The Supreme Court ruled unanimously that an action to quiet title under state law was properly decided by a federal district court. The issue -- the adequacy of the notice of sale given a delinquent taxpayer under the Internal Revenue Code -- was a "substantial federal question," the Court said.
In 1994, the IRS seized property in Michigan belonging to Grable & Sons Metal Products Inc., to satisfy Grable's federal tax delinquency. The property was sold, but Grable said that the certified mail the IRS used to notify the company did not comply with the language of Code Section 6335, which requires the notice in writing to be "given" to the owner of the property.
The case was removed from state court to federal district court, which denied Grable's motion to quiet title and awarded judgment to the IRS's buyer.
The Supreme Court held that the national interest in providing a federal forum for federal tax litigation is sufficiently substantial to support the exercise of federal jurisdiction over the disputed issue.
