In re Methyl Tertiary Butyl Ether (Mtbe)

• Decision Date: 07 November 2007
• Docket Number: No. 1:00-1898.,No. MDL 1358(SAS).,No. M21-88.,1:00-1898.,MDL 1358(SAS).,M21-88.
• Citation: 522 F.Supp.2d 569
• Parties: In re METHYL TERTIARY BUTYL ETHER ("MTBE") PRODUCTS LIABILITY LITIGATION. This document relates to: Quincy Community Services District v. Atlantic Richfield Co., et al., 04 Civ. 4970(SAS).
• Court: U.S. District Court — Southern District of New York

522 F.Supp.2d 569

In re METHYL TERTIARY BUTYL ETHER ("MTBE") PRODUCTS LIABILITY LITIGATION.

This document relates to:

Quincy Community Services District v. Atlantic Richfield Co., et al., 04 Civ. 4970(SAS).

No. 1:00-1898.

No. MDL 1358(SAS).

No. M21-88.

United States District Court, S.D. New York.

November 7, 2007.

Robin Greenwald, Esq., Robert Gordon, Esq., Weitz & Luxenberg, P.C., New York City, for Plaintiffs.

Peter John Sacripanti, Esq., James A. Pardo, Esq., McDermott Will & Emery LLP, New York City, for Defendants.

Victor M. Sher, Esq. Richard M. Franco, Esq. Sher Leff LP, San Francisco, CA, for Plaintiff Quincy Community Services District.

Richard E. Wallace, Esq., Peter C. Condron, Esq., Steven C. Dubuc, Esq., Wallace King Domike & Reiskin, PLLC, Washington, D.C., for Defendants Chevron U.S.A., Inc., Equilon Enterprises LLC, Shell Oil Company, and TMR Company and on behalf of the Defendants listed in the Opposition of Certain Defendants to Plaintiff's Motion to Remand.

OPINION AND ORDER

SHIRA A. SCHEINDLIN, District Judge.

I. INTRODUCTION

"Celebrated as the best example of democracy, cursed as the worst form of fragmented government, and generally misunderstood even by the experts, special districts are California's unique contribution to local government."¹ The first special district was organized by farmers frustrated with an inconsistent water supply and widely fluctuating prices in San Joaquin Valley.² Under California's Wright Act of 1887, these farmers were allowed to "create irrigation districts that could raise taxes to build needed canals and diversion structures."³

Today, there are over thirty thousand special districts across the country including the Californian plaintiff in this action, Quincy Community Services District ("Quincy").⁴ "Special districts deliver highly diverse services including water, closed captioned television, mosquito abatement, and fire protection."⁵ "Districts' service areas can range from a single city block to vast areas which cross city and county lines."⁶

In this case, Quincy "owns and operates a public drinking water system that supplies water to residential and business users within its service area."⁷ Four years ago, Quincy sued various oil companies as a result of the contamination, or threatened contamination, of its groundwater with methyl tertiary butyl ether ("MTBE"). Defendants removed the action from state to federal court and, in mid-2004, it was transferred to this Court as part of a large multi-district litigation ("MDL").

Quincy now moves to remand the action to state court in light of the Second. Circuit's decision in People of State of California v. Atlantic Richfield Company, et al. and State of New Hampshire v. Amerada Hess Corporation, et al.⁸ Quincy argues that it is in the same position as the states of California and New Hampshire (i.e., that they are all governmental units enforcing their police or regulatory power) and thus should not have been removed under the bankruptcy removal statute.⁹

Quincy's argument must be rejected for the simple reason that, as a special district under California law, Quincy does not have any police or regulatory powers. Moreover, to the extent that Quincy urges that this Court should exercise its discretion to abstain from exercising jurisdiction, the Court continues to adhere to the position stated over three years ago when it first considered this issue: retaining federal jurisdiction over the action as part of the MDL better serves the goal of judicial efficiency.¹⁰

II. PROCEDURAL BACKGROUND

On November 7, 2003, Quincy filed a complaint in the Superior Court of California, Sacramento County, against various oil companies as a result of the contamination, or threatened contamination, of their groundwater with MTBE. On December 17, 2003, Defendants removed the action to the United States District Court for the Eastern District of California based on, inter alia, (1) federal agent jurisdiction, and (2) bankruptcy jurisdiction.¹¹ Five days later, on December 22, 2003, Quincy filed a motion to remand. The district judge denied Quincy's remand motion and granted a motion to stay the action pending transfer of the case to this Court by the Judicial Panel on Multidistrict Litigation ("JPML"). On a motion to reconsider, however, the judge vacated his order denying the motion for remand, acknowledging that it was not considered on its merits, but ordered that the action remain stayed pending a final order by the JPML.

The JPML then transferred the action to this Court pursuant to section 1407 of title 28 of the United States Code as part of a large MDL involving MTBE that now involves over one hundred cases from across the country. The final transfer order was issued on June 16, 2004. Within the thirty day limit for filing a motion to remand, Quincy joined with plaintiffs from California in several other actions in the MDL to move for remand on July 15, 2004. In effect, the July 15, 2004 motion renewed Quincy's original motion for remand made in the Eastern District of California. In the July 15 motion, plaintiffs argued that 28 U.S.C. § 1442 ("section 1442"), the federal officer removal statute, was not a proper basis for removing the actions to federal court or, if this Court held otherwise, it should certify the opinion for review by the Second Circuit under 28 U.S.C. § 1292(b).¹²

In response to the motions to remand filed by various plaintiffs in the MDL, I issued the following orders. In nine actions, plaintiffs from New York filed a motion to remand their cases, which I denied on March 16, 2004.¹³ In particular, I held that defendants could remove the action under the federal officer removal statute. I held, among other things, that defendants had sufficiently alleged that they added MTBE to gasoline at the direction of the Environmental Protection Agency, a federal agency, to comply with the requirements of the Reformulated Gasoline ("RFG") Program and the Oxygenated Fuels ("OF") Program.

I then considered the motions to remand filed by twenty-one plaintiffs in non-RFG and non-OF areas of the country, including Quincy.¹⁴ In denying these remand motions on September 3, 2004, I held that this Court had bankruptcy jurisdiction under 28 U.S.C. § 1334 ("section 1334"), because defendant Texaco, Inc. (now ChevronTexaco Corp.) had earlier filed for and been discharged from bankruptcy.¹⁵ Thus, defendants had properly removed the action to federal court under section 1452, the bankruptcy removal statute.

Finally, I considered the motions to remand by the states of California and New Hampshire, which argued that the Eleventh Amendment of the United States Constitution prohibited their actions from being removed to federal court under the doctrine of sovereign immunity.¹⁶ These plaintiffs also argued that their cases were improperly removed under the statutes governing the removal of cases involving federal officers or bankruptcy. I held that "the removal of Cases filed by State Plaintiffs does not violate principles of sovereign immunity."¹⁷

The states of California and New Hampshire appealed that decision to United States Court of Appeals for the Second Circuit. The court affirmed this Court on the first issue, holding that "sovereign immunity does not preclude the removal to federal court of a suit filed by a state plaintiff in state court."¹⁸

The Second Circuit then turned to the question of "whether the removal of these cases has, in fact, been authorized by Congress."¹⁹ The court recognized that "the denial of a motion to remand is generally not the proper subject of an interlocutory appeal."²⁰ "Nevertheless, California and New Hampshire [asked the Second Circuit] to rule that the district court erred in holding that these cases were removable under the federal officer and bankruptcy removal statutes."²¹

The Second Circuit held that the interlocutory appeal by California and New Hampshire on the issue of sovereign immunity presented a unique situation allowing it to review whether jurisdiction was proper because the issues were "inextricably intertwined" with sovereign immunity, which was properly before the court pursuant to the collateral order doctrine. The Second Circuit held that those two actions had been improperly removed under both the federal officer removal statute and the bankruptcy removal statute.²² The Second Circuit therefore vacated this Court's order and remanded with directions to return the cases to the forums from which they were removed.

Following the Second Circuit's decision, Quincy filed this new motion to remand. Quincy argues that the removal of its action under the bankruptcy removal statute was improper and thus the case should be remanded or the Court should exercise its discretion and abstain from continuing to exercise jurisdiction.²³

III. DISCUSSION

Quincy's primary argument is that "[u]nder the Second Circuit's holding in the People of California and New Hampshire cases, Plaintiff's lawsuit comes squarely under the public agency exception to the bankruptcy removal statute."²⁴ However, unlike the states of California and New Hampshire, Quincy does not have any police or regulatory powers. Thus, as a matter of law, it is impossible for Quincy to file a civil action to enforce such power. In addition, Quincy also argues that this Court should exercise its discretion to remand the action. The Court declines to exercise its discretion because the reasons for retaining the action as part of this MDL that this Court gave several years ago still apply today.

A. DEFENDANTS PROPERLY REMOVED THE ACTION UNDER SECTION 1452

The bankruptcy removal statute provides:

A party may remove any claim or cause of action in a civil action other than ... a civil action by a governmental unit to enforce such governmental unit's police or regulatory power, to the district court for the district where such civil action is pending, if such district court has jurisdiction of such...