Energy Mgmt. Servs., LLC v. City of Alexandria

• Citation: 739 F.3d 255
• Decision Date: 09 January 2014
• Docket Number: No. 12–31184.,12–31184.
• Parties: ENERGY MANAGEMENT SERVICES, LLC, Plaintiff–Appellant v. CITY OF ALEXANDRIA, Defendant–Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

739 F.3d 255

ENERGY MANAGEMENT SERVICES, LLC, Plaintiff–Appellant

v.CITY OF ALEXANDRIA, Defendant–Appellee.

No. 12–31184.

United States Court of Appeals,Fifth Circuit.

Jan. 9, 2014.

James Huey Gibson, David Jude Ayo, Allen & Gooch, Lafayette, LA, Scott Aaron Siebeneicher, Johnson, Siebeneicher & Ingram, Pineville, LA, for Plaintiff–Appellant.

Claude Favrot Reynaud, Jr., Esq., Carroll Devillier, Jr., Breazeale, Sachse & Wilson, L.L.P, Baton Rouge, LA, for Defendant–Appellee.

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

Before WIENER, DENNIS, and OWEN, Circuit Judges.

DENNIS, Circuit Judge:

Plaintiff–Appellant Energy Management Services, L.L.C. (“EMS”) appeals the district court's order denying EMS's motion to remand its suit against the City of Alexandria, Louisiana (“the City”) to the state court from which it was removed. Because the district court does not have jurisdiction over EMS's suit, we REVERSE the district court's order and REMAND this case to the district court with instructions to remand it to the Louisiana state court in which it was initially filed.

I.

In a previous case, the City filed suit against its electricity provider, CLECO Corporation and its subsidiaries (collectively “CLECO”), in Louisiana state court on June 22, 2005, alleging that CLECO had overcharged the City for electricity. CLECO removed the case (hereinafter “ City v. CLECO ”) to the U.S. District Court for the Western District of Louisiana. The City and CLECO reached a settlement agreement that involved several long-term contractual relationships between the City and CLECO and two cash payments from CLECO to the City. On February 24, 2010, in light of the settlement, the district court entered a Judgment of Dismissal that dismissed the case with prejudice. However, the district court retained jurisdiction over the City v. CLECO settlement for the purpose of resolving disputes over attorneys' fees expended during the litigation of the otherwise—dismissed case and to enforce its protective orders governing the confidentiality of the settlement proceedings and documents, as needed. The evidence and settlement documents are under seal in the district court.

In 2004, in anticipation of its suit against CLECO, the City hired EMS, a Louisiana-based energy and utility auditing and consultingfirm, to conduct an audit of the City's electricity expenses and specifically its overpayments to CLECO. EMS and the City signed an agreement that provided, inter alia, that EMS's fee was twenty percent of any recovery, damages, or other credits the City received as a result of the City v. CLECO litigation. The agreement also provided that the City would allow EMS to review all settlement documents in order to assess its fee.

Subsequently, in August 2010, EMS filed a separate suit against the City in Louisiana state court. EMS asserted a breach of contract claim alleging that the City failed to provide compensation and documentation, seeking damages as well as a request for accounting and a writ of sequestration. The City removed the case to the U.S. District Court for the Western District of Louisiana on August 26, 2010, asserting supplemental jurisdiction under 28 U.S.C. §§ 1367 and 1441. On September 16, 2010, EMS filed a motion to remand the case to state court. The district court denied EMS's motion to remand on the basis that it possessed supplemental jurisdiction over EMS's claims against the City. The district court then granted EMS's motion to certify the order for immediate interlocutory appeal, authorizing this court's review of the decision under 28 U.S.C. § 1292(b). We granted EMS's Motion for Leave To Appeal from an Interlocutory Order and now consider EMS's appeal.

II.

A.

“Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). “It is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction.” Id. Furthermore, “[t]he right of removal is entirely a creature of statute and ‘a suit commenced in a state court must remain there until cause is shown for its transfer under some act of Congress.’ These statutory procedures for removal are to be strictly construed.” Syngenta Crop Prot., Inc. v. Henson, 537 U.S. 28, 32, 123 S.Ct. 366, 154 L.Ed.2d 368 (2002) (quoting Great N. Ry. Co. v. Alexander, 246 U.S. 276, 280, 38 S.Ct. 237, 62 L.Ed. 713 (1918)). “If at any time before final judgment it appears that the district court lacks subject matter jurisdiction [over a removed case], the case shall be remanded.” 28 U.S.C. § 1447(c). We review the denial of a motion to remand to state court de novo. Roland v. Green, 675 F.3d 503, 511 (5th Cir.2012).

The district court denied EMS's motion to remand on the ground that it possessed supplemental ¹ jurisdiction over EMS's claims against the City because EMS's subsequent lawsuit was “factually interdependent” with the City v. CLECO case and, therefore, should be maintained in the court with jurisdiction over that litigation and settlement. We reverse, concluding that (1) the district court does not have original jurisdiction over EMS's state-court civil action required to permit its removal to federal court, and (2) although the district court retains jurisdiction over the City v. CLECO post-settlement matters, neither the dismissed claims nor the court's retained jurisdiction over the separate, post-settlement matters may serve as the basis for the district court's jurisdiction over EMS's state-law claims, which are asserted in a separate and new proceeding.

1.

Before a state-court civil action may be removed to federal district court, the action must satisfy § 1441. In relevant part, § 1441 provides that

[e]xcept as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.

28 U.S.C. § 1441(a) (emphasis added). This provision is to be strictly construed. See Syngenta Crop Prot., 537 U.S. at 32, 123 S.Ct. 366. “Under the plain terms of § 1441(a), in order to properly remove [an] action pursuant to that provision, petitioners must demonstrate that original subject-matter jurisdiction lies in the federal courts.” Id. A federal district court may exercise original jurisdiction over any civil action that either satisfies diversity requirements or that arises under the federal constitution, statutes, or treaties—commonly referred to as “federal question” jurisdiction. 28 U.S.C. §§ 1331, 1332, 1369. Thus, under § 1441, removal is proper only when the court has original jurisdiction over at least one asserted claim under either federal question or diversity jurisdiction. See City of Chicago v. Int'l Coll. of Surgeons, 522 U.S. 156, 165, 118 S.Ct. 523, 139 L.Ed.2d 525 (1997). Once § 1441 is satisfied, pursuant to § 1367, the court may then assert supplemental jurisdiction over any remaining state-law claims that do not independently satisfy original jurisdiction, if the state-law claims are part of the same case or controversy as the “anchor claim.” ²28 U.S.C. § 1367; see also DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 351, 126 S.Ct. 1854, 164 L.Ed.2d 589 (2006) (“[F]ederal question jurisdiction over a claim may authorize a federal court to exercise jurisdiction over state-law claims that may be viewed as part of the same case because they ‘derive from a common nucleus of operative fact’ as the federal claim.” (quoting United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966))).

EMS's suit against the City raises no claims over which a federal district court could exercise original jurisdiction and therefore it does not satisfy § 1441. EMS's suit concerns a contract dispute that presents only state-law questions and the parties do not dispute that there is lack of diversity between them. We have unequivocally held that

[w]here ... the plaintiff files an action in state court with no federal question or complete diversity, the original jurisdiction necessary for removal under § 1441 does not exist. Congress specified that federal courts have removal jurisdiction under § 1441 only if the district court otherwise has original jurisdiction over the civil action. No federal court had original jurisdiction over the [present action], and § 1367, by its own terms cannot fill the void. Section 1367 grants supplemental jurisdiction over state claims, not original jurisdiction. Without original jurisdiction, [there is] no jurisdictional hook for removal.

Halmekangas v. State Farm Fire & Cas. Co., 603 F.3d 290, 294 (5th Cir.2010) (footnotes omitted) (internal quotation marks omitted). Thus, removal of EMS's entirely state-law-based, non-diverse action was improper under § 1441.

2.

The district court's jurisdiction over the City v. CLECO litigation and settlement does not satisfy the statutory requirements for removal of EMS's separate civil action under § 1441 and thus does not vest the district court with jurisdiction over EMS's claims. First, the district court's original jurisdiction over the claims asserted in City v. CLECO—which the parties settled and the court dismissed on the merits with prejudice—may not serve as an anchor claim for exercising jurisdiction over EMS's state-law contract claims. Additionally, standing alone, the attorneys' fees and sealed document matters over which the district court retained limited jurisdiction after the City v. CLECO settlement-dismissal does not constitute an anchor claim that would support supplemental jurisdiction over EMS's separate civil action, given that...