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Parish of Cameron v. Auster oil & Gas Inc.

United States District Court, W.D. Louisiana, Lake Charles Division

September 26, 2019

PARISH OF CAMERON ET AL
v.
AUSTER OIL & GAS INC ET AL

          KAY MAGISTRATE JUDGE.

          REASONS FOR DECISION

          Robert R. Summerhays United States District Judge.

         Presently before the court is the Report and Recommendation [doc. 103] issued by the Magistrate Judge regarding the Motion to Remand [doc. 67] filed by the Parish of Cameron and a Motion to Remand [doc. 71] filed by intervenor-plaintiffs, the State of Louisiana ex rel., the Louisiana Attorney General, and the Louisiana Department of Natural Resources (hereafter, state and parish parties referred to collectively as "Plaintiffs"). In her Report and Recommendation, the Magistrate Judge recommends that the Motion to Remand be granted on the grounds that removal was untimely. While the Court concludes that removal here was timely, the Court agrees with the Magistrate Judge that the Motion to Remand should be granted as explained below. Accordingly, the motions [doc. 67 and 71] are GRANTED.

         I.

         BACKGROUND

         Several Louisiana parishes filed forty-two lawsuits against various oilfield-related defendants[1] (hereafter, all defendants in these matters will collectively be referred to as "Defendants") in state court alleging violations of permits issued under the State and Local Coastal Resources Management Act of 1978 ("SLCRMA") also known as the Coastal Zone Management Act, La. Rev. Stat. § 49:214.21 et seq., and associated regulations, rules, and ordinances ("CZM laws") based upon the defendants' dredging, drilling, and waste disposal in coastal parishes. See, e.g., doc. 1, att. 59, pp. 3-26.

         SLCRMA provides a cause of action against companies that either violate a state-issued coastal use permit or fail to properly obtain a coastal use permit when required. The act also contains certain exemptions from the coastal use permitting requirements, namely, uses which do not have a significant impact on coastal waters[2] and activities which were "lawfully commenced" prior to the enactment of SLCRMA ~ the so-called "historical use" or "lawfully commenced" exemption.[3] Plaintiffs assert that the pre-SLCRMA activities by defendants were not lawfully commenced and therefore do not fall within the exemption.

         The cases were previously removed to this Court on the basis of admiralty jurisdiction, federal jurisdiction under the Outer Continental Shelf Lands Act ("OCSLA"), 43 U.S.C. § 1349(b)(1), and federal question jurisdiction under 28 U.S.C. § 1331. Those cases were remanded when the Court rejected these grounds for removal. As for OCSLA, the Court found that the activities involved did not take place on the Outer Continental Shelf. The Court also found that admiralty claims brought at law in state court pursuant to the Saving to Suitors' Clause are not removable in the absence of an independent jurisdictional basis. Finally, the Court held that the defendants could establish no federal question jurisdiction because the remedies sought were specifically limited to those arising under state law.[4]

         Defendants have now removed this case along with eleven others again. The current Notice of Removal, filed on May 23, 2018, asserts federal officer jurisdiction under 28 U.S.C. § 1442 and federal question jurisdiction under 28 U.S.C. § 1331.[5] Defendants claim that they first became aware of these removal grounds when they received an expert report in a related case on April 30, 2018.[6] Defendants argue that this expert report reveals for the first time that Plaintiffs' claims primarily attack activities undertaken before SLCRMA's effective date (1980), including activities that were subject to extensive and exclusive federal direction, control, and regulation during World War II.

         Plaintiffs have filed motions to remand, arguing that (1) the claim of federal officer jurisdiction is without merit; (2) the claim of federal question jurisdiction is without merit and is also precluded from re-litigation; and (3) removal was untimely because the expert report was received months, if not years, after the removing defendants knew or should have known of the nature of the claims asserted by Plaintiffs. Defendants opposed the Motions to Remand.

         On November 20, 2018, the Magistrate Judge issued a Report and Recommendation, recommending that the Motions to Remand be granted because removal was untimely. The recommendation that the removal was untimely was based upon the fact that the Plaintiffs' original petition makes numerous references to Defendants' activities which took place prior to the enactment of SLCRMA and that Defendants were put on notice that pre-SLCRMA activities were at issue. Defendants timely objected to the Report and Recommendation.

         II.

         LAW AND ANALYSIS

         A. Timeliness of Removal.

         A notice of removal must be filed within 30 days of receipt of the initial pleading in the case by the defendant. 28 U.S.C. § 1446(b). However, if the initial pleading does not set forth grounds for removal, "a notice of removal may be filed within 30 days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable."[7] The Fifth Circuit has held that "the information supporting removal in a copy of an amended pleading, motion, order or other paper must be 'unequivocally clear and certain' to start the time limit running for a notice of removal." Bosky v. Kroger Texas, LP, 288 F.3d 208 (5th Cir. 2002). The document need not be a filing to qualify as an "other paper."[8] Under some circumstances, a paper filed in another case may also qualify. Id. However, if the removal is based on an "other paper, " that paper must still result from a voluntary act by the plaintiff. Addo v. Globe Life and Ace. Ins. Co., 230 F.3d 759, 761-62 (5th Cir. 2000). Generally, when courts are looking to an "other paper" to determine removability, they are addressing the question in the context of a diversity jurisdiction case.[9] "The presence or absence of federal-question jurisdiction is governed by the well-pleaded complaint rule, under which federal jurisdiction exists only when a federal question is presented on the face of the plaintiffs properly pleaded complaint." Rivet v. Regions Bank of La., 522 U.S. 470, 475, 118 S.Ct. 921, 139 L.Ed.2d 912 (1998). However, under some limited circumstances, courts do look to an "other paper" to establish federal question jurisdiction. For example, a court may look to an "other paper" to determine whether a plaintiffs state law claim may be one that is preempted by federal law.[10]

         The requirement that the grounds for removal be "unequivocally clear and certain" creates a bright line rule requiring that the document itself reveal the grounds for removal before a party's removal rights are subject to the 30-day cutoff.[11] A party's subjective knowledge is not sufficient to trigger the removal deadline.[12] Similarly, the Fifth Circuit does not impose a due diligence requirement on the defendant to uncover the grounds for removal based on an ambiguous pleading.[13]

         In the instant case, the "other paper" on which defendants base their theory of removability is an expert report filed in a related case in state court by Plaintiffs, called the Rozel Report. The Rozel Report details the precise activities which Plaintiffs allege caused damage and also specifies preferred methods which would have prevented the damage. Defendants assert that this report revealed for the first time that Plaintiffs were attacking activities which were subject to extensive federal direction, control and regulation. Plaintiffs maintain that they have repeatedly referenced pre-SLCRMA activities dating back to the original complaint. Defendants contend, however, that while the prior filings may have referenced pre-SLCRMA activities, they did not reveal that Plaintiffs were challenging specific activities which were heavily regulated by the federal government during World War II. The Rozel Report offers the opinion that there are three types of activities which occurred which violated SLCRMA, namely:

First, there were certain uses that were legally commenced before 1980 but whose impacts changed post-1980, triggering the requirement for a permit that was never obtained. Second, there were certain uses that were illegally commenced at their beginning and therefore did not qualify for the exemption from coastal permitting or review. And third, there were certain uses that were commenced after 1980 that did not receive appropriate permits under SLCRMA.

         The Rozel Report also relies on language from a 1980 federal Final Environment Impact Statement ("FEIS"), which was submitted for proposed federal approval of Louisiana's Coastal Resources Program:

Any use or activity which, prior to the initiation of the coastal use permit program, has been lawfully commenced in good faith and for which all required permits have been obtained is consistent with the Coastal Management Program and no coastal use permit is required for it.... Moreover, such use or activity shall thereafter be consistent with the program even if renewals of previously issued permits become necessary or if new permits are required by other governmental bodies provided that there is no significant change in the nature, size, shape, location or impacts of the use or activity.

         The authors of the FEIS offered this language to provide guidance regarding the types of activities that would be exempt with regard to the so-called "historical use" exemption. Under Louisiana Administrative Code § 43;I.723.B.8, Louisiana law provides a "[b]lanket exemption" under which a use or activity shall not require a coastal use permit if (1) the use or activity was lawfully commenced or established prior to the implementation of the coastal use permit process, (2) the secretary determines that it does not have a direct or significant impact on coastal waters, or (3) the secretary does not determine that a permit is required under § 723.G.

         Defendants argue that Plaintiffs' adoption of this construction of the exemption necessarily injects a substantial federal question into the case to the extent that Plaintiffs are challenging activities regulated by the federal government during World War II. Defendants argue that their activities were exempt, while Plaintiffs claim they were not. The expert report provides opinions regarding whether the activities were legally commenced and whether they had an impact on coastal waters. Defendants assert the expert report is the first time that the pleadings or "other papers" clearly disclose the specific activities that plaintiffs claim were not exempt and why. They also contend that this report was the first time that the pleadings clearly and unambiguously disclose specific practices challenged by Plaintiffs that were heavily regulated during World War II.

         The Magistrate Judge concluded that the Notice of Removal was untimely because the involvement of pre-SLCRMA activities - i.e., activities occurring before 1980 - was apparent in the original complaint filed by Plaintiffs. The Court disagrees. Based on the original complaint and subsequent pleadings, Defendants were on notice that some activities occurring during the broad time period before 1980 may be at issue in this case. However, the complaint and pleadings do not reveal that Plaintiffs would be challenging specific activities that took place from 1941 to 1945 when the federal government's World War II regulatory regime was in place. The basis for jurisdiction under the federal officer removal statute - whether a defendant was "acting under" a federal officer - requires scrutiny of the specific activities of the defendant and the relationship between those activities and the federal government.[14] Federal court jurisdiction under Grable similarly requires some "assessment of litigation reality" to assess the substantiality of a federal issue; in other words, the role of each legal issue in the context of the facts that have to be established.[15] Here, allegations that merely point to pre-1980 activities do not trigger the removal deadline based on federal officer removal or federal question jurisdiction with respect to specific activities occurring during the World War II era. These allegations may put Defendants on notice that these activities could potentially become relevant, and Defendants could have investigated their pre-1980 activities and "connected the dots" to reveal grounds for federal court jurisdiction. However, the trigger for starting the removal clock requires a higher burden: the allegations must be in the complaint or "other paper" and must be "unequivocally clear and certain."" [16] A defendant's subjective knowledge is irrelevant in determining removability, and there is no duty on the part of the defendant to investigate and "connect the dots" outside the pleadings.[17]

         The case of Durham v. Lockheed Martin Corp., 445 F.3d 1247 (9th Cir. 2006), illustrates this point.[18] The plaintiff had alleged asbestos exposure based on his work as an electrician at various Air Force facilities. He sued Lockheed. The complaint, however, did not identify which specific Lockheed products resulted in his exposure. At the time, Lockheed provided aircraft to the government under government contracts, and commercial aircraft to non-government buyers. A subsequent discovery response identified the specific Lockheed products at issue.[19] Once those products were identified, Lockheed removed the case on the basis that Lockheed manufactured the aircraft for the government under a government contract.[20] The court in Durham emphasized that the specific facts supporting federal officer removal must be disclosed in the pleadings or an "other paper" before the time period to remove commences.[21] According to the court, until the specific Lockheed aircraft was identified, the grounds for removal had not been disclosed. It was irrelevant that Lockheed could, through investigation and due diligence, have uncovered the grounds for removal based on allegations identifying where the plaintiff worked. The Durham court also noted that the "liberal" interpretation of the federal officer removal provisions in 28 U.S.C. § 1442 extends to the deadline for removal.[22]

         The Court finds the same reasoning applies in the instant case. Until the point when Plaintiffs revealed the specific activities mentioned in the Rozel Report, Defendants had no basis to assert the grounds for removal which they now assert. That report was filed in the related matter on April 30, 2018. As the Notice of Removal was filed on May 23, 2018, the Court finds that the removal was timely. As the removal was timely, the court will address the grounds for removal raised in the current Notice of Removal: "federal officer" removal under 28 U.S.C. § 1442(a) and federal question jurisdiction under 28 U.S.C. § 1331.

         B. Federal Officer Removal.

         A defendant may remove any action against "[t]he United States or any agency thereof or any officer (or any person acting under that officer) of the United States or of any agency thereof, [sued in] an official or individual capacity for any act under color of such office." 28 U.S.C. § 1442(a). "[F]ederal officer removal under § 1442 is unlike other removal doctrines: it is not narrow or limited." State v. Kleinert, 855 F.3d 305, 311 (5th Cir. 2017). The Supreme Court requires "a liberal interpretation of § 1442(a) in view of its chief purpose-to prevent federal officers who simply comply with a federal duty from being punished by a state court for doing so." State v. Sparks, 978 F.2d 226, 232 (5th Cir. 1992). Section 1442 applies to any "private persons 'who lawfully assist' the federal officer 'in the performance of his official duty.'" Watson v. Philip Morris, 551 U.S. 142, 151 (2007). Section 1442(a) creates an exception to the "well-pleaded complaint" rule in that "the raising of a federal question in the officer's removal petition... constitutes the federal law under which the action against the federal officer arises for Article III purposes." Mesa v. California, 489 U.S. 121, 136 (1989). A defendant may remove a case under § 1442(a) by showing "(1) that it is a person within the meaning of the statute, (2) that it has a colorable federal defense, (3) that it acted pursuant to a federal officer's directions, and (4) that a causal nexus exists between [its] actions under color of federal office and the plaintiffs claims." Legendre v. Huntington Ingalls, 885 F.3d 398, 400 (5th Cir. 2018). There is no dispute that Defendants qualify as "persons" under the first requirement. Accordingly, the Court starts with the second requirement that Defendants "acted under" a federal officer's direction.

         1. "Acting Under" a Federal Officer.

         To satisfy § 1442(a)'s "acting under" prong, a defendant must show "an effort to assist, or to help carry out, the duties or tasks of the federal superior." Watson, 551 U.S. at 152. The Watson Court distinguished a party's compliance with federal regulations from actions "helping the Government to produce an item that it needs."[23]Assistance that "goes beyond simple compliance with the law and helps officers fulfill other basic governmental tasks" meets § 1442(a)'s "acting under" requirement.[24] To establish that a person is "acting under" a federal official, a removing party must show a "substantial degree of direct and detailed federal control over the defendant's work...."[25] This relationship between the defendant and the federal office or official must involve "subjection, guidance, or control."[26] It is not sufficient to merely show that "the relevant acts occurred under the general auspices of a federal office or officer."[27]

         The cases applying this "acting under" requirement provide useful guidance as to how to draw the line between "direct control" and mere regulation. Many cases where courts have found sufficient control and direction to satisfy the "acting under" requirement involve government contractors who manufacture products according to detailed specifications and oversight by an agency or officer of the federal government.[28] For example, in Winters, the plaintiff sued for personal injuries received as a result of exposure to Agent Orange while working as a civilian nurse for the United States Agency for International Development in Vietnam.[29] Diamond Shamrock was a government contractor that supplied the mix of herbicides known as Agent Orange to the United States Defense Department.[30] The Fifth Circuit affirmed the District Court's conclusion that Diamond Shamrock was "acting under" a federal office or office in supplying this mix of herbicides. The court observed that the Defense Department mandated a specific mixture of herbicides making up Agent Orange and that "the defendants were compelled to deliver Agent Orange to the government under threat of criminal sanctions."[31] The court concluded that the federal government exercised direct control over the composition and production of Agent Orange.[32] In other words, the plaintiffs injuries resulted from an aspect of the product that was mandated and controlled by the federal government under the terms of a contract with Diamond Shamrock.

         Similarly, in Zeringue, the plaintiff sued multiple defendants for damages caused by asbestos exposure.[33] He claimed exposure while deployed with the U.S. Navy as well as exposure when he worked in the Avondale Shipyard near Navy ships that contained asbestos.[34] The court found that the defendants had "acted under" a federal office or officer with respect to these asbestos exposure claims because the Navy had mandated the use of asbestos insulation in its contract specifications and the defendants complied with those requirements.[35] According to the court, "equipment could not have been installed aboard Navy vessels unless it was first determined by the Navy to be in conformity with all applicable Navy specifications."[36] The court further noted that had the defendant not complied with the specifications and provided these products to the government, "the Navy would have had to build those parts instead."[37] In all of these cases, the plaintiffs' claims arose out of conduct mandated hy the government.

         On the other hand, two cases where the courts concluded that the "acting under" requirement was not satisfied illustrate the limits of federal officer removal: Watson, 120 S.Ct. 2301, and In re Methyl Tertiary Butyl Ether ("MTBE") Prod Liab. Litig., 480 F.3d 112 (2d Cir. 2007). In Watson, the plaintiffs alleged that Phillip Morris manipulated the design of its "light" cigarettes so that they tested for lower levels of tar and nicotine. The industry's testing process for measuring tar and nicotine was operated under the regulatory supervision of the Federal Trade Commission (FTC). The Supreme Court concluded that Phillip Morris was not "acting under" the FTC even though the testing process for tar and nicotine was heavily regulated. The Court noted that a private party's compliance with federal law or acquiescence to a federal agency's order does not satisfy the "acting under" requirement of the federal officer removal statute, "even if the regulation is highly detailed and even if the private firm's activities are highly supervised and monitored."[38] In other words, differences in the degree of regulatory oversight alone cannot bring a regulated party within the contours of section 1442(a):

As we have pointed out, however, differences in the degree of regulatory detail or supervision cannot by themselves transform Philip Morris' regulatory compliance into the kind of assistance that might bring the FTC within the scope of the statutory phrase "acting under" a federal "officer." And, though we find considerable regulatory detail and supervision, we can find nothing that warrants treating the FTC/Philip Morris relationship as distinct from the usual regulator/regulated relationship. This relationship, as we have explained, cannot be construed as bringing Philip Morris within the terms of the statute.[39]

         The Court also distinguished the government contractor line of cases, such as the Agent Orange and asbestos cases, by reasoning that the defendants in those cases were assisting the federal government by producing an item that the government needed pursuant to a contract. Id. No such contractual relationship existed in the Watson case.

         In MTBE Prod. Liab. Litig., the plaintiffs brought claims against private companies that "manufactured, refined, marketed, or distributed gasoline containing MTBE" on the grounds that this additive contaminated water supplies.[40] The defendants attempted to remove the case under the federal officer removal statute on the grounds that the federal Clean Air Act and regulations promulgated by the Environmental Protection Agency (EPA) required them to reformulate their gas with additives such as MTBE to "oxygenate" the gas and therefore reduce emissions in certain metropolitan areas.[41] The District Court concluded that the defendants had satisfied the "acting under" requirement for removal on the grounds that the defendants used MTBE because EPA regulations required them to oxygenate their product for certain metropolitan areas. Even though other additives had been approved to oxygenate gasoline, the District Court noted that "both Congress and the EPA were aware that the defendants would have to use MTBE in order to comply with the Clean Air Act's requirements."[42] The District Court further noted that MTBE was the only approved additive available in a quantity sufficient to comply with the EPA's regulations. Id. The Second Circuit reversed. According to the court, there was no evidence of "an explicit directive in either the Clean Air Act or its implementing regulations" that required the use of MTBE. Id. In other words, while the statute and implementing regulations required defendants to oxygenate their gas, the regulations did not mandate that this be done by the addition of a specific additive, namely MTBE.[43] Nor did the court find evidence that these regulations were implemented with the knowledge that the use of MTBE was the only way that the defendants could comply with the directives of the EPA's regulations.[44]

         In the present case, Defendants contend that Plaintiffs' claims challenge the following aspects of their pre-SLCRMA activities that were allegedly governed by federal regulations and directives during World War II:

• how Defendants spaced wells;
• Defendants' use of dredged canals instead of roads;
• Defendants' use of vertically drilled wells;
• Defendant's use of earthen pits and centralized tank batteries;
• Defendants' practices involving water discharged from drilling sites and the failure to re-inject saltwater; and
• Defendants' use of inadequate tubing.[45]

         Defendants characterize the U.S. oil and gas industry as essentially an agent of the federal government during World War II, and that the industry's activities were tightly controlled to support the country's war efforts.[46] They contend that federal regulations and directives issued during the war mandated the activities challenged by Plaintiffs. Specifically, in 1941, President Franklin Roosevelt created the Office of Petroleum Coordinator, [47] which subsequently was renamed the Petroleum Administration for War ("PAW").[48] PAW issued directives to the oil industry to manage the allocation of material for necessary operations and to maximize oil and gas production needed for the war. One example offered by Defendants is PAW-issued directives mandating the spacing of oil wells in order to preserve materials.[49] Defendants argue that since PAW controlled the materials necessary for drilling activities, oil companies were required to comply with PAW mandates in order to function. They also argue that the government set production quotas. Plaintiffs, however, argue that PAW did not "order" oil and gas companies to meet quotas, but rather imposed conservation measures known as "allowables, " or ceilings on the amounts that producers were allowed to produce so that reservoirs were preserved.[50]

         Applying the reasoning of Watson and MTBE Prod. Liab. Litig. to the facts of this case, Defendants have not demonstrated the "subjection, guidance, or control" required to show that they were acting under a federal office or officer.[51] First, unlike Winters and Zeringue, Defendants have not shown that their World War II era activities were mandated by PAW or any other federal agency. For example, Defendants point to no actual federal directive governing well spacing.[52]Nor have they shown that PAW or any other federal agency mandated vertically drilled wells.[53]Defendants have referred to three specific instances of federal involvement with operations in the East and West Hackberry fields, where this particular case is located.[54] Each of the three instances involved applications for exceptions to Order M-68, which is the PAW order issued regarding conservation of materials.[55] Each of the three applications were approved and the companies seeking permission were allowed to obtain materials under less stringent requirements. Critically, Defendants have not offered any instances where PAW prohibited any of their activities in these areas. As in MTBE Prod. Liab. Litig, there is no evidence that PAW and other federal agencies directed Defendants' activities or that they mandated how Defendants were to comply with federal regulations and directives. In sum, the record demonstrates little more than a regulated industry complying with the requirements of a federal regulatory regime. But as Watson emphasized, compliance with a regulatory regime standing alone does not amount to the control and direction required as grounds for federal officer removal.[56]

         Second, the record does not reflect the government contractor relationship that existed in Winters and Zeringue. In those cases, the courts highlighted the fact that the defendants were supplying products needed by the federal government pursuant to contracts, and that without these contracts the government would have to produce the products themselves. In this context, a state court lawsuit that targeted a contractor's activities under a government contract would threaten the government's ability to procure the goods that it needs. On the other hand, mere compliance with federal regulations does not raise the same policy concern. As explained by the Watson Court:

Without evidence of some such special relationship, Philip Morris' analogy to Government contracting breaks down. We are left with the FTC's detailed rules about advertising, specifications for testing, requirements about reporting results, and the like. This sounds to us like regulation, not delegation. If there is a difference between this kind of regulation and, say, that of Food and Drug Administration regulation of prescription drug marketing and advertising (which also involve testing requirements), see Serono Labs., Inc. v. Shalala, 158 F.3d 1313, 1316 (C.A.D.C.1998), that difference is one of degree, not kind.[57]

         Here, federal agencies likely entered into contracts for the sale of oil, gas, and other petroleum products during World War II to support the war effort. But as noted by Plaintiffs, the oil and gas industry includes "upstream" activities - exploration and production of oil and gas - and "downstream" activities - the actual refinement of crude oil into usable petroleum products. Although Defendants gloss over this distinction, any World War II contracts would have generally involved "downstream" refined petroleum products, while the federal regulation at issue here involved "upstream" exploration and production activities. Thus, unlike Winters and Zeringue, the Plaintiffs' claims are ...


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