Louisiana v. Union Oil Co. of California

• Citation: 458 F.3d 364
• Decision Date: 25 July 2006
• Docket Number: No. 05-30488.,No. 05-30492.,No. 05-30493.,No. 05-30489.,05-30488.,05-30489.,05-30492.,05-30493.
• Parties: State of LOUISIANA; School Board Vermilion Parish, Plaintiffs-Appellants, v. UNION OIL COMPANY OF CALIFORNIA, also known as Unocal Exploration Corp., also known as Union Exploration Partners, Ltd., Defendant-Appellee. State of Louisiana; School Board Vermilion Parish, Plaintiffs-Appellants, v. Chevron USA Inc., also known as Texas Co., also known as Texaco Exploration and Production Inc., formerly known as Texaco Inc., also known as Texaco Producing Inc.; ExxonMobil Corp., also known as Humble Oil & Refining Co., formerly known as Exxon Corp.; Beta Operating Company LLC; Hilcorp Energy Co., Defendants-Appellees. State of Louisiana; School Board Vermilion Parish, Plaintiffs-Appellants, v. ExxonMobil Corp., also known as Humble Oil & Refining Co., formerly known as Exxon Corp., Defendant-Appellee. State of Louisiana; School Board Vermilion Parish, Plaintiffs-Appellants, v. Shell Oil Co.; SWEPI LP, formerly known as Shell Western E&P Inc., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

458 F.3d 364

State of LOUISIANA; School Board Vermilion Parish, Plaintiffs-Appellants, v. UNION OIL COMPANY OF CALIFORNIA, also known as Unocal Exploration Corp., also known as Union Exploration Partners, Ltd., Defendant-Appellee.

State of Louisiana; School Board Vermilion Parish, Plaintiffs-Appellants, v. Chevron USA Inc., also known as Texas Co., also known as Texaco Exploration and Production Inc., formerly known as Texaco Inc., also known as Texaco Producing Inc.; ExxonMobil Corp., also known as Humble Oil & Refining Co., formerly known as Exxon Corp.; Beta Operating Company LLC; Hilcorp Energy Co., Defendants-Appellees.

State of Louisiana; School Board Vermilion Parish, Plaintiffs-Appellants, v. ExxonMobil Corp., also known as Humble Oil & Refining Co., formerly known as Exxon Corp., Defendant-Appellee.

State of Louisiana; School Board Vermilion Parish, Plaintiffs-Appellants, v. Shell Oil Co.; SWEPI LP, formerly known as Shell Western E&P Inc., Defendants-Appellees.

No. 05-30488.

No. 05-30489.

No. 05-30492.

No. 05-30493.

United States Court of Appeals, Fifth Circuit.

July 25, 2006.

Victor L. Marcello (argued), Talbot, Carmouche & Marcello, Gonzales, LA, Grady J. Abraham, Koury & Abraham, Lafayette, LA, for Plaintiffs-Appellants.

G. William Jarman, Alan James Berteau, Charles Simon McCowan, III, Louis Victor Gregoire, Jr., Kimberly Kaye Hymel, Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, Baton Rouge, LA, Gilbert Stephen Keteltas, Howrey, Simon, Arnold & White, Washington, DC, for Defendants-Appellees.

Benjamin Roth Grau, Wilson, Elser, Moskowitz, Edelman & Dicker, Dallas, TX, Charles R. Talley, Jamie Domilise Henry, Lemle & Kelleher, New Orleans, LA, for Azimuth Energy LLC, Amicus Curiae.

Robert Beattie McNeal (argued), Mark LeRay McNamara (argued), Natalie Renee Bolling, Frilot, Partridge, Kohnke & Clements, New Orleans, LA, for ExxonMobil Corp.

Jamie Duayne Rhymes, Liskow & Lewis, Lafayette, LA, for Beta Operating Co. LLC.

Paul J. Hebert (argued), Mark DeWitt Sikes, Ottinger Hebert, Lafayette, LA, for Hilcorp Energy Co.

Thomas M. McNamara, Jessica Gray McNamara, Lafayette, LA, for Shell Oil Co. and SWEPI LP.

Appeals from the United States District Court for the Western District of Louisiana.

Before DeMOSS, BENAVIDES and PRADO, Circuit Judges.

PRADO, Circuit Judge:

The State of Louisiana and the Vermillion Parish School Board (collectively "VPSB") brought suit against Union Oil Co. of California, Chevron USA Inc., ExxonMobil Corp., and Shell Oil Co. (collectively "Unocal") in Louisiana state court for alleged breach of contract, negligence, strict liability and trespass arising out of oil and gas exploration activities conducted by Unocal on Section 16 lands.¹ The Unocal removed to federal court in the Western District of Louisiana based on diversity jurisdiction under 28 U.S.C. § 1332. The VPSB filed motions to remand, arguing that diversity jurisdiction does not exist because the State is a plaintiff. The district court denied the motions to remand because it concluded that the State is a nominal party with no real interest in the controversy.

The district judge certified its order denying remand for interlocutory appeal. The controlling question of law, as stated by the district court, is: "Is the State of Louisiana a real party in interest for purposes of determining diversity removal jurisdiction in a suit for damages to Sixteenth Section school lands filed in the name of the State pursuant to the authority granted to Louisiana School Boards in Louisiana Revised Statutes 41:961 through 965?"

"This court's jurisdiction derives from the district court's certification of its interlocutory order denying the motion to remand as suitable for appeal under 28 U.S.C. § 1292(b). . . . A district court's denial of a motion to remand is reviewed de novo." Ard v. Transcon. Gas Pipe Line Corp., 138 F.3d 596, 600 (5th Cir. 1998).

The District Courts have original jurisdiction of controversies between citizens of different states; and when in any suit brought in a state court, there is a controversy, which is wholly between citizens of different states, and which can be fully determined as between them, a defendant interested in such controversy may remove the suit to the proper District Court of the United States . . . . Jurisdiction cannot be defeated by joining formal or unnecessary parties.

Salem Trust Co. v. Mfrs.' Fin. Co., 264 U.S. 182, 189, 44 S.Ct. 266, 68 L.Ed. 628 (1924)(internal citations omitted).

Ordinarily "[i]n an action where a state is a party, there can be no federal jurisdiction on the basis of diversity of citizenship because a state is not a citizen for purposes of diversity jurisdiction." Texas Dep't of Hous. & Cmty. Affairs v. Verex Assurance, Inc., 68 F.3d 922, 926 (5th Cir.1995). However, if the State is a nominal party with no real interest in the dispute, its citizenship may be disregarded. See Wolff v. Wolff, 768 F.2d 642, 645 (5th Cir.1985) ("In determining diversity jurisdiction, the citizenship of the real parties in interest is determinative, and the citizenship of nominal or formal parties who have no real interest in the dispute before the court may be disregarded, even though they may be required by law or court order to join in the lawsuit."); see also Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 461, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980) ("Thus, a federal court must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy.").

"Whether a party is [formal or] `nominal' for removal purposes depends on whether, in the absence of the [party], the Court can enter a final judgment consistent with equity and good conscience, which would not be in any way unfair or inequitable . . . ." Acosta v. Master Maint. & Constr. Inc., 452 F.3d 373, 379 (5th Cir.2006)(internal quotations omitted). An alternate articulation of the test is whether or not a named party's "role in the law suit is that of a depositary or stakeholder." Tri-Cities Newspapers, Inc. v. Tri-Cities Printing Pressmen & Assistants' Local 349, Int'l Printing Pressmen & Assistants' Union of N. Am., 427 F.2d 325, 327 (5th Cir.1970)(internal quotations omitted). We take practical considerations into account in making this determination. See Shaughnessy v. Pedreiro, 349 U.S. 48, 54, 75 S.Ct. 591, 99 L.Ed. 868 (1955)("Our former cases have established a policy under which indispensability of parties is determined on practical considerations."); Stonybrook Tenants Ass'n v. Alpert, 194 F.Supp. 552, 557 (D.Conn.1961)("Determination...