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Board of Commissioners of Southeast Louisiana Flood Protection Authority - East v. Tennessee Gas Pipeline Co., L.L.C.

United States Court of Appeals, Fifth Circuit

March 3, 2017

BOARD OF COMMISSIONERS OF THE SOUTHEAST LOUISIANA FLOOD PROTECTION AUTHORITY - EAST; ORLEANS LEVEE DISTRICT; LAKE BORGNE BASIN LEVEE DISTRICT; EAST JEFFERSON LEVEE DISTRICT, Plaintiffs-Appellants,
v.
TENNESSEE GAS PIPELINE COMPANY, L.L.C.; ALTA MESA SERVICES, L.P.; ANADARKO E&P ONSHORE, L.L.C.; APACHE CORPORATION; ATLANTIC RICHFIELD COMPANY; BEPCO, L.P.; BOARDWALK PIPELINE PARTNERS, L.P.; BOPCO, L.P.; BP AMERICA PRODUCTION COMPANY; BP OIL PIPELINE COMPANY; CALLON OFFSHORE PRODUCTION, INCORPORATED; CALLON PETROLEUM COMPANY; CASKIDS OPERATING COMPANY; CENTERPOINT ENERGY RESOURCES CORPORATION; CHEVRON PIPELINE COMPANY; CHEVRON USA, INCORPORATED; CLAYTON WILLIAMS ENERGY, INCORPORATED; CLOVELLY OIL COMPANY, L.L.C.; COASTAL EXPLORATION AND PRODUCTION, L.L.C.; COLLINS PIPELINE COMPANY; CONOCOPHILLIPS COMPANY; CONTINENTAL OIL COMPANY; COX OPERATING, L.L.C.; CRAWFORD HUGHES OPERATING COMPANY; DALLAS EXPLORATION, INCORPORATED; DAVIS OIL COMPANY; DEVON ENERGY PRODUCTION COMPANY, L.P.; ENERGEN RESOURCES CORPORATION; ENTERPRISE INTRASTATE, L.L.C.; EOG RESOURCES, INCORPORATED; EP ENERGY MANAGEMENT, L.L.C.; EXXON MOBIL CORPORATION; EXXON MOBIL PIPELINE COMPANY; FLASH GAS & OIL NORTHEAST, INCORPORATED; GRAHAM ROYALTY, LIMITED; GREKA AM, INCORPORATED; GULF PRODUCTION COMPANY, INCORPORATED; GULF SOUTH PIPELINE COMPANY, L.P.; HELIS ENERGY, L.L.C.; HELIS OIL & GAS COMPANY, L.L.C.; HESS CORPORATION, A Delaware Corporation; HILLIARD OIL & GAS, INCORPORATED; HKN, INCORPORATED; INTEGRATED EXPLORATION & PRODUCTION, L.L.C.; J.C. TRAHAN DRILLING CONTRACTOR, INCORPORATED; J.M. HUBER CORPORATION; KENMORE OIL COMPANY, INCORPORATED; KEWANEE INDUSTRIES, INCORPORATED; KOCH EXPLORATION COMPANY, L.L.C.; KOCH INDUSTRIES, INCORPORATED; LIBERTY OIL; GAS CORPORATION; LLOG EXPLORATION COMPANY; MANTI OPERATING COMPANY; MARATHON OIL COMPANY; MOEM PIPELINE, L.L.C.; MOSBACHER ENERGY COMPANY; NATURAL RESOURCES CORPORATION OF TEXAS; NEWFIELD EXPLORATION GULF COAST, L.L.C.; NOBLE ENERGY, INCORPORATED; O'MEARA, L.L.C.; P. R. RUTHERFORD; PLACID OIL COMPANY; PLAINS PIPELINE, L.P.; REPUBLIC MINERAL CORPORATION; RIPCO, L.L.C.; ROZEL OPERATING COMPANY; MURPHY EXPLORATION & PRODUCTION COMPANY, USA; SHELL OIL COMPANY; SOUTHERN NATURAL GAS COMPANY, L.L.C.; SUN OIL COMPANY; SUNDOWN ENERGY, L.P.; UNION OIL COMPANY OF CALIFORNIA; WHITING OIL & GAS CORPORATION; WILLIAMS EXPLORATION COMPANY; YUMA EXPLORATION AND PRODUCTION COMPANY, INCORPORATED; MERIDIAN RESOURCE & EXPLORATION, L.L.C.; PICKENS COMPANY, INCORPORATED; ESTATE OF WILLIAM G. HELIS; LOUISIANA LAND AND EXPLORATION COMPANY, L.L.C. MARYLAND; KAISER-FRANCIS OIL COMPANY; BP PIPELINES NORTH AMERICA, INCORPORATED; VINTAGE PETROLEUM, L.L.C., Delaware; ENLINK LIG, L.L.C., Defendants-Appellees.

         Appeal from the United States District Court for the Eastern District of Louisiana

          Before STEWART, Chief Judge, and OWEN and COSTA, Circuit Judges.

          PRISCILLA R. OWEN, Circuit Judge.

         The Board of Commissioners of the Southeast Louisiana Flood Protection Authority-East filed a lawsuit in Louisiana state court against various companies involved in the exploration for and production of oil reserves off the southern coast of the United States. The Board alleged that Defendants' exploration activities caused infrastructural and ecological damage to coastal lands overseen by the Board that increased the risk of flooding due to storm surges and necessitated costly flood protection measures. Defendants removed the case to federal court, and the district court denied the Board's motion to remand, on the ground that the Board's claims necessarily raise a federal issue. Defendants also moved to dismiss the case for failure to state a claim on which relief can be granted, and the district court granted the motion. We affirm.

         I

         In July 2013, the Board of Commissioners of the Southeast Louisiana Flood Protection Authority-East (the Board) filed a lawsuit in Louisiana state court against ninety-seven entities (the Defendants) involved in the exploration for and production of oil reserves off the southern coast of the United States. The Board, whose purpose is "regional coordination of flood protection, "[1] alleges that since the 1930s, coastal landscapes that serve as a "first line of defense" against flooding (the Buffer Zone) have been suffering from rapid land loss. The Board alleges that replacement of land in the Buffer Zone with water threatens the existing levee system and imperils coastal communities. It further asserts that Defendants' oil and gas activities- primarily the dredging of an extensive network of canals to facilitate access to oil and gas wells-has caused "direct land loss and increased erosion and submergence in the Buffer Zone, resulting in increased storm surge risk." Attached to the complaint was a list of Defendants' names, agents, and addresses; a map depicting the levee districts under the Board's purview; a list of the names and location information of wells operated by Defendants; a list of the locations in the relevant levee districts subject to dredging permits and the permittees benefitting thereunder; and a list of the locations and grantees of rights of way in the relevant levee districts.

         The Board's asserted bases for recovery from Defendants include negligence, strict liability, natural servitude of drain, public nuisance, private nuisance, and breach of contract as to third-party beneficiaries. The Board describes the "highly costly but necessary remedial measures" that it has undertaken or will undertake to protect against the increased storm surge risk. These measures include "abatement and restoration of the coastal land loss at issue, " including backfilling and revegetating each canal dredged by Defendants; the joint state-federal Hurricane and Storm Damage Risk Reduction System, some of the cost of which has been borne by the Board; investigation and remediation of defects in the local levee systems to comply with relevant certification standards; and "additional flood protection expenses, " including the construction of "safe houses" for use by employees during dangerous flooding conditions.

         The complaint describes "a longstanding and extensive regulatory framework under both federal and state law" that protects against the effects of dredging activities and establishes the legal duties by which Defendants purportedly are bound. It enumerates four main components of this framework, including the Rivers and Harbors Act of 1899 (RHA);[2] the Clean Water Act of 1972 (CWA);[3] "[r]egulations related to rights-of-way granted across state-owned lands and water bottoms administered by the Louisiana Office of State Lands"; and the Coastal Zone Management Act of 1972 (CZMA)[4]"and related Louisiana coastal zone regulations bearing directly on oil and gas activities." None of the individual claims relies on a cause of action created under federal law, and the negligence, strict liability, and natural servitude claims explicitly rely on state law causes of action.

         The Board seeks "[a]ll damages as are just and reasonable under the circumstances, " as well as injunctive relief requiring the backfilling and revegetating of canals, "wetlands creation, reef creation, land bridge construction, hydrologic restoration, shoreline protection, structural protection, bank stabilization, and ridge restoration."

         Defendants removed the case to federal court, asserting five separate grounds for federal jurisdiction. The Board moved to remand, and the district court denied the motion, concluding that the Board's state law claims "necessarily raise a federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing the congressionally approved balance of federal and state judicial responsibilities." Defendants moved to dismiss the case pursuant to Federal Rule of Civil Procedure 12(b)(6) as preempted by federal law and barred under state law. The district court granted the motion with respect to all of the Board's claims, concluding that none of the Board's stated grounds for relief constituted a claim upon which relief could be granted under state law. The Board appealed.

         II

         We review an order denying remand to state court de novo.[5] A federal court may exercise federal question jurisdiction over any civil action that "arises under the federal constitution, statutes, or treaties."[6] A federal question exists only where "a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law."[7]However, "[t]he fact that a substantial federal question is necessary to the resolution of a state-law claim is not sufficient to permit federal jurisdiction."[8]Only in a "'special and small category' of cases" will federal jurisdiction exist when state law creates the cause of action.[9] That limited category of federal jurisdiction only exists where "(1) resolving a federal issue is necessary to resolution of the state-law claim; (2) the federal issue is actually disputed; (3) the federal issue is substantial; and (4) federal jurisdiction will not disturb the balance of federal and state judicial responsibilities."[10] "[I]f a plaintiff files suit in state court alleging both federal and state claims arising out of the same controversy, the entire action may be removed to federal court."[11]

         The district court concluded that three of the Board's claims necessarily raise federal issues: the negligence claim, which purportedly draws its requisite standard of care from three federal statutes; the nuisance claims, which rely on that same standard of care; and the third-party breach of contract claim, which purportedly is based on permits issued pursuant to federal law.

         A

         The Board argues that the district court was incorrect to conclude that the nuisance and negligence claims necessarily raise a federal issue, because although the state law claims "could turn to federal law for support, federal law is not necessary for their resolution." It points to this court's holding in MSOF Corp. v. Exxon Corp. that an allegation that a facility was maintained "in violation of federal regulations as well as in violation of state and local regulations" was not enough for the action to arise under federal law.[12]

         Defendants dispute the Board's contention that the negligence or nuisance claims could be resolved solely as a matter of state law; they note that although the negligence claim draws its cause of action from a Louisiana statute, the "sole basis" for any standard of care is found in the federal regulatory scheme. Unlike in MSOF, the Board is seeking a remedy-the backfilling of canals-that could not be required under any state law-based conception of negligence, and accordingly the claim of necessity has a "federal substance." Similarly, Defendants argue that the nuisance claims posit an obligation not to make "unauthorized" changes or alterations to levee systems-an imperative that they argue could only exist under federal law.

         The Board's negligence claim in fact requests relief for multiple distinct injuries and refers to multiple sources of law that might establish a duty of care, and it is not the case that just because some of these sources are drawn from state law and some from federal law that the two sources are redundant and therefore "alternative." The claims for negligence and strict liability in MSOF arose out of the alleged contamination of plaintiffs' land with toxic chemicals, which undisputedly gave rise to a cause of action under state law.[13]Here, however, Defendants correctly point out that the Board's complaint draws on federal law as the exclusive basis for holding Defendants liable for some of their actions, including for the "unauthorized alteration" of federal levee systems and for dredging and modifying lands away from their "natural state." Unless Louisiana state law requires persons engaged in oil and gas activities to restore dredged or modified areas to their "natural state" to the identical extent that the CWA purportedly does, then a court would not be able to establish the magnitude of any potential liability without construing that Act. The same is true of the alleged obligation not to alter levee systems built by the United States, which the complaint draws from the RHA. The Board points out that Louisiana law sets forth apparently similar requirements, such as the provision stating that "[m]ineral exploration and production sites shall be cleared, revegetated, detoxified, and otherwise restored as near as practicable to their original condition upon termination of operations to the maximum extent practicable."[14] But the "maximum extent practicable" in turn is defined as a regulatory determination that entails "a systematic consideration of all pertinent information regarding the use, the site and the impacts of the use . . . and a balancing of their relative significance."[15] No Louisiana court has used this or any related provision as the basis for the tort liability that the Board would need to establish, and the Louisiana Supreme Court has explicitly rejected the prospect that a statutory obligation of "reasonably prudent conduct" could require oil and gas lessees to restore the surface of dredged land.[16]

         The absence of any state law grounding for the duty that the Board would need to establish for the Defendants to be liable means that that duty would have to be drawn from federal law. Supreme Court precedent is clear that a case arises under federal law where "the vindication of a right under state law necessarily turn[s] on some construction of federal law, "[17] and the Board's negligence and nuisance claims thus cannot be resolved without a determination whether multiple federal statutes create a duty of care that does not otherwise exist under state law.

         B

         The Board argues that even if its claims necessarily raise federal issues, those issues are not "actually disputed." But its argument draws entirely on district court cases in which the parties did not disagree with respect to the proper interpretation of federal statutes unrelated to those raised in the Board's complaint.[18] Defendants refute this argument by pointing out that they do not concede, for example, that the RHA establishes liability for otherwise permitted activity that might have the effect of altering United States-built levee systems; that the CWA requires them to restore dredged canals to their "natural state"; or that they are required to backfill canals that they have dredged pursuant to federal permits. These are legal, not factual, questions, and the parties dispute them.

         C

         For a federal issue to give rise to federal jurisdiction, "it is not enough that the federal issue be significant to the particular parties in the immediate suit . . . . The substantiality inquiry under Grable looks instead to the importance of the issue to the federal system as a whole."[19] The Supreme Court has suggested that an issue can be important for many reasons: because state adjudication would "undermine 'the development of a uniform body of [federal] law'";[20] because the case presents "a nearly pure issue of law" that would have applications to other federal cases;[21] or because resolution of the issue has "broad[] significance" for the federal government.[22] "The absence of any federal cause of action . . . [is] worth some consideration in the assessment of substantiality."[23]

         The district court concluded that the substantiality requirement was met in this case, both because the relevant federal statutes plainly regulate "issues of national concern" and because the case affects "an entire industry" rather than a few parties. Moreover, it called the lawsuit "a collateral attack on an entire regulatory scheme . . . premised on the notion that [the scheme] provides inadequate protection." The Board disagrees and argues that it raises that regulatory scheme "to support the obligations created under state law."

         The Board is correct that the federal regulatory scheme is only relevant to its claims insofar as the scheme provides the underlying legal basis for causes of action created by state law. But of course Defendants dispute whether the federal scheme provides such basis at all. The dispute between the parties does not just concern whether Defendants breached duties created by federal law; it concerns whether federal law creates such duties. As Defendants point out, the validity of the Board's claims would require that conduct subject to an extensive federal permitting scheme is in fact subject to implicit restraints that are created by state law.[24] The implications for the federal regulatory scheme of the sort of holding that the Board seeks would be significant, and thus the issues are substantial.

         D

         In Singh, we considered whether the area of law relevant to the plaintiff's claims "has traditionally been the domain of state law, " and in that case we concluded that "federal law rarely interferes with the power of state authorities to regulate" that area of law.[25] The Supreme Court has held that the balance of federal and state judicial responsibilities would be disturbed by the exercise of federal jurisdiction where such exercise would "herald[] a potentially enormous shift of traditionally state cases into federal courts."[26]Here, the district court held that no such shift would arise, noting that the Board relies on federal law to establish liability and that resolution of its claims could affect coastal land management in multiple states as well as the national oil and gas market.

         The Board points out that each of the three federal statutes that forms the basis of its claims contains a savings clause, which it argues supports an inference that exercising federal jurisdiction would disrupt the balance struck by Congress.[27] But as Defendants point out, these savings clauses act to preserve existing state law claims; they do not confine consideration of lawsuits based on federal law to state courts. They also argue that the relief sought by the Board would require federal approval to be implemented, and thus it cannot be that the lawsuit is a matter only of state concern.[28]

         In Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, the Supreme Court explicitly rejected "[a] general rule of exercising federal jurisdiction over state claims resting on federal . . . statutory violations, " and it also rejected the proposition that "any . . . federal standard without a federal cause of action" is enough to support federal jurisdiction over a lawsuit.[29] However, the Court nonetheless held that federal jurisdiction was proper in the state quiet title action before it, because "it is the rare state quiet title action that involves contested issues of federal law, " and thus "jurisdiction over actions like Grable's would not materially affect, or threaten to affect, the normal currents of litigation."[30]

         The Grable Court was persuaded that "the absence of threatening structural consequences" was relevant to its inquiry, and the same logic militates in favor of federal jurisdiction here.[31] If the federal statutes at issue in this case do create duties and obligations under the laws of various states, then it might be inappropriate for federal question jurisdiction to obtain every time a state-law claim is made on that basis. But where, as here, one of the primary subjects of dispute between the parties is whether the federal laws in question may properly be interpreted to do that at all, the implications for the federal docket are less severe.[32] Relatedly, the scope and limitations of a complex federal regulatory framework are at stake in this case, and disposition of the question whether that framework may give rise to state law claims as an initial matter will ultimately have implications for the federal docket one way or the other.

         E

         Because we conclude that the Board's negligence and nuisance claims necessarily raise federal issues sufficient to justify federal jurisdiction, we do not reach the question whether the third-party breach of contract claim also does so. We also do not reach the question whether maritime jurisdiction provides an independent basis for federal jurisdiction in this case.

         III

         "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'"[33] "[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a ...


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