Baker v. Atl. Richfield Co., Nos. 19-3159 & 19-3160

Decision Date18 June 2020
Docket NumberNos. 19-3159 & 19-3160
Citation962 F.3d 937
Parties Sherrie BAKER, et al., Plaintiffs-Appellees, v. ATLANTIC RICHFIELD COMPANY, E. I. du Pont de Nemours and Company, et al., Defendants-Appellants.
CourtU.S. Court of Appeals — Seventh Circuit

Colin E. Flora, Attorney, Eric Stephen Pavlack, Attorney, Pavlack Law LLC, Indianapolis, IN, for Plaintiffs-Appellees (Case no. 19-3159)

Kathleen A. DeLaney, Attorney, DeLaney & DeLaney LLC, Indianapolis, IN, Diana Reiter, Nancy G. Milburn, Attorney, Arnold & Porter Kaye Scholer LLP, New York, NY, Sean Morris, Attorney, Arnold & Porter Kaye Scholer LLP, Los Angeles, CA, for Defendants-Appellants

Honor Costello, Attorney, Crowell & Moring, LLP, New York, NY, Tracy Ann Roman, Attorney, Crowell & Moring LLP, Washington, DC, for Defendants-Appellants (Case no. 19-3160)

Before Flaum, Kanne, and Brennan, Circuit Judges.

Flaum, Circuit Judge.

Former residents of the West Calumet Housing Complex sued nine industrial manufacturing companies in Indiana state court. The residents allege that, for most of the twentieth century, each company directly or through a predecessor corporate entity polluted the soil in and around the site of their later-built residence. Specifically, the residents claim that the companies’ operations at these facilities contaminated the property with "lead, arsenic and likely other substances."

Several companies removed the case to federal court under 28 U.S.C. § 1442(a)(1), asserting their right to a federal forum because the case relates to their acts under color of federal office. During World War II, the companies argue, the United States government directed them to produce certain materials for the military, supervised distribution of these goods, and controlled their ultimate usage. The residents disagreed and moved to remand the case back to state court. The district court granted that motion, holding in principle that the companies acted under color of federal office for only a portion of the time period covered by the residents’ claims. We reverse.

I. Background

From 1906 to approximately 1970, the defendants-appellants Atlantic Richfield Company, BP West Coast Products LLC, E. I. du Pont de Nemours and Company, and The Chemours Company (collectively, "the Companies"), their predecessors, and a handful of other entities manufactured certain industrial materials at the U.S. Smelter and Lead Refinery, Inc. Superfund Site in East Chicago, Indiana. In the 1970s, the East Chicago Housing Authority constructed the West Calumet Housing Complex, a low-income residential building, on the same site.

In September 2017, former West Calumet tenants sued the Companies as the successors in interest to International Smelting and Refining Company (ISR), Anaconda Lead Products Company, International Lead Refining Company, International Smelting Company, and other entities in Indiana state court alleging that they had polluted the soil at and around their modern-day building, exposing the residents to hazardous substances like lead and arsenic. Specifically, the resident-plaintiffs ("the Residents") claimed Atlantic Richfield tortiously contaminated the land between 1938 and 1965, and that E. I. du Pont de Nemours and Company and The Chemours Company (together, "DuPont") did so from 1910 to 1949.

In November 2017, Atlantic Richfield removed the case to federal court under 28 U.S.C. § 1442(a)(1), asserting that it was entitled to a government contractor defense. In support of its notice, Atlantic Richfield contended that its predecessor, ISR, operated a lead refinery, white lead carbonate plant, and zinc oxide plant near the site of the modern-day West Calumet Housing Complex during World War II. At that time, the federal government thoroughly regulated the use of lead and zinc, which ISR sold to entities who were under contract with the government to produce the goods for the military. More importantly, ISR itself held five contracts with the United States Army worth $837,000 (today, approximately $12 million) in sales of zinc oxide.

The materials made by ISR—white lead carbonate, zinc oxide, and lead—were critical wartime commodities because they were necessary to make essential military and civilian goods. Given their critical nature, the United States required ISR to manufacture the zinc oxide, white lead carbonate, and lead produced at the East Chicago site according to detailed federal specifications. Certain regulations also mandated that ISR prioritize its sales to rubber and paint companies holding defense contracts (setting aside the predetermined quantities for the federal government), which effectively prevented ISR from selling its products to distributors for civilian applications. Indeed, at one point, conservation orders severely restricted the amount of white lead in paint, and as a result, reduced ISR's sales. Similarly, the government either restricted or prohibited the use of zinc to manufacture most civilian products. Other forms of federal oversight included price control, with violations punishable by criminal prosecution and the denial of further supplies. In sum, the government directed nearly every aspect of ISR's production process at the site.

On the same day Atlantic Richfield filed its notice of removal, DuPont joined its codefendant and filed a supplemental notice. DuPont asserted that the United States government directed it to build a facility for the government and then lease it from the government to produce Freon-12 and hydrochloric acid (a byproduct of Freon-12) solely for the government. DuPont's manufacture of Freon-12 resulted in waste streams containing lead and arsenic. Additionally, DuPont received five shipments of surplus lead from the military following the war in September 1945, April 1946, October 1946, and December 1946. The government closely controlled the plant's operation, approving the plans, designs, and schedules for manufacturing. It even assigned a supervising engineer and other support staff to oversee the activities on site.

The Residents moved to remand the case back to state court in December 2017. The district court granted that motion, concluding that the Companies had only acted under color of federal office for a small part of the alleged time period at issue. Put differently, the court found removal improper because most of the Companies’ government business occurred outside the relevant time frame. The court further reasoned that Atlantic Richfield was under no obligation to comply with industrywide regulations, and regardless, was merely a supplier. As to DuPont, the court determined that the Residents were not suing DuPont over its Freon-12 production, citing the Residents’ statement in their complaint that "[t]his action does not pertain to DuPont's manufacture and production of Freon-12 and the byproduct of hydrochloric acid."

These timely appeals followed.

II. Discussion

"We review subject-matter jurisdiction and the propriety of the removal of a state-court action de novo. The party seeking removal bears the burden of establishing federal jurisdiction.... [T]he Supreme Court has made clear that courts must liberally construe § 1442(a)." Betzner v. Boeing Co. , 910 F.3d 1010, 1014 (7th Cir. 2018) (citations omitted). We therefore evaluate the Companies’ allegations in support of removal under the federal pleading standards, asking whether they are facially plausible. See id. at 1016.

Federal officer removal is appropriate when "the defendant (1) is a person within the meaning of the statute, (2) is acting under the United States, its agencies, or its officers, (3) is acting under color of federal authority, and (4) has a colorable federal defense." Id. at 1015. Recognizing our precedent on the matter, the Residents do not dispute that the Companies are persons under § 1442(a). See Ruppel v. CBS Corp. , 701 F.3d 1176, 1181 (7th Cir. 2012) (holding that corporations are persons within the meaning of the federal officer removal statute). Instead, the Residents focus on the Companies’ purported failure to establish the third and fourth criteria and assert that Atlantic Richfield specifically does not meet the second criterion. We begin with the latter.

A. Acting Under the Federal Government

The Residents contend that Atlantic Richfield must show substantially more than its wartime operation of a plant in a highly regulated industry to establish it acted under federal authority. They insist that most of the conduct Atlantic Richfield relies on to support removal is nothing more than its adherence to regulations that applied to all market participants. The crux of the inquiry under this element, however, is whether there was a special relationship between the defendant and the federal government. That the federal government may have had special relationships with other private entities because it was fighting a war is irrelevant.

"The relevant relationship," the Supreme Court has reminded us, "is that of a private person acting under a federal ‘officer’ or ‘agency.’ " Watson v. Philip Morris Cos., Inc. , 551 U.S. 142, 151, 127 S.Ct. 2301, 168 L.Ed.2d 42 (2007) (quoting § 1442(a)(1) ). Typically, "[t]hat relationship ... involves subjection, guidance, or control. In addition, precedent and statutory purpose make clear that the private person's ‘acting under’ must involve an effort to assist, or to help carry out, the duties or tasks of the federal superior." Id. at 151–52, 127 S.Ct. 2301 (citations and internal quotation marks omitted).

But "the help or assistance necessary to bring a private person within the scope of the statute does not include simply complying with the law." Id. at 152, 127 S.Ct. 2301. In Watson , the Supreme Court explained that

a highly regulated firm cannot find a statutory basis for removal in the fact of federal regulation alone. A private firm's compliance (or non-compliance) with federal laws, rules, and regulations does not by itself fall within the scope of

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