Landry v. Exxon Pipeline Co.
| Decision Date | 28 March 2001 |
| Docket Number | No. 99-1084.,99-1084. |
| Parties | Claiborne Joseph LANDRY, James Joseph Landry, and Michael J. Dupre v. EXXON PIPELINE COMPANY, Mendoza Marine, Inc., Shell Western E & P, Inc., Panaco, Inc., and Louisiana Department of Transportation and Development. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Middle District of Louisiana |
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William W. Goodell, Jr., Lafayette, LA, for Claiborne Joseph Landry, James Joseph Landry, and Michael E. Dupre.
Henry D.H. Olinde, Jr., Baton Rouge, LA, for Claiborne Joseph Landry.
Patricia E. Weeks, New Orleans, LA, for Exxon Pipeline and Shell Western.
Charles Roward Talley, New Orleans, LA, for Northfield Insurance Company.
REASONS FOR ORDER REMANDING CASE TO STATE COURT
Before the Court is Defendants' Motion to Transfer this matter to the Bankruptcy Court for the Northern District of Texas, and Plaintiffs' Motion to Remand this matter to the Eighteenth Judicial District Court for the Parish of Iberville, State of Louisiana ("State Court"). For the following reasons, the Court grants Plaintiffs' Motion to Remand, therefore, the Defendant's Motion to Transfer is moot.
On August 21, 1998, Plaintiffs, Claiborne Joseph Landry, James Joseph Landry, and Michael J. Dupre (collectively, "Plaintiffs") filed suit in State Court against National Energy Group, Inc. ("NEG" or "Debtor"), Exxon Pipeline Company ("Exxon"), Mendoza Marine, Inc. ("Mendoza"), Shell Western E & P, Inc. ("Shell"), Panaco, Inc. ("Panaco"), and the Louisiana Department of Transportation and Development ("LDOTD") (collectively, "Defendants"), generally alleging entitlement, under Louisiana law, to damages from the Defendants as a result of contamination of the Plaintiffs' land.1 The basis for damages, as alleged by the Plaintiffs, is that a pipeline, either owned and/or operated by the Defendants, leaked contaminants onto the Plaintiff's property requiring an environmental cleanup of that property.
On September 23, 1998, Panaco, with the consent of Exxon, Shell, and NEG, removed this lawsuit to the United States District Court for the Middle District of Louisiana ("District Court") alleging fraudulent joinder of Mendoza2 and LDOTD, thereby premising jurisdiction upon diversity. The District Court subsequently remanded the matter to State Court on November 25, 1998.
On December 4, 1998, an involuntary Chapter 11 proceeding was commenced against NEG in the United States Bankruptcy Court for the Northern District of Texas.3 Plaintiffs then moved to dismiss NEG from the lawsuit on December 23, 1998.4 On January 11, 1999 the State Court granted Plaintiffs' Motion to Dismiss NEG.
On January 15, 1999, apparently unaware that Plaintiffs had dismissed NEG from the suit, Shell and Exxon, with the consent of Panaco, again filed a Notice of Removal with the District Court. Defendants asserted that the bankruptcy case involving NEG provided a basis for federal jurisdiction under, at the least, the "related to" prong of 28 U.S.C. 1334(b).5 The Defendants subsequently moved to voluntarily dismiss the removal, which was treated by the District Court as a Motion to Remand. The District Court again remanded the matter to State Court on April 23, 1999.
Thereafter, Plaintiffs moved in the State Court to add, as defendants, NEG's insurers, Northfield Insurance Company, Westchester Fire Insurance Company, Lexington Insurance Company, and Commercial Underwriters Insurance Company (collectively, "Insurers") pursuant to the Louisiana Direct Action Statute.6 Plaintiffs sought to recover against certain comprehensive general liability ("CGL") insurance policies issued by the Insurers to NEG. On July 21, 1999, the State Court granted Plaintiffs' motion to amend their petition to add the Insurers.
On August 9, 1999, Shell and Exxon, joined by Panaco and the Insurers,7 again removed the lawsuit to the District Court under 28 U.S.C. § 1452. The Defendants again premised jurisdiction for this removal on 28 U.S.C. § 1334(b), asserting that "the possible distribution of NEG's insurance proceeds are property of the bankruptcy estate and will affect the bankruptcy estate."8 Shell and Exxon immediately filed a Motion to Transfer the matter to the United States District Court for the Northern District of Texas, the district court handling the NEG bankruptcy.
Plaintiffs subsequently filed a Motion to Remand or Abstain. Plaintiffs argue that the addition of the Insurers does not confer jurisdiction on this Court, but that even if it does, then equity dictates either remand under 28 U.S.C. § 1452(b) or abstention under 28 U.S.C. § 1334(c). As this matter ostensibly involves jurisdiction premised upon 28 U.S.C. § 1334, the District Court referred the matter to this Court for resolution.9
As has been oft repeated, federal courts are courts of limited jurisdiction. A specific basis for jurisdiction must be statutorily or constitutionally present for a federal court to take cognizance of a particular matter.10 In our system of federalism, state courts, which are generally courts of general jurisdiction except where Congress has statutorily posited exclusive original jurisdiction within the federal courts,11 may hear and determine controversies which either arise under, or are affected by, federal laws. In certain situations, though, Congress has chosen to allow a partyies to the action to "remove" the proceeding from the state court to the federal court for adjudication.12 Federal court removal jurisdiction, however, is to be strictly construed.13
In this case, the removing parties, Shell and Exxon, based removal on 28 U.S.C. § 1452, which allows for removal of civil actions if the district court has jurisdiction under 28 U.S.C. § 1334, i.e., the bankruptcy jurisdiction statute. Specifically, 28 U.S.C. § 1452(a) provides:
A party may remove any claim or cause of action in a civil action other than a proceeding before the United States Tax Court or 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 claim or cause of action under section 1334 of this title.
As 28 U.S.C. § 1452(a) enables a removal of an action only if a federal court has jurisdiction under 28 U.S.C. § 1334, the first task for this Court, then, is to determine whether it has jurisdiction under 28 U.S.C. § 1334.14 28 U.S.C. § 1334, in turn, provides in pertinent part:
Section 1334(a) and (b), thus, provide four types of matters upon which federal jurisdiction may be founded: (1) cases under title 11; (2) civil proceedings arising under title 11; (3) civil proceedings arising in cases under title 11, and; (4) civil proceedings related to cases under title 11.15 The Fifth Circuit previously defined the phrase "all cases under title 11" as referring merely to the bankruptcy petition itself.16 The phrase "all civil proceedings arising under title 11, or arising in or related to cases under title 11," however, was meant to identify, collectively, a broad range of matters subject to the bankruptcy jurisdiction.17 The Fifth Circuit has interpreted the phrase "Arising under title 11" to delineate those proceedings that involve a cause of action created or determined by a statutory provision of title 11,18 while the phrase "arising in . . . cases under title 11" refers to administrative matters that arise only in bankruptcy cases.19
The phrase "related to," however, refers to a much broader category of proceedings. The United States Supreme Court, wading into the mire of "related to" jurisdiction, has noted:
Congress did not delineate the scope of "related to" jurisdiction, but its choice of words suggests a grant of some breadth. The jurisdictional grant in § 1334(b) was a distinct departure from the jurisdiction conferred under previous Acts, which had been limited to either possession of property by the debtor or consent as a basis for jurisdiction.20
Delving further, the United States Supreme Court has expressed agreement with the Third Circuit's21 view that:
Congress intended to grant comprehensive jurisdiction to the bankruptcy courts so that they might deal efficiently and expeditiously with all matters connected with the bankruptcy estate, and that the "related to" language of § 1334(b) must be read to give district courts (and bankruptcy courts under § 157(a)) jurisdiction over more than simple proceedings involving the property of the debtor or the estate.22
However, the Edwards Court cautioned that "related to" jurisdiction is not limitless.23 As has been described by the Fifth Circuit, the phrase, "related to," is a term of art with a meaning less broad than that ordinarily given to the phrase, i.e., "having some connection with."24 For purposes of bankruptcy jurisdiction, the phrase "related to" has a causal component.25 For bankruptcy jurisdiction to attach, the proceeding must be capable of causing an effect on a bankruptcy estate.26
To strike a balance between the broad grant of jurisdictional authority and the inherent limits vested in bankruptcy courts, the Fifth Circuit, following the lead of the Third Circuit's Pacor decision, has stated that a proceeding is "related to" a bankruptcy if "the outcome of that proceeding could...
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...See Appellants' Br. at 24 (citing In re Babcock & Wilcox. Co, 69 F. App'x 659 (5th Cir. 2003) (per curiam); Landry v. Exxon Pipeline Co., 260 B.R. 769, 800 (Bankr. M.D. La. 2001) (examining Louisiana's analogous direct action statute)). However, even within the context of Louisiana law, the......