IOWA COMPREHENSIVE PETROLEUM v. Amoco Oil Co.

Decision Date27 April 1995
Docket NumberNo. C 95-3017.,C 95-3017.
PartiesIOWA COMPREHENSIVE PETROLEUM UNDERGROUND STORAGE TANK FUND BOARD 990C80656, Plaintiff, v. AMOCO OIL COMPANY, Defendant.
CourtU.S. District Court — Northern District of Iowa

Asst. Iowa Atty. Dean A. Lerner, for plaintiff Iowa Comprehensive Petroleum Underground Storage Tank Fund.

Michael J. Philippi, Coffield, Ungaretti & Harris, Chicago, IL, for defendant Amoco Oil Co.

ORDER GRANTING MOTION TO REMAND

BENNETT, District Judge.

                                             TABLE OF CONTENTS
                I.  INTRODUCTION .........................................................  405
                II. ANALYSIS .............................................................  407
                    A. Removal and Remand ................................................  407
                    B. Subject Matter Jurisdiction .......................................  408
                    C. Factors in Determining Status of an Entity ........................  409
                       1. Power to Sue and Be Sued in Its Own Name and to Enter into
                           Contracts .....................................................  413
                       2. Degree of Autonomy Over its Operations .........................  416
                       3. Whether the Entity is Performing a Governmental or Proprietary
                           Function ......................................................  417
                       4. Whether an Entity has been Separately Incorporated .............  420
                       5. Whether Entity's Property is Immune From State Taxation ........  420
                       6. Local Law and Decisions ........................................  420
                       7. Immunity .......................................................  420
                       8. Fiscal Autonomy ................................................  420
                    D. Conclusion ........................................................  422
                

Plaintiff's motion to remand to state court raises a nettlesome question of federal jurisdiction: is the Plaintiff, the Iowa Comprehensive Petroleum Underground Storage Tank Fund Board 990C80656 ("the Board"), a citizen of the State of Iowa for federal diversity of citizenship jurisdiction pursuant to 28 U.S.C. § 1332? The Board contends that it is an arm or alter ego of the State of Iowa and, if that is true, under well established precedent, the Board would not be a citizen of the State of Iowa. Consequently, federal diversity of citizenship jurisdiction would not exist in this case, and remand to the state courts of Iowa would be required. Amoco counters that the Board is an independent agency of the State, not its alter ego. Likewise, if this is true, under equally well established precedent, the Board would be a citizen of the State of Iowa; and there is federal diversity of citizenship jurisdiction in this court pursuant to 28 U.S.C. § 1332. This issue is a close one — the parties have mustered substantial arguments on both sides of the question.

Resolution of this question is further complicated by the parties' disagreement—reflected to a certain degree in the somewhat limited case law on the subject—as to the appropriate legal test or analysis to be used in determining whether the Board is or is not a citizen of the State of Iowa. Placing this procedural dispute in the context it is due, another court recently observed that a preliminary jurisdictional skirmish such as this one, requiring determination of citizenship for diversity of jurisdiction purposes, "has nothing to do with the substance of the real world dispute between these parties, but simply resolves where to try their lawsuit." University of Rhode Island v. A.W. Chesterton Co., 2 F.3d 1200, 1219 (1st Cir.1993) (Hornby, J., concurring). For the reasons that follow, this court concludes that the Board's motion to remand should be granted and the parties' lawsuit should be resolved where it began, in the state courts of Iowa.

I. INTRODUCTION

On January 19, 1995, the Board filed its petition in the Iowa District Court for Butler County against Defendant Amoco Oil Company ("Amoco") asserting a cause of action under Iowa Code § 455G.13 to recover money expended from the Iowa Comprehensive Petroleum Underground Storage Tank Fund ("the Fund"). The Board also asserts claims against Amoco under the Iowa common law for negligence. In 1989, the Iowa legislature enacted comprehensive legislation concerning petroleum underground storage tanks.1 1989 Iowa Acts ch. 131; See Hagen v. Texaco Refining & Mktg., Inc., 526 N.W.2d 531, 535 (Iowa 1995). This legislation is codified in Iowa Code ch. 455G. See Hagen, 526 N.W.2d at 535. The legislation established the Fund which is administered by the Board. See id.; Iowa Code §§ 455G.3-4. The Board is made up of six members, consisting of the following: the director of the department of natural resources, or the director's designee; the treasurer of state, or the treasurer's designee; the commissioner of insurance, or the commissioner's designee; the director of the legislative fiscal bureau, or the director's designee; and two public members appointed by the governor.2See Iowa Code § 455G.4(1)(a)-(e). The Fund was established to assist owners and operators of businesses with petroleum underground storage tanks to comply with federal financial responsibility requirements.3 The Fund was also designed to provide a fund for the cleanup of petroleum releases, and a mechanism to cover the costs of remedial actions for preexisting releases from petroleum underground storage tanks. It is the cost recovery enforcement provisions of the Fund, see Iowa Code § 455G.13, which the Board is attempting to enforce in this action. The Board asserts that Amoco owned underground storage tanks from which petroleum was released, and that in response to this leak the Board has expended money from the Fund for corrective action. The Board requests judgment against Amoco for the costs of corrective actions taken to remediate the site pursuant to Iowa Code §§ 455G.13(1) & (7).

Amoco is a corporation not organized under the laws of the state of Iowa, with its principal place of business outside the state of Iowa.4 On February 21, 1995, Amoco filed a petition for removal of this case to federal court pursuant to 28 U.S.C. § 1441. Amoco's basis for removal was diversity of citizenship pursuant to 28 U.S.C. § 1332.5 On February 27, 1995, the Board filed its motion to remand to state court. The Board argues that it is not a citizen of the State of Iowa for the purposes of diversity of citizenship because it is an arm of the State of Iowa or its alter ego, and this court therefore lacks jurisdiction under section 1332. Amoco filed a timely resistance to the Board's motion and argues that the Board is an entity independent of the State of Iowa and thus is a "citizen" of the State of Iowa for diversity purposes.

A hearing on the Board's motion was held on April 21, 1995. At the hearing the Board was represented by Assistant Iowa Attorney General Dean A. Lerner. Amoco was represented by Michael J. Philippi of Coffield, Ungaretti & Harris, Chicago, Illinois. The parties have filed thorough and extensive briefs and both counsel presented superb oral argument in support of their respective positions. This matter is now deemed fully submitted. Although not free from doubt, for the reasons set forth below, the court concludes the Board is the alter ego of the State of Iowa and, as such, there is no diversity of citizenship jurisdiction in this court under 28 U.S.C. § 1332.

II. ANALYSIS
A. Removal and Remand

The grounds and procedures for removal of a state court proceeding to federal court and for remand to state court are stated in three statutes, 28 U.S.C. §§ 1441, 1446, and 1447. The statute identifying removable actions, 28 U.S.C. § 1441, states in pertinent part:

(a) Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.

28 U.S.C. § 1441(a) (emphasis added).

The procedure and grounds for a challenge to removal are stated in 28 U.S.C. § 1447:

(c) A motion to remand the case on the basis of any defect in removal procedure must be made within 30 days after the filing of the notice of removal under section 1446(a). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded....

28 U.S.C. § 1447(c).6

As the party seeking removal and opposing remand, Amoco has the burden of establishing federal subject matter jurisdiction. See In re Business Men's Assurance Co. of America, 992 F.2d 181, 183 (8th Cir. 1993); Bor-Son Bldg. Corp. v. Heller, 572 F.2d 174, 181 n. 13 (8th Cir.1978); see also Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 42 S.Ct. 35, 66 L.Ed. 144 (1921); Mulcahey v. Columbia Organic Chem. Co., Inc., 29 F.3d 148, 151 (4th Cir.1994). The court's removal jurisdiction must be strictly construed. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 61 S.Ct. 868, 85 L.Ed. 1214 (1941); Mulcahey, 29 F.3d at 151. Furthermore, the district court is required to resolve all doubts about federal jurisdiction in favor of remand. In re Business Men's Assurance Co., 992 F.2d at 183 (citing Steel Valley Auth. v. Union Switch & Signal Div., 809 F.2d 1006, 1010 (3d Cir.1987), cert. denied, 484 U.S. 1021, 108 S.Ct. 739, 98 L.Ed.2d 756 (1988)). In general, remand orders issued under 28 U.S.C. § 1447(c) are not reviewable by appeal or writ of mandamus. In re Business Men's Assurance Co., 992 F.2d at 183; see also Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 342-43, 96 S.Ct. 584, 588-89, 46 L.Ed.2d 542 (1976) (remand orders unreviewable whether or not deemed to be erroneous by appellate court except when based on grounds outside § 1447(c)); Carr v. American Red Cross, 17 F.3d 671, 679 (3d Cir.1994) (citing Th...

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