Waste Control Specialists v. Envirocare

• Decision Date: 18 January 2000
• Docket Number: No. 98-50952,98-50952
• Citation: 199 F.3d 781
• Parties: (5th Cir. 2000) WASTE CONTROL SPECIALISTS, LLC, Plaintiff-Appellant, v. ENVIROCARE OF TEXAS, INC.; ET AL., Defendants, ENVIROCARE OF TEXAS, INC; ENVIROCARE OF UTAH, INC.; KHOSROW B. SEMNANI; CHARLES A. JUDD; FRANK C. THORLEY, Defendants-Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

Page 781

199 F.3d 781 (5th Cir. 2000)

WASTE CONTROL SPECIALISTS, LLC, Plaintiff-Appellant, v. ENVIROCARE OF TEXAS, INC.; ET AL., Defendants, ENVIROCARE OF TEXAS, INC; ENVIROCARE OF UTAH, INC.; KHOSROW B. SEMNANI; CHARLES A. JUDD; FRANK C. THORLEY, Defendants-Appellees.

No. 98-50952

IN THE UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT

January 18, 2000

Appeal from the United States District Court for the Western District of Texas, Midland

Before REYNALDO G. GARZA, JOLLY, and WIENER, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

The issues presented in this appeal are, first, whether the district court erred in failing to remand this antitrust and business tort case to the state court by concluding that the complaint fell within the artful pleading doctrine and, second, whether the plaintiff waived its right to challenge federal jurisdiction because, after its efforts to remand had failed, it amended its complaint to state a federal claim.

I

The dispute between the appellant, Waste Control Specialists, L.L.C. ("WCS"), and the appellees, Envirocare of Texas, Inc., et al. (collectively, "Envirocare"), revolves around WCS's bid to enter the market for disposal of low-level radioactive and mixed waste.

WCS brought this suit against Envirocare in Texas state court alleging that "Envirocare conceived and implemented a plan to destroy WCS' ability to compete in the low-level radioactive and mixed waste business." WCS pled exclusively state law causes of action. They ranged from allegations of violation of the Texas Free Enterprise and Antitrust Act of 1993, Tex. Bus. & Com. Code 15.05(b) (1987) ("Texas Antitrust Act"), to business tort claims. Specifically, WCS alleged that Envirocare used its monopoly position improperly to prevent WCS from obtaining the approval of the state of Texas for its project. The alleged impropriety turned, first, on allegations of false and defamatory communications to state regulatory officials regarding the WCS project. Second, WCS charged that Envirocare engaged in a sham effort to create a competing facility in Andrews County, Texas. WCS alleged that the sole purpose of this effort in Andrews County was to incite a backlash against WCS based on citizen fear of that co unty becoming a toxic dumping ground. Naturally, Envirocare denied those allegations. Additionally, Envirocare raised the Noerr-Pennington affirmative defense, i.e., that these activities were immune from suit because efforts to influence public officials cannot violate antitrust laws.

Ten months after filing its original state petition, WCS filed an amended petition, apparently restricting its allegations to the non-commercial waste market--a market with only one consumer of disposal services, i.e., the only generator of non-commercial waste, the United States Department of Energy. At that point, Envirocare removed the action to federal district court. It asserted that, because the only customer for non-commercial waste market is the federal government, the single viable claim propounded by WCS must be based on federal antitrust law, notwithstanding that WCS's complaint made no reference to any federal law.

The district court agreed and, asserting the artful pleading doctrine, denied WCS's motion to remand. In filing its motion to remand, WCS objected strenuously to what it considered Envirocare's improper removal. It also filed a motion to reconsider the order denying remand. After its unsuccessful efforts to have the case remanded, WCS faced Envirocare's motion to dismiss. The district court strongly suggested that WCS's only potentially viable claim was a federal one. Accordingly, WCS amended its complaint expressly to allege a violation of the Sherman Act. Despite this amendment, on Envirocare's Fed. R. Civ. P. 12(b)(6) motion, the district court dismissed WCS's complaint, reasoning that Envirocare's activities were protected under the Noerr-Pennington doctrine.¹

II

We review de novo denials of motions to remand. See Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365 (5th Cir. 1995). The district court rejected WCS's motion to remand on the basis that the artful pleading doctrine applied. The court reached this conclusion notwithstanding the fact that the Sherman Act does not completely preempt the Texas Antitrust Act. The district court recognized that WCS's claim under the Texas Antitrust Act was not one subject to complete federal preemption. Indeed, the district court explicitly noted that federal antitrust law does not preempt Texas' antitrust law. See Pounds Photographic Labs, Inc. v. Noritsu America Corp., 818 F.2d 1219, 1226 (5th Cir. 1987). The district court held, however, that the Texas Antitrust Act was not applicable on the facts. The district court interpreted the Texas Act not to apply to actions that are wholly interstate in nature, and it found that WCS could not establish a Texas antitrust action because of the wholly interstate, or non-intrastate, nature of the federal government's waste disposal market. Although not expressly saying so, the district court's order clearly hinted that WCS's only possible claim was a federal one. Indeed, in a footnote, the order states that it "does not address the merits of the Plaintiff's federal antitrust claim," although WCS had not alleged that cause of action. Based on this conclusion that a federal claim effectively had been alleged, the court decided that it had subject matter jurisdiction.

The district court's decision regarding the viability of WCS's allegations appears to have been one the district court had no jurisdiction to make. Without complete preemption, the artful pleading doctrine does not apply. If this was once a matter of debate, the Supreme Court recently has put the issue to rest. See Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 118 S.Ct. 921, 925 (1998) ("The artful pleading doctrine allows removal where federal law completely preempts a plaintiff's state-law claim. . . . Although federal preemption is ordinarily a defense, once an area of state law has been completely considered, any claim purportedly based on that pre-empted state law claim is considered, from its inception, a federal claim, and therefore arises under federal law.")(citations and internal quotation marks omitted). See also Caterpillar, Inc. v. Williams, 482 U.S. 386, 397 n.11 (1987) ("Although 'occasionally the removal court will seek to determine whether the real nature of the claim is federal,regardless of plaintiff's characterization, most [courts] correctly confine this practice to areas of the law pre-empted by federal substantive law.") (quoting Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 410 (1981) (Brennan, J., dissenting)). Indeed, even prior to Rivet, this was the rule in this circuit and others. See Avitts v. Amoco Prod. Co., 53 F.3d 690, 693 (5th Cir. 1995) ("[W]hen both federal and state remedies are available, plaintiff's election to proceed exclusively under state law does not give rise to federal jurisdiction. In the present case, there is no doubt that Appellees have chosen to pursue only state law causes of action. . . . The district court had no jurisdiction over the subject matter . . . ."). See also James W. Moore, MOORE'S FEDERAL PRACTICE 107.14 [3][b][iv], p. 107.86.2-86.3 & n.184.1 (3d ed. 1999) (citing cases from the Third, Eighth, and Ninth Circuits, but noting some authority to the contrary).

The district court's error, perhaps, lies in overreliance on Carpenter, supra, 44 F.3d 362. The district court's adoption of language in Carpenter to support its holding that the artful pleading doctrine could apply irrespective of the lack of complete preemption does not take into account the full reach of the case's language or holding. For instance, the district court focused on a statement in Carpenter that, "[t]he artful pleading doctrine recognizes that the characterization of a federal claim as a state claim will not in all cases prohibit removal when the plaintiff has no state claim at all." Id. at 367. That quote must be read in context. First, Carpenter expressly stated:

In certain situations where the plaintiff necessarily has available no legitimate or viable state cause of action, but only a federal claim, he may not avoid removal by artfully casting his federal suit as one arising exclusively under state law. Although a defense, preemption may so forcibly and completely displace state law that the plaintiff's cause of action is either wholly federal or nothing at all.

Id. at 366 (emphasis added)(citing Avco Corp. v. Aero Lodge No. 735, Int'l Ass'n of Machinists, 390 U.S. 557, 559 (1968)). Indeed, the district court did not note the next sentence and citation.

The doctrine does not convert legitimate state claims into federal ones, but rather reveals the suit's necessary federal character. See Franchise Tax Board [v. Construction Laborers Vacation Trust], 463 U.S. [1,] 23 [(1983)] (announcing that this exception to the well-pleaded complaint rule "stands for the proposition that if a federal cause of action completely preempts a state cause of action any complaint that comes within the scope of the federal cause of action necessarily 'arises under' federal law.").

Carpenter specifically noted that the artful pleading doctrine is a "narrow exception," id. at 367, to the well-pleaded complaint rule, and that "[t]he Supreme Court has required that the preemption be complete." Id. at n.2 (citations omitted). Finally, Carpenter observed that "the Supreme Court has clearly sanctioned the [artful pleading] rule only in the area of federal labor relations and the Employee Retirement Income Security Act of 1974. . . ." Id.

In this circumstance, WCS remained the master of its complaint. See Avitts, 53 F.3d at 693. Although WCS could have alleged a federal cause of action in its state petition, it did not. It filed a complaint in state court alleging wholly state claims in a non-preempted field. Its choice...