Products Liability Law Daily Fossil fuel companies failed to establish federal officer status to merit federal jurisdiction
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Wednesday, May 27, 2020

Fossil fuel companies failed to establish federal officer status to merit federal jurisdiction

By Leah S. Poniatowski, J.D.

Products liability lawsuits filed by several California local government entities were remanded to state court.

Over 30 fossil-fuel energy companies named as defendants in lawsuits filed by cities and counties in California based on products liability and nuisance theories could not demonstrate that they were "acting under" the government pursuant to the federal officer removal statute to merit jurisdiction in federal court, the U.S. Court of Appeals for the Ninth Circuit ruled, affirming the lower court’s order to remand the matter on that sole issue (County of San Mateo v. Chevron Corp., May 26, 2020, Ikuta, S.).

The counties of San Mateo, Marin, and, Santa Cruz, and the cities of Imperial Beach, Santa Cruz, and Richmond, California, filed similar lawsuits against over 30 fossil-fuel energy companies, asserting products liability, nuisance, and trespass claims for the effects of fossil fuels that the companies had produced and sold in the state. The lawsuits had been filed in California state court, prompting the companies to remove the lawsuits to federal court. The companies premised removal on seven-plus jurisdictional bases, including the federal-officer statute. The counties and cities filed motions to remand the lawsuits, asserting that the federal court lacked subject-matter jurisdiction. The federal district court held that none of the companies’ jurisdictional arguments were persuasive, but the district court stayed the remand orders to allow the companies to file an appeal.

"Colorable" characterization. As an initial matter, the Ninth Circuit explained that its authority to review the remand order was limited by federal law; specifically, two clauses under 28 U.S.C. §1447(d). The first clause "broadly prohibits" review of remand orders, but the U.S. Supreme Court narrowed this prohibition only to when a remand order was issued on a ground enumerated in §1447(c), namely subject matter jurisdiction or non-jurisdictional defects. Another High Court ruling instructs that federal appellate review would be allowed only to confirm that a district court’s characterization of its remand for lack of subject-matter jurisdiction was "colorable."

The companies asserted that they met this threshold because the federal district court had based its remand on a merits determination when it ruled that federal law did not govern the counties’ and cities’ claims. The appellate court was not persuaded, however, finding that the lower court determined that it did not have subject matter jurisdiction under §1447(c).

Exception clause. The appellate court also held that §1447(d)(2)’s "exception clause" did not apply to the case at bar. Under its own precedent, the Ninth Circuit explained that it had interpreted the clause as giving the panel the authority to review a district court’s remand orders only to the extent that the order addresses the statutory sections listed in the clause. Thus, in the case at bar, the appellate court could review the companies’ appeal to the extent that the remand order addressed §1442(a)(1) federal officer jurisdiction, but not the other bases that the companies had articulated for subject-matter jurisdiction. The companies based their argument that their appeal was subject to plenary review on a Seventh Circuit decision and the passing of the Removal Clarification Act of 2011, but the appellate court held that under the doctrine of stare decisis, the companies’ argument was misplaced. The panel explained that there was no intervening authority to abrogate its prior ruling and, thus, the court’s review of the remand order was limited to the federal officer removal issue.

Federal officer statute. At present, §1442(a)(1) provides removal of civil actions against the United States "or any agency thereof or any officer (or any person acting under that officer) in an official or individual capacity" Thus, private persons may remove lawsuits to federal court if they can establish that: (1) it is a person within the meaning of the statute; (2) there is a causal nexus between its actions, taken pursuant to a federal officer’s directions, and the plaintiff’s claims; and (3) it can assert a colorable federal defense. With respect to the first prong, the companies were not within the scope of "acting under" a federal officer because they only had engaged in arm’s-length business dealings with the federal government. CITGO asserted that its fuel supply agreements with the Navy Exchange Service Command to supply gasoline and diesel fuel at service stations on Navy installations brought it under the statute, but the appellate court reasoned that the contracts were typical of general commercial contracts and did not put the company at risk of "significant state-court prejudice" for its relationship with the U.S. Navy.

Similarly, Standard Oil’s unit agreement with the Navy was not evidence that the company was acting on the government’s behalf. Finally, the lease agreements granted by the government to the companies to explore the outer Continental Shelf did not mark the companies’ as "acting under" the government. Because there was no evidence that any of the companies could satisfy the first prong of the statute, the appellate court did not consider the remaining two prongs. Consequently, the panel affirmed the lower court’s ruling that there was no jurisdiction pursuant to 28 U.S.C. §1442(a)(1), and the remainder of the appeal was dismissed for lack of jurisdiction under §1447(d).

The case is Nos. 18-15499, 18-15502, 18-15503, 18-16376.

Attorneys: Paul A. Okada, Office of the County Counsel, and Martin Daniel Quinones (Sher Edling, LLP) for County of San Mateo. Theodore J. Boutrous, Jr. (Gibson, Dunn & Crutcher LLP) and Erica W. Harris (Susman Godfrey, LLP) for Chevron Corp. and Chevron U.S.A. Inc. Jaren Janghorbani (Paul, Weiss, Rifkind, Wharton & Garrison LLP) for Exxonmobil Corp. Philip Curtis (Arnold & Porter LLP) for BP PLC and BP America, Inc.

Companies: County of San Mateo; Chevron Corp.; Chevron U.S.A. Inc.; Exxonmobil Corp.; BP PLC; BP America, Inc.

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