Industria Lechera De P.R., Inc. v. Beiró, 18-1347
| Decision Date | 01 March 2021 |
| Docket Number | No. 18-1347,18-1347 |
| Parties | INDUSTRIA LECHERA DE PUERTO RICO, INC., Plaintiff-Appellant, v. Ramón González BEIRÓ in his official capacity as Acting Secretary of The Puerto Rico Department of Agriculture; Jorge Campos Merced, in his official capacity as Administrator of the Puerto Rico Milk Industry Regulatory Office, Defendants-Appellees, and Suiza Dairy, Corp.; Vaquería Tres Monjitas, Inc., Intervenor-Defendants, Intervenor-Appellees. |
| Court | U.S. Court of Appeals — First Circuit |
Rafael M. Santiago-Rosa, Guaynabo, PR, with whom José R. Negrón-Fernández, and Marichal, Hernández, Santiago & Juarbe, LLC were on brief, for appellant.
Edward W. Hill, with whom The Law Offices of Edward W. Hill was on brief, for appellees.
Rafael Escalera Rodríguez, with whom Viviana M. Berríos-González, San Juan, PR, and Reichard & Escalera, LLC were on brief, for intervenor-appellee, Suiza Dairy Corp.
Enrique Nassar Rizek, with whom Enrique Nassar Rizek, Esq. ENR & Associates appeared, for intervenor-appellee Vaquería Tres Monjitas, Inc.
Before Howard, Chief Judge Torruella*** and Thompson, Circuit Judges.
This case is the latest episode in the long-running litigation over milk price regulation in Puerto Rico. Although this Court has spent much ink recounting the history of this dispute -- see Vaquería Tres Monjitas, Inc. v. Comas-Pagán, 772 F.3d 956 (1st Cir. 2014) ; Vaquería Tres Monjitas, Inc. v. Comas-Pagán, 748 F.3d 21 (1st Cir. 2014) ; P.R. Dairy Farmers Ass'n v. Comas-Pagán, 748 F.3d 13 (1st Cir. 2014) ; Vaquería Tres Monjitas, Inc. v. Irizarry, 587 F.3d 464 (1st Cir. 2009), reh'g and reh'g en banc denied, 600 F.3d 1 (1st Cir. 2010) -- we briefly lay out the relevant facts that have led us here and assume familiarity with our past decisions. We ultimately hold that neither we, nor the district court, have federal subject matter jurisdiction over the instant dispute and therefore remand with instructions to send the case back to the Puerto Rico Court of First Instance.
The relevant parties are familiar to us. Appellant Industria Lechera de Puerto Rico, Inc. ("Indulac") is owned and operated by Fondo de Fomento de la Industria Lechera, a statutorily created entity whose purpose is to promote Puerto Rico's milk industry. See Irizarry, 587 F.3d at 468. Indulac is the only entity in Puerto Rico authorized to process ultra-high temperature milk ("UHT milk"), which does not need to be refrigerated before it is opened. Id. at 468.
Appellees include Ramón González Beiró, in his official capacity as the acting Secretary of the Puerto Rico Department of Agriculture, and Jorge Campos Merced, the administrator of the Milk Industry Regulation Administration for the Commonwealth of Puerto Rico (Spanish acronym "ORIL"). ORIL, a subdivision of Puerto Rico's Department of Agriculture, regulates Puerto Rico's milk industry and has the power to set milk and milk-product prices. Id. at 469.
The appellees also include Puerto Rico dairy producers, Suiza Dairy, Inc. ("Suiza") and Vaquería Tres Monjitas ("VTM"). Id. at 467-68. Suiza and VTM purchase raw milk from local dairy farmers and process the milk into drinkable fresh milk. Id. at 468. Their fresh milk product is a direct competitor to Indulac's UHT milk. Id.
Suiza and VTM brought a lawsuit in 2004 in which they asserted that Puerto Rico's milk pricing regulations violated their rights under the Commerce Clause and the Fifth and Fourteenth Amendments of the United States Constitution, as well as under Puerto Rico law. Id. at 471-72. In 2007, the district court issued a preliminary injunction and ordered ORIL to adopt a mechanism to compensate retroactively Suiza and VTM at a "fair rate of return" from the year 2003 until ORIL could implement a new pricing regime. Id. at 472. To comply with the preliminary injunction, ORIL implemented a "regulatory accrual" mechanism that placed a small surcharge on every quart of milk sold to consumers. The surcharge amount then went into an account to benefit Suiza and VTM. Id. at 477.
In 2013, "after almost a decade of litigation -- complete with various evidentiary hearings, three appeals, and the onset of contempt proceedings -- the principal parties settled" and ORIL agreed to promulgate an industry-shaping price regulation. Comas-Pagán, 772 F.3d at 957. The parties to the Agreement were the Secretary of Agriculture of Puerto Rico on behalf of the Government of Puerto Rico, ORIL, VTM, and Suiza. The Agreement required ORIL to promulgate a new regulatory scheme and enact a Milk Price Order effective November 7, 2013. The Agreement further provided that, once the November 2013 Price Order came into effect, "the regulatory accrual charge ... will be deferred until January 1, 2017."
On November 7, 2013, the district court entered an order approving the Agreement and incorporating it as a consent decree. The district court retained jurisdiction of the case "for compliance purposes of all the covenants of the Settlement Agreement of October 29, 2013, or any other related matter and/or remedy related to the full compliance of the Settlement Agreement of October 29, 2013." Indulac, which had been an intervenor in that case -- but not a signatory to the Agreement -- moved to alter or amend the judgment. The district court denied Indulac's motion on the basis that, as an intervenor, Indulac did not have standing to request that the judgment adopting and entering the Agreement as a consent decree be amended or modified. See Vaquería Tres Monjitas, Inc. v. Comas, 992 F. Supp. 2d 39, 41 n.1 (D.P.R. 2013).
On December 29, 2016, ORIL issued a Price Order that reestablished the regulatory accrual surcharge on fresh milk products, effective January 1, 2017. And on May 31, 2017, ORIL issued another Price Order extending the regulatory accrual surcharge over all fluid milk, including UHT milk, effective June 1, 2017. The latter Price Order, which affects Indulac's UHT milk product, is the focus of this appeal.
On June 9, 2017, Indulac filed a challenge to ORIL's May 31, 2017 Price Order in the Puerto Rico Court of First Instance. Indulac argued that ORIL had failed to comply with three different procedural administrative requirements before issuing the May 2017 Price Order. Specifically, Indulac alleged that ORIL failed to: (1) give Indulac proper notice of the proposed Price Order; (2) abide by a statutory requirement to hold public hearings and require the attendance of specific government officials, consider certain factors prescribed by statute, including a recommendation by the Secretary of Consumer Affairs, and conduct a market study before issuing the Price Order; and (3) publish the rule in three consecutive editions of a newspaper of general circulation as required by statute. Because ORIL allegedly failed to comply with the applicable procedural rules, Indulac argued that the Price Order was void under Puerto Rico law and that its issuance violated Indulac's due process rights under the Constitution of the Commonwealth of Puerto Rico.
ORIL filed a notice of removal on June 27, 2017 and asserted federal jurisdiction based on 28 U.S.C. § 1331 and § 1441(a) and (c). ORIL contended that federal question jurisdiction existed because Indulac's lawsuit would "frustrate" the 2013 consent decree and cited "the All Writs Act ( 28 U.S.C. § 1651 ) and the Anti-Injunction Act ( 28 U.S.C. § 2283 ) in order to protect or effectuate [the Court's] judgment" (internal quotations omitted). ORIL also cited the district court's retention of jurisdiction to enforce the Agreement as supporting removal.
In addition, ORIL sought a preliminary and permanent injunction under the All Writs Act to enjoin the Puerto Rico Court proceedings in the event Indulac succeeded on a motion to remand the case back to the Puerto Rico Court. But Indulac did not oppose removal. Instead, Indulac acquiesced to the removal, stating that it would not seek remand if the district court found it had federal subject matter jurisdiction over the dispute.
The district court found that it had jurisdiction and denied ORIL's motion for injunctive relief as moot. Having found jurisdiction, the district court granted ORIL's motion to dismiss for failure to state a claim. Indulac appeals that dismissal.
Federal courts "have an independent obligation to determine whether subject-matter jurisdiction exists, even when no party challenges it." Hertz Corp. v. Friend, 559 U.S. 77, 94, 130 S.Ct. 1181, 175 L.Ed.2d 1029 (2010) ; see also Lawless v. Steward Health Care Sys., LLC, 894 F.3d 9, 16 (1st Cir. 2018) () Therefore, we must "raise and decide jurisdictional questions that the parties either overlook or elect not to press." Henderson ex rel. Henderson v. Shinseki, 562 U.S. 428, 434, 131 S.Ct. 1197, 179 L.Ed.2d 159 (2011). Mindful of these principles, our review of the district court's "retention of subject-matter jurisdiction over a removed case [is] de novo." Lawless, 894 F.3d at 16-17.
Federal courts have jurisdiction "over two general types of cases: cases that 'aris[e] under' federal law" and "cases in which the amount in controversy exceeds $75,000 and there is diversity of citizenship among the parties." Home Depot U.S.A., Inc. v. Jackson, ––– U.S. ––––, 139 S. Ct. 1743, 1746, 204 L.Ed.2d 34 (2019) (citing 28 U.S.C. §§ 1331, 1332(a) ). Defendants may remove a "state-court action over which the federal courts would have original jurisdiction ... to federal court" under the general removal statute, 28 U.S.C. § 1441. Id. All the parties before us are citizens of Puerto Rico, which precludes the existence of diversity jurisdiction, and ORIL did not claim diversity jurisdiction supported removal. Therefore, if federal jurisdiction exists, it must be supported by an issue that arises under federal law; this type of jurisdiction is often...
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