In re Methyl Tertiary Butyl Ether ("Mtbe")

• Decision Date: 24 May 2007
• Docket Number: Docket No. 04-6056-cv(CON).,Docket No. 04-5974-cv(L).
• Citation: 488 F.3d 112
• Parties: In re METHYL TERTIARY BUTYL ETHER ("MTBE") PRODUCTS LIABILITY LITIGATION. The People of the State of California, Plaintiff-Appellant, v. Atlantic Richfield Company, et al., Defendants-Appellees. The State of New Hampshire, Plaintiff-Appellant, v. Amerada Hess Corporation, et al. Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

488 F.3d 112

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

The People of the State of California, Plaintiff-Appellant, v. Atlantic Richfield Company, et al., Defendants-Appellees.

The State of New Hampshire, Plaintiff-Appellant, v. Amerada Hess Corporation, et al. Defendants-Appellees.

Docket No. 04-5974-cv(L).

Docket No. 04-6056-cv(CON).

United States Court of Appeals, Second Circuit.

Argued: January 26, 2006.

Decided: May 24, 2007.

[488 F.3d 114]

Jan Scully, Albert Locher, Russ Detrick, Sacramento County Office of the District Attorney, Sacramento, CA, for California Plaintiff-Appellant.

Kelly Ayotte, Maureen D. Smith, Attorney General of the State of New Hampshire Concord, NH, for New Hampshire Plaintiff-Appellant.

Nathan P. Eimer, Eimer Stahl Klevorn & Solberg LLP, Chicago, IL, for Defendants-Appellees.

Before: RAGGI and HALL, Circuit Judges, and KORMAN, District Judge.^*

EDWARD R. KORMAN, District Judge.

This interlocutory appeal arises from lawsuits originally filed by the States of California and New Hampshire in their respective state courts against corporations that manufactured, refined, marketed, or distributed gasoline containing methyl tertiary butyl ether ("MTBE"). Refiners have added MTBE to some gasoline since the late 1970s in order to enhance its octane content. The use of MTBE significantly increased after 1990, when Congress established the Reformulated Gasoline Program ("RFG Program") as part of its amendments to the Clean Air Act ("CAA"). See 42 U.S.C. § 7545(k). Until 2005, when the Clean Air Act was again amended, the RFG Program required the use of reformulated gasoline containing at least 2 percent chemical oxygen by weight in certain metropolitan areas with high summertime smog levels. See id. § 7545(k)(2)(B) (2000). States with less severe smog problems may opt in to the RFG Program. Id. § 7545(k)(6). Pursuant to regulations promulgated by the Environmental Protection Agency ("EPA") in 1991, MTBE is one of several different oxygenates that may be used to certify gasoline as reformulated. 40 C.F.R. § 80.46(g)(2)(i). These provisions of the RFG Program took effect in 1995. 42 U.S.C. § 7545(k)(5). The CAA amendments also created the Oxygenated Fuels Program ("Oxyfuel Program"), which requires gasoline containing 2.7 percent oxygen by weight during winter months in areas that do not meet national air quality standards for carbon monoxide. 42 U.S.C. § 7545(m)(2).

The complaints allege that MTBE contaminated public drinking water supplies through discharges, leaks, overfills, and spills from gasoline delivery facilities, as well as from the release of gasoline in certain consumer and commercial activities. When released into the environment, MTBE can render water undrinkable by giving it a foul taste and odor, and, at high concentrations, it poses a risk to human health. Because of its chemical properties MTBE dissolves easily in water, does not biodegrade, and can disperse quickly through a water supply, reaching areas far from its initial release. This makes MTBE more difficult and expensive to remove from groundwater than other gasoline constituents that also pose a threat to the environment and human health. The complaints allege various theories of liability, under the laws of California and New Hampshire, to hold the defendants responsible for the damage caused by MTBE.

These two cases are among scores of related actions removed from state court and transferred to the Southern District of New York by the Judicial Panel on Multi-district Litigation pursuant to MDL No. 1358, In re Methyl Tertiary Butyl Ether ("MTBE") Products Liability Litigation. Before considering California's and New Hampshire's motions to remand, the district court had already denied similar motions by plaintiffs in other related cases. In two decisions, the district court held that the cases were removable under either (1) the federal officer removal statute, 28 U.S.C. § 1442, because the defendants had acted at the direction of a federal agency in adding MTBE to gasoline, In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liab. Litig., 342 F.Supp.2d 147, 156-58 (S.D.N.Y.2004) ("MTBE III"), or (2) the bankruptcy removal statute, 28 U.S.C. § 1452, because defendant Texaco, Inc. (now ChevronTexaco Corp.) had earlier filed for and been discharged from bankruptcy, In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liab. Litig., 341 F.Supp.2d 386, 413-14 (S.D.N.Y.2004) ("MTBE V"). In the latter case, the district court also held that subject matter jurisdiction could not be predicated on the basis of a substantial federal question or complete preemption. Id. at 402-03, 406-11.

The district judge asked California and New Hampshire to brief the then-undecided question of sovereign immunity. She then held that "the removal of cases filed by State Plaintiffs does not violate principles of sovereign immunity." In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liab. Litig., 361 F.Supp.2d 137, 148 (S.D.N.Y.2004) ("MTBE VI"). This interlocutory appeal followed. Two issues are presented: (1) whether principles of sovereign immunity are violated when a state plaintiff voluntarily prosecutes a claim in state court and the action is removed from state to federal court pursuant to a statute that expressly authorizes removal; and (2) if not, whether the district court had subject matter jurisdiction over this matter under the federal officer removal statute, 28 U.S.C. § 1442, the bankruptcy removal statute, 28 U.S.C. § 1452, or some other ground. Because the subject matter jurisdiction of the district court, unlike the issue of sovereign immunity, is not normally the proper subject of an interlocutory appeal, we must also determine whether we may even reach the second issue.

DISCUSSION

We review the district court's legal conclusions de novo. Cooper v. New York State Office of Mental Health, 162 F.3d 770, 773 (2d Cir.1998) (sovereign immunity); Bechtel v. Competitive Techs, Inc., 448 F.3d 469, 471 (2d Cir.2006) (subject matter jurisdiction).

I. Sovereign Immunity

The Eleventh Amendment provides that "[t]he Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." U.S. Const. amend. XI. The question presented here is whether a suit filed by a state in its own courts, and then removed to federal court, is a suit "commenced or prosecuted against" that state.

Early in its history, the Supreme Court answered that question in the negative. Speaking through Chief Justice Marshall, the Court held in Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 5 L.Ed. 257 (1821), that the character of the parties to a lawsuit does not change when the forum in which the suit is heard does:

To commence a suit, is to demand something by the institution of process in a Court of justice; and to prosecute the suit, is, according to the common acceptation of language, to continue that demand. By a suit commenced by an individual against a State, we should understand process sued out by that individual against the State, for the purpose of establishing some claim against it by the judgment of a Court; and the prosecution of that suit is its continuance. Whatever may be the stages of its progress, the actor is still the same . . . . If a suit, brought in one Court, and carried by legal process to a supervising Court, be a continuation of the same suit, then this suit is not commenced nor prosecuted against a State. It is clearly in its commencement the suit of a State against an individual, which suit is transferred to [federal] Court, not for the purpose of asserting any claim against the State, but for the purpose of asserting a constitutional defence against a claim made by a State.

Id. at 408-09. As a result, the Chief Justice concluded, "[t]he [Eleventh] amendment . . . extended to suits commenced or prosecuted by individuals, but not to those brought by States." Id. at 407. While the particular issue in Cohens was whether the Eleventh Amendment barred Supreme Court review of a judgment obtained by a state against an individual in state court, the holding is equally applicable here.

Nevertheless, state sovereign immunity is broader than, and independent of, the immunity provided by the Eleventh Amendment. See Alden v. Maine, 527 U.S. 706, 713, 119 S.Ct. 2240, 144 L.Ed.2d 636 (1999); Idaho v. Coeur d'Alene Tribe of Idaho, 521 U.S. 261, 267, 117 S.Ct. 2028, 138 L.Ed.2d 438 (1997). Indeed, since Hans v. Louisiana, 134 U.S. 1, 10 S.Ct. 504, 33 L.Ed. 842 (1890), the Supreme Court has recognized that state sovereign immunity is not confined by the text of the Eleventh Amendment, but is part of the constitutional structure. California and New Hampshire argue that these broader principles are offended when a suit voluntarily prosecuted by a state is removed to federal court.

Specifically, California argues that Hans raises a presumption against proceedings or suits that were "anomalous and unheard of" at the time the Constitution was adopted, and that the removal of cases brought by states from state courts was unheard of at that time. Cal. Br. at 15-20. The holding in Hans, however, was that "[t]he suability of a state, without its consent, was a thing unknown to the law." 134 U.S. at 16, 10 S.Ct. 504. While it is true that, prior to the adoption of the Constitution, removal of a case from state court was "unheard of," this was because "each State had complete and exclusive authority to administer by its courts all the law, civil and criminal, which existed within its borders. Its judicial power extended over every legal question that could arise." Tennessee v. Davis, 100 U.S. 257, 267, 25 L.Ed. 648 (1880). In other words, the constitutional framework for removal—including the existence of a federal judiciary—did not exist.

Nevertheless, there...