Orange County Water Dist. v. Unocal Corp.

• Decision Date: 01 October 2009
• Docket Number: No. 07-5724-op.,07-5724-op.
• Citation: 584 F.3d 43
• Parties: ORANGE COUNTY WATER DISTRICT, Petitioner, v. UNOCAL CORPORATION, formerly known as Costal Oil New York, Inc., formerly known as Union Oil Company Of California, Conocophillips Company, Chevron U.S.A., Inc., individually doing business as Chevron Products Company, doing business as Chevron Chemical Company, Chevrontexaco Corporation, Texaco Refining and Marketing, Inc., now known as TMR Company, Equilon Enterprises LLC, Shell Oil Company, Inc., individually doing business as Shell Oil Products US, Union Oil Company of California, individually doing business as Unocal, Tosco Corporation, Exxon Mobil Corporation, individually formerly known as Exxon Corporation Doing Business as Exxonmobil Refining And Supply Company, Exxon Chemical U.S.A., Exxonmobil Chemical Corporation, Mobil Corporation, Ultramar, Inc., Valero Refining, Valero Refining Company-California, Valero Marketing and Supply Company, Atlantic Richfield Company, Inc., individually formerly known as Arco Petroleum Company doing business as Arco Products Company also known as Arco, BP Products North America, Inc., BP West Coast LLC, Tesoro Petroleum Corporation, Tesoro Refining and Marketing Company, Inc., Petro-Diamond, Inc., Southern Countries Oil Co., Citgo Petroleum Corporation, Arco Chemical Company, Lyondell Chemical Company, individually formerly known as Arco Chemical Company, G & M Oil Company, Inc., 7-Eleven, Inc., USA Gasoline Corporation, Does 9-200, and Does 202-1000, inclusive, Defendants.<SMALL><SUP>*</SUP></SMALL>
• Court: U.S. Court of Appeals — Second Circuit

584 F.3d 43

ORANGE COUNTY WATER DISTRICT, Petitioner, v. UNOCAL CORPORATION, formerly known as Costal Oil New York, Inc., formerly known as Union Oil Company Of California, Conocophillips Company, Chevron U.S.A., Inc., individually doing business as Chevron Products Company, doing business as Chevron Chemical Company, Chevrontexaco Corporation, Texaco Refining and Marketing, Inc., now known as TMR Company, Equilon Enterprises LLC, Shell Oil Company, Inc., individually doing business as Shell Oil Products US, Union Oil Company of California, individually doing business as Unocal, Tosco Corporation, Exxon Mobil Corporation, individually formerly known as Exxon Corporation Doing Business as Exxonmobil Refining And Supply Company, Exxon Chemical U.S.A., Exxonmobil Chemical Corporation, Mobil Corporation, Ultramar, Inc., Valero Refining, Valero Refining Company-California, Valero Marketing and Supply Company, Atlantic Richfield Company, Inc., individually formerly known as Arco Petroleum Company doing business as Arco Products Company also known as Arco, BP Products North America, Inc., BP West Coast LLC, Tesoro Petroleum Corporation, Tesoro Refining and Marketing Company, Inc., Petro-Diamond, Inc., Southern Countries Oil Co., Citgo Petroleum Corporation, Arco Chemical Company, Lyondell Chemical Company, individually formerly known as Arco Chemical Company, G & M Oil Company, Inc., 7-Eleven, Inc., USA Gasoline Corporation, Does 9-200, and Does 202-1000, inclusive, Defendants.^*

No. 07-5724-op.

United States Court of Appeals, Second Circuit.

Submitted: April 14, 2009.

Decided: October 1, 2009.

Michael Axline, Tracey O'Reilly, Miller, Axline & Sawyer, Sacramento, CA, for Petitioner.

Thomas Marcelle, Albany, NY, Amicus Curiae in Opposition to Petitioner.

Before WINTER and CABRANES Circuit Judges.^**

PER CURIAM:

The question presented is whether a district court may retain jurisdiction when a case was improperly removed to federal court. Specifically, we consider whether improper removal under the bankruptcy removal statute requires subsequent remand to state court.

The Orange County Water District ("OCWD") petitions for a writ of mandamus challenging a November 7, 2007 order of the United States District Court for the Southern District of New York (Shira A. Scheindlin, Judge), denying OCWD's motion to remand the case from the Southern District of New York to California state court. OCWD argues that this Court's decision in In re MTBE Prods. Liab. Litig., 488 F.3d 112 (2d Cir.2007) ("MTBE") — which involved other parties in this multi-district litigation — required the District Court to remand OCWD's action. Specifically, OCWD contends as follows: (1) this Court's opinion in MTBE requires that the District Court find that OCWD asserted a timely objection under 28 U.S.C. § 1447(c) to the improper application of the bankruptcy removal statute, 28 U.S.C. § 1452(a); and, alternatively, (2) the District Court was required to abstain pursuant to 28 U.S.C. § 1334(c)(2) because it lacked "core" bankruptcy jurisdiction. We deny OCWD's petition for a writ of mandamus because we conclude that: (1) our opinion in MTBE did not require the District Court to remand OCWD's action, and (2) OCWD's alternative jurisdictional arguments can be reviewed in the regular course of appeal.

BACKGROUND

The facts of this case are set forth in detail in the District Court's opinion. See In re MBTE Prods. Liab. Litig., 522 F.Supp.2d 557 (S.D.N.Y.2007). We review here only those facts relevant to the issues presented in this petition for mandamus.

In the spring of 2003, OCWD filed state-law claims in the Superior Court of California, Orange County, against various oil companies alleging contamination, or threatened contamination, of groundwater in Orange County, California with methyl tertiary butyl ether ("MTBE"), an additive that many refiners added to gasoline beginning in the late 1970s to increase its octane content. MTBE is known to discolor water, impart a foul odor, and endanger human health when it enters the water supply.¹ This suit was one of over one-hundred actions brought by public and private entities that provide public drinking water throughout the United States against corporations that manufactured, refined, marketed, or distributed gasoline containing MTBE. On December 5, 2003, defendants removed the action to the United States District Court for the Central District of California. Although OCWD filed a motion to remand on January 6, 2004, that Court stayed the proceeding pending transfer of the case to the United States District Court for the Southern District of New York, pursuant to an order of the Panel on Multidistrict Litigation, 28

U.S.C. § 1407.²

Shortly after the final transfer order was issued by the District Court for the Central District of California on June 16, 2004, OCWD and other plaintiffs moved on July 15, 2004, in the Southern District of New York to remand the case to the California state court where it was originally filed. In a series of opinions, Judge Scheindlin denied the motions of OCWD and several other California plaintiffs. She concluded that the actions had been properly removed under (1) the federal officer removal statute, 28 U.S.C. § 1442, because defendants alleged that they had acted at the direction of a federal agency in adding MTBE to gasoline, In re MTBE Prods. Liab. Litig., 342 F.Supp.2d 147, 156-58 (S.D.N.Y.2004),³ and (2) the bankruptcy removal statute, 28 U.S.C. § 1452, because OCWD's claims implicated claims arising from the earlier bankruptcy proceedings of defendant Texaco, Inc. (now ChevronTexaco Corp.), In re MTBE Prods. Liab. Litig., 341 F.Supp.2d 386, 413-14 (S.D.N.Y.2004).⁴ Judge Scheindlin also held that "the removal of cases filed by State Plaintiffs does not violate principles of sovereign immunity." In re MTBE Prods. Liab. Litig., 361 F.Supp.2d 137, 148 (S.D.N.Y.2004). Based on these three decisions, two plaintiffs — the People of the State of California ("California") and the State of New Hampshire ("New Hampshire") — pursued interlocutory appeals.

On May 24, 2007, we held that the actions brought by California and New Hampshire had been improperly removed from state court to federal court. MTBE, 488 F.3d 112. First, we held that "removal was inappropriate under the federal officer removal statute because the defendants did not act under an officer of the United States." Id. at 132. We also held that removal was improper under the bankruptcy removal statute because the "proceedings represent efforts by California and New Hampshire to enforce their `police or regulatory power' and are not subject to removal under section 1452['s] [governmental unit exception]." Id. at 133 (quoting 28 U.S.C. § 1452(a)).⁵ Removal was likewise unavailable on grounds of federal preemption or the existence of a substantial federal question. MTBE, 488 F.3d at 134-36. Because the requirements of the applicable removal statutes had not been met, we vacated the order of the District Court denying the motion to remand of California and New Hampshire and we directed that the cases brought by California and New Hampshire be returned to the state courts where they were originally filed. Id. at 136.

In July 2007, OCWD and the defendants in its action submitted to Judge Scheindlin a proposed order remanding this case to the Superior Court of Orange County, in light of (1) our opinion in MTBE, and (2) the Supreme Court's then-recent decision in Watson v. Philip Morris Cos., 551 U.S. 142, 153, 127 S.Ct. 2301, 168 L.Ed.2d 42 (2007) (holding that "a highly regulated firm cannot find a statutory basis for removal [under the federal officer removal statute] in the fact of federal regulation alone"). During a conference with the parties, however, the District Court rejected the jointly proposed order, explaining that "jurisdiction is not something which is handled on consent and negotiation." App. at 6. The District Court informed the parties that it had "an issue ... as to whether the court still has [bankruptcy] jurisdiction," and directed OCWD to file a motion to remand. Id.

On August 1, 2007, OCWD submitted a remand motion, which was unopposed. OCWD argued that the District Court lacked bankruptcy jurisdiction because, as established in our opinion in MTBE, bankruptcy removal under 28 U.S.C. § 1452(a) had been improper because the case fell under the governmental unit exception to that removal statute. The District Court, however, denied the motion, dismissing as untimely OCWD's argument that the action had been improperly removed. It further explained that "even if the action were improperly removed, lack of subject matter jurisdiction is the only ground [provided by 28 U.S.C. § 1447(c)⁶] on which this Court may remand an action once thirty days have elapsed." MTBE, 522 F.Supp.2d at 562. The District Court concluded that it possessed subject matter jurisdiction because "questions concerning when certain `claims' arose and whether those claims ... involve the enforcement and construction of Texaco's discharge injunction [involve] a substantive right created by the federal Bankruptcy Code." Id. at 566-67.

OCWD then petitioned this Court for a writ of mandamus, requesting that we order the case be remanded to the California state court in which it was filed.

DISCUSSION

A. Standard of Review

It is well established that "[t]he remedy of mandamus is a drastic one, to be invoked only in extraordinary situations." Kerr v. U.S. Dist. Court, 426 U.S. 394, 402, 96 S.Ct. 2119, 48 L.Ed.2d 725 (1976). "[M]ere error, even gross error in a particular case, as distinguished from a calculated and repeated disregard of governing rules, does not suffice to support issuance of the writ." United States v. DiStefano, 464 F.2d 845, 850 (2d Cir.1972). Mandamus therefore "does not `run the gauntlet of reversible errors.'" Id. (quoting Bankers Life & Cas. Co. v. Holland, 346 U.S. 379, 382, 74 S.Ct. 145, 98 L.Ed....