## Facts

- A partnership holding a leasehold-type interest in New Orleans property granted a first mortgage to Regions Bank of Louisiana and later a second mortgage to the petitioners.
- The partnership entered bankruptcy, and the Bankruptcy Court approved sale of the leasehold interest to the Bank.
- The Bank later acquired the underlying land and sold the combined property interests to Fountainbleau Storage Associates.
- Petitioners sued in Louisiana state court, asserting state-law claims that the property transfer impaired or violated their rights as second mortgage holders.
- Defendants removed to federal district court, arguing federal-question jurisdiction existed because prior Bankruptcy Court orders extinguished petitioners’ interests, thereby precluding the state-law claims.
- The district court denied remand and granted summary judgment for defendants; the Fifth Circuit affirmed on the theory that “complete” claim preclusion by a prior federal judgment permits removal.

## Issues

1. Whether removal under 28 U.S.C. § 1441(b) is proper when the only asserted federal basis is a defendant’s claim-preclusion defense resting on prior federal bankruptcy orders.

## Decision

- The Supreme Court unanimously reversed the Fifth Circuit and remanded.
- The Court held that claim preclusion based on a prior federal judgment is a defensive plea that does not supply a basis for removal.
- The Court directed that the preclusion defense be raised in the state-court action, with state-court resolution subject to eventual Supreme Court review.

## Legal Principles

- Federal-question jurisdiction for removal exists only when a federal issue appears on the face of the plaintiff’s properly pleaded complaint (well-pleaded complaint rule).
- A federal defense—including res judicata based on a prior federal judgment—cannot create federal-question jurisdiction and therefore cannot justify removal.
- Claim preclusion differs from “complete preemption”: a prior federal judgment, even if dispositive, does not convert state-law claims into federal claims; it only bars them if applicable.
- State courts may adjudicate the preclusive effect of federal judgments, subject to Supreme Court review of any federal questions.

## Conclusion

Removal was improper because the asserted federal ingredient—preclusion by prior federal bankruptcy orders—was solely a defense, not a federal question presented by the complaint; defendants had to litigate that defense in state court.


Rivet v. Regions Bank of La., 522 U.S. 470 (1998)