and in view of this uncertainty, since no
federal question was presented and the jurisdiction was invoked
solely on grounds of diversity of citizenship, it thought that
petitioners should be required to proceed in the state courts.
Although the opinion below refers to the suit as one for a
declaratory judgment, the declaration of rights prayed, as is
usually the case in suits for an injunction, is an indispensable
prerequisite to the award of one or the other of the forms of
equitable relief which petitioners seek in the alternative. Hence,
so far as we are concerned with the necessity and propriety of a
determination by a federal court of questions of state law, the
case does not differ from an ordinary equity suit in which, both
before and since
Erie R. Co. v. Tompkins, 304 U. S.
64, federal courts have been called upon to decide state
questions in order to render a judgment.
The facts, as presented by the amended bill of complaint and the
motion to dismiss, raise two issues of state law, one and possibly
both of which must be decided if petitioners are to have the
benefit which they seek of the jurisdiction conferred on district
courts in diversity cases. The first question arises from the fact
that the Refunding Bonds of
Page 320 U. S. 232
1933 were issued without a referendum to the freehold voters of
the city. Article IX, § 6 of the Florida constitution provides that
municipalities "shall have power to issue bonds only after the same
shall have been approved by a majority of the votes cast in an
election," in which a majority of the freeholders of the
municipality shall participate, but dispenses with this requirement
in the case of "refunding" bonds. The question is whether, under
the applicable decisions of the Florida courts, the provision for
deferred interest coupons could rightly be included in the
obligation of the Refunding Bonds of 1933 without a referendum. If
it be decided that the provision could not be included and that the
coupons are invalid, the second question is whether petitioners, as
holders of refunding bonds, are entitled, under § 20 of the
resolution of the city commissioners authorizing the Refunding Bond
issue,
* to recover the
principal and interest of an equivalent amount of the bonds
refunded. This question, unlike the first, so far as appears has
not been passed upon by the Florida courts.
Several decisions of the Supreme Court of Florida have declared
that, where bonds to be refunded contain no provision for deferred
interest coupons, refunding bonds containing such coupons would
impose "new and additional or more burdensome terms" (
Outman v.
Cone, 141 Fla.196, 199, 192 So. 611, 613) which may not be
included in refunding bonds unless they are approved by referendum
in accordance with Article IX, § 6.
Outman v.
Page 320 U. S. 233
Cone, supra; Taylor v. Williams, 142 Fla. 402, 195 So.
175;
Andrews v. City of Winter Haven, supra.
As appears from the amended bill of complaint, after the present
suit was begun, the Supreme Court of Florida decided the case of
Andrews v. City of Winter Haven, supra. This case involved
the same issue of Refunding Bonds as are here in question. The
Florida court held that the deferred interest coupons are invalid;
that the purported obligation of the invalid coupons is severable
from the obligations to pay the principal of the bonds and current
interest on the other coupons, which obligations are valid and
enforceable, and that the bonds are subject to call upon tender of
the stipulated principal and interest without including any amount
purporting to be payable on the deferred interest coupons.
It is the contention of petitioners that the Andrews case is not
controlling, because it, as well as
Outman v. Cone, supra,
and
Taylor v. Williams, supra, which it cited and
followed, is inconsistent with earlier decisions of the Supreme
Court of Florida antedating the Refunding Bonds of 1933,
particularly
Sullivan v. City of Tampa, supra; State v. City of
Miami, 103 Fla. 54, 137 So. 261;
State v. Special Tax
School Dist. No. 5 of Dade County, Fla., 107 Fla. 93, 144 So.
356;
Bay County v. State, 116 Fla. 656, 157 So. 1;
State v. Citrus County, 116 Fla. 676, 157 So. 4;
State
v. Sarasota County, 118 Fla. 629, 159 So. 797. Petitioners
also insist that, in deciding the
Andrews case, the
attention of the Supreme Court of Florida was not directed to the
doctrine which it had earlier announced in
Commissioners of
Columbia County v. King, supra, and in
State ex rel.
Nuveen v. Greer, supra, that, by the law of Florida, a
contract is governed by the laws declared at the time the contract
was made, and that, consequently, the court did not apply the
doctrine. And, finally, it is said that the weight of the
Outman and
Andrews cases as precedents is
impaired by the fact that, although they appear on the record to
be
Page 320 U. S. 234
adversary litigations, they were not in fact vigorously
contested.
While the rulings of the Supreme Court of Florida in the
Andrews case must be taken as controlling here unless it
can be said with some assurance that the Florida Supreme Court will
not follow them in the future,
see Wichita Royalty Co. v. City
Nat. Bank, 306 U. S. 103,
306 U. S. 107;
Fidelity Union Trust Co. v. Field, 311 U.
S. 169,
311 U. S.
177-178;
West v. American Tel. & Tel. Co.,
311 U. S. 223,
311 U. S. 236,
we assume, as the Court of Appeals has indicated, that the Supreme
Court of the State may modify or even set them aside in future
decisions. But we are of opinion that the difficulties of
ascertaining what the state courts may hereafter determine the
state law to be do not, in themselves, afford a sufficient ground
for a federal court to decline to exercise its jurisdiction to
decide a case which is properly brought to it for decision.
The diversity jurisdiction was not conferred for the benefit of
the federal courts, or to serve their convenience. Its purpose was
generally to afford to suitors an opportunity in such cases at
their option, to assert their rights in the federal, rather than in
the state, courts. In the absence of some recognized public policy
or defined principle guiding the exercise of the jurisdiction
conferred which would in exceptional cases warrant its nonexercise,
it has from the first been deemed to be the duty of the federal
courts, if their jurisdiction is properly invoked, to decide
questions of state law whenever necessary to the rendition of a
judgment.
Commonwealth Trust Co. v. Bradford, 297 U.
S. 613,
297 U. S. 618;
Risty v. Chicago, R.I. & P. Ry. Co., 270 U.
S. 378,
270 U. S. 387;
Kline v. Burke Const. Co., 260 U.
S. 226,
260 U. S. 234,
23;
McClellan v. Carland, 217 U.
S. 268,
217 U. S.
281-282. When such exceptional circumstances are not
present, denial of that opportunity by the federal courts merely
because the answers to the questions of state law are difficult or
uncertain or have not yet been given by
Page 320 U. S. 235
the highest court of the state would thwart the purpose of the
jurisdictional act.
The exceptions relate to the discretionary powers of courts of
equity. An appeal to the equity jurisdiction conferred on federal
district courts is an appeal to the sound discretion which guides
the determinations of courts of equity.
Beal v. Missouri Pac.
R. Corp., 312 U. S. 45,
312 U. S. 50.
Exercise of that discretion by those as well as by other courts
having equity powers may require them to withhold their relief in
furtherance of a recognized defined public policy.
Di Giovanni
v. Camden Fire Ins. Assn., 296 U. S. 64,
296 U. S. 73,
and cases cited. It is for this reason that a federal court having
jurisdiction of the cause may decline to interfere with state
criminal prosecutions except when moved by most urgent
considerations,
Spielman Motor Co. v. Dodge, 295 U. S.
89,
295 U. S. 95;
Beal v. Missouri Pac. R. Corp., supra, 312 U. S. 49-51;
Douglas v. City of Jeannette, 319 U.
S. 157; or with the collection of state taxes or with
the fiscal affairs of the state,
Matthews v. Rodgers,
284 U. S. 521;
Stratton v. St. Louis Southwestern Ry. Co., 284 U.
S. 530;
Great Lakes Dredge & Dock Co. v.
Huffman, 319 U. S. 293; or
with the state administrative function of prescribing the local
rates of public utilities,
Central Kentucky Natural Gas Co. v.
Railroad Commission, 290 U. S. 264,
290 U. S. 271,
et seq., and cases cited; or to interfere, by appointing a
receiver, with the liquidation of an insolvent state bank by a
state administrative officer where there is no contention that the
interests of creditors and stockholders will not be adequately
protected,
Pennsylvania v. Williams, 294 U.
S. 176;
Gordon v. Ominsky, 294 U.
S. 186;
Gordon v. Washington, 295 U. S.
30;
cf. Kelleam v. Maryland Casualty Co.,
312 U. S. 377,
312 U. S. 381.
Similarly, it may refuse to appraise or shape domestic policy of
the state governing its administrative agencies.
Railroad
Commission v. Rowan & Nichols Oil Co., 311 U.
S. 570;
Burford v. Sun Oil Co., 319 U.
S. 315. And it may, of course, decline to exercise
Page 320 U. S. 236
the equity jurisdiction conferred on it as a federal court when
the plaintiff fails to establish a cause of action.
Cavanaugh
v. Looney, 248 U. S. 453;
Gilchrist v. Interborough Rapid Co., 279 U.
S. 159. So too, a federal court, adhering to the
salutary policy of refraining from the unnecessary decision of
constitutional questions, may stay proceedings before it to enable
the parties to litigate first in the state courts questions of
state law decision of which is preliminary to, and may render
unnecessary, decision of the constitutional questions presented.
Railroad Commission v. Pullman Co., 312 U.
S. 496;
cf. Thompson v. Magnolia Petroleum Co.,
309 U. S. 478. It
is the court's duty to do so when a suit is pending in the state
courts, where the state questions can be conveniently and
authoritatively answered, at least where the parties to the federal
court action are not strangers to the state action.
Chicago v.
Fieldcrest Dairies, 316 U. S. 168,. In
thus declining to exercise their jurisdiction to enforce rights
arising under state laws, federal courts are following the same
principles which traditionally have moved them, because of like
considerations of policy, to refuse to give an extraordinary remedy
for the protection of federal rights.
United States ex rel.
Greathouse v. Dern, 289 U. S. 352,
289 U. S.
359-361;
see Virginian Ry. Co. v. System
Federation, 300 U. S. 515,
300 U. S.
551-552, and cases cited;
cf. Securities and
Exchange Comm'n v. United States Realty & Improvement Co.,
310 U. S. 434,
310 U. S. 455
et seq.
But none of these considerations, nor any similar one, is
present here. Congress having adopted the policy of opening the
federal courts to suitors in all diversity cases involving the
jurisdictional amount, we can discern in its action no recognition
of a policy which would exclude cases from the jurisdiction merely
because they involve state law or because the law is uncertain or
difficult to determine. The decision of this case is concerned
solely with the extent of the liability of the city on its
Refunding
Page 320 U. S. 237
Bonds. Decision here does not require the federal court to
determine or shape state policy governing administrative agencies.
It entails no interference with such agencies, or with the state
courts. No litigation is pending in the state courts in which the
questions here presented could be decided. We are pointed to no
public policy or interest which would be served by withholding from
petitioners the benefit of the jurisdiction which Congress has
created with the purpose that it should be availed of and exercised
subject only to such limitations as traditionally justify courts in
declining to exercise the jurisdiction which they possess. To remit
the parties to the state courts is to delay further the disposition
of the litigation which has been pending for more than two years
and which is now ready for decision. It is to penalize petitioners
for resorting to a jurisdiction which they were entitled to invoke
in the absence of any special circumstances which would warrant a
refusal to exercise it.
Erie R. Co. v. Tompkins, supra, did not free the
federal courts from the duty of deciding questions of state law in
diversity cases. Instead, it placed on them a greater
responsibility for determining and applying state laws in all cases
within their jurisdiction in which federal law does not govern.
Accepting this responsibility, as was its duty, this Court has not
hesitated to decide questions of state law when necessary for the
disposition of a case brought to it for decision, although the
highest court of the state had not answered them, the answers were
difficult, and the character of the answers which the highest state
courts might ultimately give remained uncertain.
Wichita
Royalty Co. v. City Nat. Bank, supra; West v. American Tel. &
Tel. Co., supra, 311 U. S.
236-237;
Fidelity Union Trust Co. v. Field,
supra, 311 U. S.
177-180;
Six Companies v. Joint Highway Dist.,
311 U. S. 180,
311 U. S. 188;
Stoner v. New York Life Ins. Co., 311 U.
S. 464;
Palmer v. Hoffman, 318 U.
S. 109,
318 U. S.
116-118. Even though our decisions
Page 320 U. S. 238
could not finally settle the questions of state law involved,
they did adjudicate the rights of the parties with the aid of such
light as was afforded by the materials for decision at hand, and in
accordance with the applicable principles for determining state
law. In this case, as in those, it being within the jurisdiction
conferred on the federal courts by Congress, we think the
plaintiffs, petitioners here, were entitled to have such an
adjudication.
The judgment will be reversed, and the cause remanded to the
Circuit Court of Appeals for further proceedings in conformity to
this opinion.
Reversed.
MR. JUSTICE BLACK and MR. JUSTICE JACKSON are of the opinion
that the judgment should be affirmed for the reasons stated in the
opinion of the Circuit Court of Appeals, 134 F.2d 202.
*
"Section 20. That if any clause, section, paragraph or provision
of this resolution or of the General Refunding Bonds hereby
authorized be declared unenforceable by any Court of final
jurisdiction, it shall not affect or invalidate any remainder
thereof, and if any of the bonds hereby authorized be adjudged
illegal or unenforceable in whole or in part, the holders thereof
shall be entitled to assume the position of holders of a like
amount of the indebtedness hereby provided to be refunded and as
such enforce their claim for payment."