352 F.3d 33 (1st Cir. 2003), 03-1134, Templeton Bd. of Sewer Com'rs. v. American Tissue Mills of Massachusets, Inc.

Docket Nº:03-1134
Citation:352 F.3d 33
Party Name:Templeton Bd. of Sewer Com'rs. v. American Tissue Mills of Massachusets, Inc.
Case Date:December 09, 2003
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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352 F.3d 33 (1st Cir. 2003)



AMERICAN TISSUE MILLS OF MASSACHUSETTS, INC., Northeast Waste Treatment Services, Inc., Erving Industries, Inc., Baldwinville Products, Inc., American Tissue Corporation, Nourollah Elghanayan and Mehdi Gabayzadeh, Defendants, Appellees.

No. 03-1134.

United States Court of Appeals, First Circuit

December 9, 2003

Heard Sept. 9, 2003.

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Stephen M. Leonard, with whom Brown Rudnick Berlack Israels LLP, was on brief, for appellant.

T. Christopher Donnelly, with whom Michael S. D'Orsi and Donnelly, Conroy & Gelhaar, LLP, were on brief, for appellees.

Before TORRUELLA and LIPEZ, Circuit Judges, and SCHWARZER,[*] Senior District Judge.


TORRUELLA, Circuit Judge.

Plaintiff-Appellant Templeton Board of Sewer Commissioners ("Templeton") appeals the district court's dismissal of its third amended complaint ("complaint") pursuant to Fed.R.Civ.P. 12(b)(1), 12(c) and 12(h)(3). The district court concluded it did not have subject matter jurisdiction over Count I of the complaint under 28 U.S.C. § 1331,1 and therefore lacked supplemental jurisdiction over the remaining state law claims pursuant to 28 U.S.C. § 1367. After careful review, we affirm.


A. Facts

The facts related to this appeal are largely undisputed and are taken fro the district court's memorandum and order. Templeton Bd. of Sewer Comm'rs v. Am. Tissue Mills, No. 96-40140(NMG) (D.Mass. Dec. 19, 2002). In March 1974, the town of Templeton entered into a Waste Management Contract with Baldwinville Products, Inc. ("Baldwinville") and its owner, Erving Industries, Inc. ("Erving"),2 by which Templeton agreed to build a wastewater treatment plant ("the plant") and make the plant available to Erving and Baldwinville for treatment of their wastewater. The contract provided, inter alia, that: (1) Templeton "shall retain legal title to all wastewater facilities," (Waste Management Contract, Section XV); (2) Templeton shall pay ... One Dollar ($1.00) per year consideration for [defendants] to operate the [plant] (id., Section XVI B.2); (3) Templeton would "apply for Federal and/or State construction grants for its wastewater treatment facility." (Id., Section VI). Finally, it provided that (4) Erving and Baldwinville would pay the net operating costs of the plant as well as 95.5% of the net capital costs of the plant. (Id., Section XVI B.1(a) and (c)).

Templeton applied to the Environmental Protection Agency ("EPA") for a construction grant. The agency approved the grant, and the plant was built and became operational.

In 1991, defendant American Tissue Mills of Massachusetts, Inc. ("ATM"), purchased

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Baldwinville's operating assets. An Assignment and Assumption Agreement was executed, assigning Baldwinville's rights and liabilities under the Waste Management Contract to Northeast Waste Treatment Services, Inc. ("Northeast"), an ATM subsidiary. From 1991 until April 3, 2002, ATM and Northeast operated the plant.

In March 1995, the EPA informed Templeton that the Clean Water Act ("CWA"), 33 U.S.C. § 1284(b)(1), required Templeton to implement a user charge system whereby each user of the plant must pay a proportionate share of the cost of operating and maintaining the entire wastewater treatment system based upon that user's contribution to the total waste flow. The EPA also advised Templeton that the user charge system specified by the Waste Management Contract was inconsistent with the user charge system required by the CWA. A subsequent EPA memorandum received by Templeton in September 1995 concluded that the contract user charge system must be revised in order to comply with the EPA's regulatory scheme.

B. Procedural History

Templeton filed its initial complaint in the district court in June 1996. Count I sought a declaration of the parties' rights, specifically whether ATM was required to pay a user charge which included payment for other treatment works pursuant to § 204 of the CWA, 33 U.S.C. § 1284, and the EPA regulations thereunder. Jurisdiction was premised upon 28 U.S.C. § 1331, as the plaintiff was allegedly seeking relief under the CWA, and the remaining state law claims were entertained pursuant to 28 U.S.C. § 1367. Although the complaint was amended three times, Count I did not materially change. It stated, in relevant part:

12. Under the Agreement, the Town is obligated, among other things, to:

a. construct a wastewater treatment plant (the "Plant") with an average daily flow capacity of approximately three million gallons and agree to make the Plant available to The Company for treatment of its wastewater. (Sections II and III);

b. maintain and operate the Plant and retain a third party to operate the Plant with prior approval of The Company. (Section IV); and

c. apply for federal and/or state construction grants for the Plant. (Section V).


18. 33 U.S.C. § 1284 states as a condition of any grant for any project for any treatment works that the applicant for the grant must adopt a system of charges such that each recipient of waste treatment services within the applicant's jurisdiction pays its proportionate share of the cost of operation and maintenance (including replacement) of any waste treatment services provided by the applicant.


23. The EPA has informed the Commissioners, and the Commissioners agree, that the Town is required under the Clean Water Act and the regulations promulgated thereunder to implement a user charge system based on actual use of wastewater treatment services such that each user, including America [sic] Tissue, pays its proportionate share of operation and maintenance ... based on each user's proportionate contribution to the total waste contributed by all users. See 40 CFR 35.929-1....

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24.... It is the Commissioners' and the EPA's position that the requirements of the Clean Water Act and regulation promulgated thereunder supersede the Agreement. [Relying on 40 CFR 35.929-2(g) ].

Third Amended Compl. at 3-6.

In 1997, Templeton moved for partial summary judgment on Count I seeking, inter alia, a declaration that ATM was subject, under the contract and federal law, to a user charge system for the use of the treatment works in compliance with the CWA and EPA regulations. The district court concluded that Templeton's interpretation of the federal requirements was correct, but denied the summary judgment motion because material facts were still in dispute. Templeton Bd. of Sewer Comm'rs v. American Tissue Mills, No. 96-40140(NMG) (D.Mass. Dec. 9, 1997). The district court denied the motion for summary judgment because the record failed to establish a conflict between the contract and the EPA regulations.3

On October 17, 2002, defendant-appellee Elghanayan, an alleged officer, director and shareholder of ATM and Northeast, filed a motion to dismiss the complaint for lack of subject-matter jurisdiction under Fed.R.Civ.P. 12(b)(1), 12(c) and 12(h)(3), arguing primarily that the district court did not have subject-matter jurisdiction over Count I because it did not arise under federal law. The district court granted the motion.


Appellee Elghanayan argues that the district court had no...

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