ANR Pipeline Co. v. Conoco, Inc.

• Decision Date: 22 October 1986
• Docket Number: No. G86-819.,G86-819.
• Parties: ANR PIPELINE COMPANY, a Delaware corporation, Plaintiff, v. CONOCO, INC., a Delaware corporation, Defendant.
• Court: U.S. District Court — Western District of Michigan

646 F. Supp. 439

ANR PIPELINE COMPANY, a Delaware corporation, Plaintiff, v. CONOCO, INC., a Delaware corporation, Defendant.

No. G86-819.

United States District Court, W.D. Michigan, S.D.

October 22, 1986.

Mika, Meyers, Beckett & Jones by John C. Jones, John M. DeVries, Grand Rapids, Mich., for plaintiff.

Ernst Altgelt, III, Russell A. Pitts of Miller, Canfield, Paddock & Stone, Grand Rapids, Mich., for defendant.

OPINION

ENSLEN, District Judge.

Introduction

Plaintiff ANR Pipeline Corporation ("ANR") and Defendant Conoco, Inc. ("CONOCO") are both Delaware corporations authorized to do business in Michigan. ANR is engaged in the business of purchasing, transporting and selling natural gas to various gas distribution utilities in nine different states including Michigan. ANR maintains its headquarters and other offices in Michigan. Defendant CONOCO is a producer and marketer of natural gas and is one of ANR's major suppliers of natural gas.

On or about August 27, 1985, ANR filed its Verified Complaint in the Circuit Court for Mecosta County, Michigan, alleging that its performance of the take-or-pay and minimum monthly take obligations under seven (7) offshore and eight (8) onshore Gas Purchase contracts is excused as a result of force majeure. The state court issued a temporary restraining order ("TRO") enjoining CONOCO from initiating duplicate litigation in any other court and ordering CONOCO to appear and show cause on September 9, 1986 why the TRO should not be replaced with a preliminary injunction.

On September 8, 1986, Defendant CONOCO filed a petition for removal and on September 9, 1986 this Court extended the state court's TRO until September 17, 1986 and directed the parties to file briefs and supporting materials, and to appear before the Court September 17, 1986, today, to resolve two issues: 1) is this a proper case for removal; and 2) if this case is properly removed, should a preliminary injunction issue?

Discussion

Defendant argues that this case was properly removed because this Court has original jurisdiction over the seven Offshore Gas Purchase Contracts under 43 U.S.C. § 1349(b)(1) and pendent jurisdiction over the eight Onshore Gas Purchase Contracts. (If there is no original jurisdiction, the discussion of pendent jurisdiction, of course, becomes moot.)

1) Defendant argues that the express language of Section 1349(b)(1) of the Outer Continental Shelf Lands Act ("OCSLA"), 43 U.S.C. § 1331 et seq. confers jurisdiction.

2) Defendant argues that even if jurisdiction is not conferred by OCSLA, plaintiff's well-pleaded complaint establishes that there is some substantial disputed question of federal law which is a necessary element of at least one of plaintiff's well-pleaded state claims.

I will address these arguments separately.

I. Jurisdiction Under OCSLA

Where there is no diversity of citizenship between the parties as is the case here, whether removal is proper depends upon whether the case falls within the original federal question jurisdiction. See 28 U.S.C. § 1331. Under the well-pleaded complaint rule, a defendant may not remove such a case to federal court unless plaintiff's complaint — standing alone — establishes that the case arises under federal law within the meaning of § 1331. Where state-law causes of action are alleged, federal defenses that the plaintiff anticipates defendant may assert are simply irrelevant to the determination of whether there is federal question jurisdiction. Similarly, it is also irrelevant that sometime during the course of litigation a federal question may arise. See Franchise Tax Board of California v. Construction Laborers Vacation Trust for Southern California, et al., 463 U.S. 1, 10, 103 S.Ct. 2841, 2846, 77 L.Ed.2d 420 (1983).

To add to the jurisdictional confusion which often accompanies the application of the "well-pleaded complaint rule", the parties have also briefed and discussed the relevancy of the Wycoff dictum to this case. In Public Service Commission v. Wycoff Co., 344 U.S. 237, 73 S.Ct. 236, 97 L.Ed. 291 (1952), the Supreme Court noted that in a declaratory judgment action the realistic positions of the parties are often reversed. The Court noted that "where the complaint in an action for declaratory judgment seeks in essence to assert a defense to an impending or threatened state court action, it is the character of the threatened action, and not of the defense, which will determine whether there is federal-question jurisdiction in the district court." Id. at 248, 73 S.Ct. at 242.

Both the well-pleaded complaint rule and the Wycoff dictum appear to be in play in this case. It is apparent that plaintiff ANR sought a declaratory judgment action in state court which would establish that events had occurred sufficient to trigger the force majeure clause in its contracts in order to stave off a breach of contract action which it anticipated that defendant CONOCO would soon be bringing.

Plaintiff has argued that under the Wycoff dictum and the "well-pleaded complaint" rule it is unnecessary to reach the issue of whether or not ANR's verified complaint for declaratory relief presents an affirmative claim under OCSLA. Why? Because plaintiff argues that under the case law a federal court lacks removal jurisdiction over a state declaratory judgment action where no allegation is made in the complaint that the declaratory defendant (CONOCO) intends or threatens to pursue a federal cause of action against it. See e.g., Trent Realty Associates v. First Federal Savings and Loan, 657 F.2d 29 (1981). Plaintiff argues further that since ANR's complaint does not allege that CONOCO threatens to bring an action under OCSLA, it is therefore unnecessary for the court to even look at the issue of whether ANR's verified complaint presents an affirmative claim under OCSLA. While the court finds plaintiff's arguments and the supporting case law persuasive on the proper interpretation of what is required under the "well-pleaded complaint" rule, under the facts of this case, the Court disagrees with the conclusion that there is no reason to reach the issue of whether or not the complaint for declaratory judgment presents an affirmative claim under OCSLA.

In the present case defendant argues that while it is true that plaintiff may have sought a declaratory judgment action in state court, the face of plaintiff's complaint makes clear that plaintiff sought to establish a defense to a breach of contract action which plaintiff anticipates that defendant will bring and that the anticipated breach of contract action is an action which necessarily involves a federal question. Thus defendant suggests that I must find that this Court has jurisdiction whether I look at the face of the complaint, or whether I look at CONOCO's "threatened action." Why is that? Because under defendant's theory, OCSLA intended to preempt any type of contract action — including this one for the sale of natural gas — which directly or indirectly concerns activities on the outer shelf. And what difference does that make? Obviously, that would mean that in the present case even though plaintiff's declaratory judgment action may have been properly brought in state court, since it seeks to establish a defense to an anticipated cause of action which necessarily involves a federal question, it is proper for defendant to remove pursuant to 28 U.S.C. § 1441(a).

There is no doubt that Section 1349(b)(1) confers original jurisdiction on the district courts of the United States. And, it is equally beyond argument that where district courts have original jurisdiction, such cases when first filed in state court may be removed by defendants to the district court pursuant to the removal statute 28 U.S.C. § 1441(a). Still, the precise issue presently before me is whether plaintiff's complaint standing alone, states a declaratory judgment relief to a threatened cause of action which necessarily must arise under OCSLA. Moreover, the burden of establishing the right to invoke federal jurisdiction is on the removing defendant. Pullman Co. v. Jenkins, 305 U.S. 534, 540, 59 S.Ct. 347, 350, 83 L.Ed. 344 (1939); B., Inc., v. Miller Brewing Co., 663 F.2d 545 (5th Cir.1981). Out of deference to the principles of federalism, the removal statutes are strictly construed against removal. Shamrock Oil Corp. v. Sheets, 313 U.S. 100, 61 S.Ct. 868, 85 L.Ed. 1214 (1941). Generally, where there is doubt as to whether or not a federal court has removal jurisdiction, that doubt is to be resolved in favor of remand. Butler v. Polk, 592 F.2d 1293 (5th Cir.1979); Elf Aquitaine, Inc. v. Placid Oil Co., 624 F.Supp. 994, 999 (D.Del.1985).

Essentially defendant must prove that the complaint states an OCSLA cause of action in one of two ways. Either the unambiguous language of the complaint establishes that plaintiff's declaratory judgment relief involves relief from a threatened breach of contract action which must necessarily be brought under OCSLA; or in the alternative, that although plaintiff does not use language that unambiguously indicates that the declaratory relief claim involves relief from a threatened OCSLA action, such threatened "future" breach of contract action of the defendant must be brought under OCSLA because in effect OCSLA has preempted this type of contract action. Put differently, defendant is arguing that plaintiff cannot avoid removal jurisdiction simply by being an "artful dodger", that is, defendant suggests that plaintiff has sought to avoid removal jurisdiction by drafting a claim for declaratory judgment which necessarily arises under the provisions of the OCSLA as a claim for declaratory judgment and which only apparently arises under the principles of state law applicable to contract interpretation. (On the question of "devious pleading" see e.g. Federated Dept. Stores, Inc. v. Moitie, 452 U.S. 394, 397 n. 2, 101 S.Ct. 2424, 2427 n. 2, 69 L.Ed.2d 103 (1981); Franchise Tax Board...