Federal Enclave Law
April 11, 2023
In this Surety Today blog post we will the discuss the topic of Federal Enclave law. What is it and why should a surety care? Federal Enclaves create a unique legal environment that could provide some surprising legal issues and even defenses.
Introduction
It is estimated that the United States federal government owns approximately 30% of all available land in the country. Approximately 7% of that federal property is imbued with federal enclave status, which equates to about 5,000 individual sites spread throughout the country. A federal enclave is land held by and under the control of the federal government that was given, deeded or ceded to the federal government by a state. Stated differently, “[a] federal enclave is an area over which the federal government has assumed exclusive legislative jurisdiction through the application of the U.S. Constitution.” These enclaves are essentially islands of federally controlled land within a state and include such things as military bases, some federal research facilities and labs, NASA facilities, certain national parks, post offices, the pentagon, federal courthouses and other places. When Congress exercises exclusive jurisdiction over federal enclaves, it “‘acts as a state government with total legislative, executive, and judicial power.’” Allison v. Boeing Laser Tech. Servs., 689 F.3d at 1236–37 (quoting United States v. Jenkins, 734 F.2d 1322, 1325–26 (9th Cir.1983)).
Why it Matters
But, before we get into more detail about what a federal enclave is, let’s talk about why it might matter. Basically when a piece of land or building is ceded to the federal government, with some exceptions, the state law in existence at the time of the transfer becomes the applicable law of the federal enclave. After the transfer, while the surrounding state law continues to expand and evolve outside of the enclave over the ensuing years, the law within the confines of the enclave remains the same, except where modified by subsequent federal law.
Over the years, defendants have successfully used the federal enclave doctrine to dismiss a variety of state law claims, including claims based on state statutes such as wage and hour laws, state workers’ safety laws and regulations, state consumer protection statutes, as well as claims alleging wrongful discharge and personal injury. Additionally, courts have considered the federal enclave doctrine in relation to many common law claims, including breach of contract, unjust enrichment, intentional infliction of emotional distress, negligent infliction of emotional distress, defamation, breach of the duty of good faith and fair dealing, tortious interference, promissory estoppel, quantum meruit, and fraud. Even judge made rules such as the discovery rule in statutes of limitations analysis may be subject to the federal enclave doctrine.
Thus, as a claims handler, if your bonded project is on a federal enclave, it is important to understand how that status can affect your handling of the case and ensure that the correct law is being applied to the claims decisions you are making. In essence, the federal enclave doctrine functions much like a choice of law provision, you have to consider it in order to determine what law applies. Allison v. Boeing Laser Tech. Servs., 689 F.3d at 1235.
Federal Enclave Generally
So, let’s look more closely at what the Federal Enclave Doctrine is. The Enclave Clause, is found at Article I, Section 8, Clause 17 of the United States Constitution, and it grants the United States “exclusive legislative jurisdiction” over any parcel of land ceded by a state to the federal government “for the Erection of Forts, Magazines, Arsenals, dockyards, and other needful Buildings.” The phrase “Exclusive legislative jurisdiction” has been held to mean exclusive jurisdiction. The Supreme Court has examined the reach of the Enclave Clause’s reference to the phrase “other needful buildings” in various cases and has made clear that the phrase “other needful buildings” as used in the clause encompasses such things as waterway locks, dams, federal courts, custom houses, post offices, and “whatever [other] structures are found to be necessary in the performance of the functions of the Federal Government.” Further, the Supreme Court has held that the Enclave Clause is not to be strictly or narrowly construed when determining what property falls within its purview.
To establish a federal enclave wherein the federal government has exclusive jurisdiction requires very specific circumstances: (1) the United States must acquire land through purchase or cession from a state for a purpose recognized in the Enclave Clause, (2) the state legislature must consent to the jurisdiction of the federal government and (3) a formal acceptance by the federal government must be provided for land acquired after 1940. This last condition about formal acceptance was added after 1940 and creates a bit of an issue in the analysis because prior to 1940 formal acceptance was not required. So when you are looking at this issue and the transfer occurred prior to 1940 you don’t need to find acceptance.
It is important to note that, “[f]ederal enclave jurisdiction does not require that any party to the suit be a federal employee, officer, or affiliate, or that substantive federal laws be at issue in the case.” Carmargo v. Gino Morean Enters., L.L.C., No. 10–242, 2010 WL 3516186, at *2 (W.D.Tex. Sept.2, 2010); Wood v. Am. Crescent Elevator Corp., No. CIV.A. 11-397, 2011 WL 1870218, at *4 (E.D. La. May 16, 2011). Thus, you can have a dispute between two private parties, but if the dispute centers on enclave property, the Enclave Doctrine will apply. Further, courts have held that exclusive federal jurisdiction was not lost by the government’s lease of property for commercial purposes within an enclave. Humble Pipe Line Co. v. Waggonner, 376 U.S. 369, 373, 84 S. Ct. 857, 860, 11 L. Ed. 2d 782 (1964). So, the fact that the government may have leased a parcel of land for the construction of a hotel does not affect the enclave status of the land the hotel is located on.
Federal Enclave Status Distinguished
There are a couple of distinctions that should be noted when discussing enclaves. First, federal enclaves are to be distinguished from federal territories and possessions which include territories like Puerto Rico, the United States Virgin Islands, Guam, American Samoa, and a few others. Those federal territories are governed under separate laws. Second, the Supreme Court has emphasized the difference between land ceded by a state to the federal government, and land acquired by the federal government through a taking. The Court noted that in the event that the United States takes land from a state through the federal sovereign’s right of eminent domain, the federal government’s legislative jurisdiction over the property remains dependent upon cession by the state. In other words, state laws apply within an area taken by the federal government via eminent domain, unless the state affirmatively cedes the land to the United States either at the time of, or after, the taking. Third, it is not unusual for the United States to own lands within a state which are set apart and used for general public purposes. Such ownership and use by the federal government, without more, does not withdraw the lands from the jurisdiction of the state. Such lands remain part of the state’s territory and within the operation of the state’s laws, except that a state cannot affect the title of the United States or interfere with its right of disposal.
The enclave clause governs only those properties where the United States acquires lands with the consent of the legislature of the state for the purposes described in the enclave clause. In 1940, Congress enacted 40 U.S.C.A. § 3112 which provides that the federal government is not required to obtain exclusive jurisdiction over all lands it acquires and that when the federal government accepts land secured or ceded from a state it must file a formal acceptance of jurisdiction. The purpose of that statute was to give broad discretion to the federal government to obtain only the necessary jurisdiction that it desired.
What Law Applies Within an Enclave
Historically, Congress provided no civil laws to govern the enclaves. So, in 1885, the Supreme Court held that the “international law rule” applied. That rule provides that when a territory is transferred from one government to another (such as when a federal enclave is ceded from a state to the federal government), existing laws for the protection of private rights continue in force until abrogated or changed by the new government. Thus, the rule was created by the Supreme Court for federal enclaves that the law of the state, as it existed at the time of the transfer, continues to apply within the enclave unless and until changed by the federal government. This includes the state’s common law rules in effect at the time of cession. Under this rule, the status quo at the time the federal enclave becomes an enclave is maintained no matter how much time has passed since the creation of the enclave, unless Congress acts to change the status quo.
That is why, when you are dealing with a federal enclave situation you will need to figure out when the transfer occurred and then determine what the state law was at the time of the transfer. There is one caveat to the rule of the applicability of existing state law. The Supreme Court has made clear that if the enforcement of a pre-existing state law would conflict with “the carrying out of a national purpose,” then the state law must be held invalid within the enclave.
Congress gradually authorized the enforcement of some state laws on federal enclaves. Thus, in 1928, Congress made applicable to federal enclaves state laws governing wrongful death and personal injuries. In the late 1930s, under the Buck Act, Congress authorized states to apply their state taxes on fuel, income, sales and use, and state laws governing worker’s compensation and unemployment insurance. Subsequently, Congress enacted the so-called “federal enclave laws” which are a group of statutes that permits the federal courts to serve as a forum for the prosecution of certain crimes when they occur within a federal enclave. 18 U.S.C. § 7. Additionally, the Assimilative Crimes Act was enacted which permits a federal court to borrow a state’s criminal laws where there is no federal law proscribing an offense committed on an enclave within that state; the Act permits the federal court to serve as a forum for the prosecution. See 18 U.S.C. § 13.
The Terms of the Consent Are Important
In analyzing federal enclave issues one must determine what the terms of the state’s ceding of the land were. The Supreme Court has acknowledged that a state is free to “qualify its cession by reservations not inconsistent with the governmental uses.” The Court stated “[i]f lands are otherwise acquired, and jurisdiction is ceded by the state to the United States, the terms of the cession, to the extent that they may lawfully be prescribed, that is, consistently with the carrying out of the purpose of the acquisition, determine the extent of the federal jurisdiction.” An example of a broad cession statute can be found in Louisiana, Section 52.1(A) of the Louisiana Revised Statutes, which simply provides “The United States in accordance with the seventeenth clause, eighth section of the first article of the Constitution of the United States, may acquire and occupy any land in Louisiana required for the purposes of the federal government. The United States shall have exclusive jurisdiction over the property during the time that the United States is the owner or lessee of the property.”
Common reservations of power in state’s cession statutes include the authority to collect state taxes and the right to serve civil and criminal process within an enclave. Reservations may also be much broader, preserving a wide range of state powers. For example, the Oklahoma cession statute “indicates that the United States is being ceded full civil and criminal jurisdiction, with a concurrent jurisdiction reserved to the State”. See United States v. Fields, 516 F.3d 923, 929 (10th Cir. 2008); Kennicott v. Sandia Corp., 314 F. Supp. 3d 1142, 1165 (D.N.M. 2018).
Federal Question Issue
There is one aspect of federal enclave status that might have significance for the surety as a procedural matter. As everyone knows, the two primary basis for federal courts to acquire jurisdiction are – diversity and federal question. In diversity, all of the defendants must be citizens of a different state than the plaintiff. Federal question jurisdiction on the other hand, means that the case must involve an issue of federal law. The best example of federal question jurisdiction in surety would be the Miller Act. If you have federal question jurisdiction then diversity is irrelevant.
If a case involves a federal enclave, it is possible that federal question jurisdiction may exist simply by virtue of the fact that the case relates to an enclave. Thus, if a surety is sued in state court over a project on a federal enclave, the case could be removed to federal court regardless of diversity. The Fifth Circuit in Mater v. Holley, 200 F.2d 123 (5th Cir. 1952), held that state laws in existence at the time of cession are converted into federal laws within the enclave. Therefore, the Mater Court concluded that federal question jurisdiction exists over matters arising on a federal enclave that center on a claim based on a pre-cession state law. Most courts that have considered the issue have followed the Mater Court’s reasoning noting that state laws in existence at the time of cession (which do not conflict with federal purposes) are transformed into federal laws within the enclave. A minority of courts, however, have reached the opposite conclusion. In most jurisdictions, it is better to litigate in federal court than state court and the federal enclave status might help get you into federal court.
If you have questions regarding the issues discussed in this post, please do not hesitate to contact Michael A. Stover, Esq. (410-659-1321/mstover@wcslaw.com) or any member of the WCS Surety and Fidelity Practice Group.