Skelly Oil Co. v. Phillips Petroleum Co
Citation and Court
Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667 (1950). United States Supreme Court.
Facts
Phillips Petroleum had a contract to purchase natural gas from Skelly Oil, contingent on Phillips receiving a Federal Power Commission (FPC) certificate of public convenience and necessity. When Phillips obtained a certificate, Skelly contended the certificate was inadequate and sought to terminate the contract. Phillips brought a declaratory judgment action in federal district court, claiming federal jurisdiction because the underlying dispute concerned the validity of a federal administrative certificate.
Issue
In a declaratory judgment action, how is federal question jurisdiction determined — by the declaratory plaintiff’s own claim, or by looking to whether the declaratory defendant could have brought a coercive suit arising under federal law?
Holding
The Supreme Court held that federal jurisdiction in a declaratory judgment case must be assessed by “looking through” the declaratory complaint to determine whether the party seeking a declaration (here Phillips) could have asserted a coercive claim arising under federal law. Because Phillips’s coercive claim would have been a breach of contract action — a state law claim — there was no federal question jurisdiction.
Rule / Doctrine
The “look through” doctrine for declaratory judgments: federal question jurisdiction exists only if the declaratory defendant (the party who would be plaintiff in a coercive suit) could have brought an action arising under federal law. The fact that a federal issue is implicated in the declaratory plaintiff’s defense or framing does not create federal jurisdiction. Declaratory relief does not expand Article III jurisdiction.
Significance
Skelly Oil prevents plaintiffs from manufacturing federal question jurisdiction by filing declaratory judgment actions that reframe what is really a state-law dispute. It is a key application of the well-pleaded complaint rule in the declaratory judgment context and is read alongside Louisville & Nashville R.R. v. Mottley.