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United States District Court, S.D. New York

October 6, 2005.

Shell Oil Company, et al., 05 Civ. 7269.

The opinion of the court was delivered by: SHIRA SCHEINDLIN, District Judge



On August 3, 2005, United States Magistrate Judge David G. Bernthal filed a Report recommending that plaintiffs' motion to remand be denied.*fn1 Plaintiffs object to three of Judge Bernthal's determinations: first, that Shell Oil Company's ("Shell Oil") Notice of Removal was timely; second, that Shell Oil acted under federal direction, had a colorable federal defense, and had shown a sufficient causal nexus between the conduct directed by the federal agency and the harm about which plaintiffs complain; and, third, that "from approximately January 1995 to June 1995, Defendant transported gasoline containing MTBE through the North Line Pipe Line in Limestone Township, Kankakee, Illinois" and that "Defendant apparently did not use MTBE in its North Line gasoline until 1995."*fn2


  Rule 72(b) of the Federal Rules of Civil Procedure permits a party to object to the recommendations of a Magistrate Judge. The District Judge is then required to "make a de novo determination of those portions of the report or specified proposed findings or recommendations to which" timely objections are made.*fn3


  This case is one of dozens in a multi-district litigation ("MDL"), in which numerous plaintiffs are seeking relief from contamination, or threatened contamination, of groundwater from various defendants' use of the gasoline additive methyl tertiary butyl ether ("MTBE").*fn4 This opinion relates only to Edith Quick, et al. v. Shell Oil Company, et al., 05 Civ. 7269.

  This case began in December 2001, when plaintiffs sued Shell Oil, Shell Pipe Line Corporation ("Shell Pipe Line"), Equilon Pipeline Company, LLC ("Equilon"), and Parsons Engineering Science, Inc., Richard M. Frendt, and Sasa Jazic (collectively "Parsons defendants") for nuisance and negligence arising out of a spill from the North Line Pipe Line ("Pipe Line"), allegedly controlled by Shell Oil, which contaminated the groundwater supply with MTBE and other additives.*fn5 Plaintiffs filed a First Amended Complaint and a Second Amended Complaint with essentially the same allegations.*fn6 These Complaints alleged that in 1988 an estimated 16,000 gallons of gasoline were released from the Pipe Line in Limestone Township, west of the City of Kankakee, in Kankakee County, Illinois.*fn7 Plaintiffs also alleged that gasoline continued to be found in the groundwater during the 1990s, either due to a subsurface spill at another location or because leakage from the original spill "was never permanently sealed off."*fn8 Plaintiffs alleged that Shell Oil transported MTBE-containing gasoline in the Pipe Line*fn9 and that it "maintained and controlled a continuing source of contamination into the waters of the State of Illinois."*fn10

  On March 11, 2005, plaintiffs obtained leave to file a Third Amended Complaint in order to add a products liability claim against Shell Oil, Shell Pipe Line, and Equilon.*fn11 In allegations added to the Third Amended Complaint, Plaintiffs stated that Shell Oil promoted the use of MTBE despite knowledge of the dangers it posed to the public health, and that MTBE pollution was inevitable unless proper precautions were taken.*fn12 Shell Oil breached its duty to test MTBE in order to determine whether it was environmentally safe and whether it posed significant risks to human health before selling MTBE-containing gasoline.*fn13 In addition, before adding MTBE to gasoline and selling it, Shell Oil should have taken special precautions, due to the fact that MTBE released into the environment would "mix easily with groundwater, move great distances, resist biodegradation and/or bioremediation, render drinking water unsafe and . . . threaten the public health and welfare."*fn14 Instead, according to plaintiffs, Shell Oil claimed that gasoline containing MTBE could be handled in the same manner as gasoline without MTBE, despite its knowledge that MTBE was a defective product and that the benefits of its use were outweighed by the costs imposed on society and the environment.*fn15

  Two days after the Third Amended Complaint was filed, Shell Oil filed a notice removing the case to federal court, asserting jurisdiction pursuant to both federal officer and federal question jurisdiction.*fn16 Shell Oil claimed that by adding the strict product liability claim, plaintiffs transformed their lawsuit into one that constituted an "attack on the comprehensive federal system that regulates the content of gasoline and that expressly authorizes and effectively requires the conduct that plaintiffs seek to prohibit."*fn17 Shell Oil further claimed that plaintiffs asserted for the first time in the Third Amended Complaint that Shell Oil was liable not only for negligently operating its pipeline when it released MTBE-containing gasoline, but also for the "design, manufacture, and formulation" of MTBE-containing gasoline.*fn18

  Shell Oil asserted that the Third Amended Complaint encompassed a time period when gasoline transported by Shell Oil "contained MTBE pursuant to a federal mandate embodied in the Reformulated Gasoline Program (`RGP') of the Clean Air Act."*fn19 Shell Oil claimed that this Third Amended Complaint was the first paper from which it could be ascertained that the action was removable pursuant to the procedural requirements of 28 U.S.C. § 1446(b).*fn20 Plaintiffs moved to remand, claiming that Shell Oil's Notice of Removal was untimely and that it had not established that removal was appropriate pursuant to section 1442(a).*fn21

  In his R & R, Judge Bernthal concluded that Shell Oil had "sufficiently established that it acted under federal agency direction when it added MTBE to its gasoline as alleged in Plaintiffs' strict liability claim."*fn22 The Judge further noted that plaintiffs' claims for public nuisance, strict liability for defective product, and negligence in the Third Amended Complaint, based on Shell Oil's decision to use MTBE-containing gasoline,*fn23 were similar to the claims addressed by this Court in MTBE III.*fn24 Finally, Judge Bernthal found that Shell Oil's only basis for removing the case was federal officer jurisdiction*fn25 and that removal was timely because Shell Oil had no notice of a claim that it acted at the direction of a federal officer until plaintiffs added the strict liability claim to the Third Amended Complaint.*fn26

  On August 11, 2005, the Judicial Panel on Multidistrict Litigation transferred this case to this Court for inclusion in In re Methyl Tertiary Butyl Ether ("MTBE") Products Liability Litigation, pursuant to Rule 7.4 of the Rules of the Judicial Panel on Multidistrict Litigation and 28 U.S.C. § 1407. IV. APPLICABLE LAW

  A. Removal and Remand

  Section 1447(c) of Title 28 provides: "If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." When a party challenges the removal of an action from state court, the burden falls on the removing party "to establish its right to a federal forum by `competent proof.'"*fn27 "In light of the congressional intent to restrict federal court jurisdiction, as well as the importance of preserving the independence of state governments, federal courts construe the removal statute narrowly, resolving any doubts against removability."*fn28 If the removing party cannot establish its right to removal by competent proof, the removal is improper, and the district court must remand the case to the court in which it was filed.*fn29

  A defendant may remove a civil action filed in state court to federal court if the claims arise under federal law.*fn30 A case arises under federal law when federal law provides for the cause of action,*fn31 or, as recently explained by the United States Supreme Court, where the state-law claim necessarily raises a "stated federal issue" that is substantial and disputed, "which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities."*fn32 In determining if this federal claim exists, courts will "examine the `well-pleaded' allegations of the complaint and ignore potential defenses."*fn33 The presence of a federal defense does not raise a federal question, "even if the defense is anticipated in the plaintiff's complaint, and even if . . . the federal defense is the only question truly at issue."*fn34 "A case is removable when the initial pleading enables the defendant to `intelligently ascertain' removability from the face of such pleading."*fn35 This standard "does not require a defendant to look beyond the initial pleading for facts giving rise to removability."*fn36 Nor does it require a defendant to "guess" whether the action is removable.*fn37

  A court must thus consider the complaint at the time of removal to determine if removal was appropriate in the first place.*fn38 If the basis for federal subject matter jurisdiction later falls away, "[t]he modern rule . . . is that a federal court [has] the power to hear claims that would not be independently removable even after the basis for removal jurisdiction is dropped from the proceedings."*fn39 There is "a judicial reluctance to make jurisdiction hinge on fortuities or ex parte tactical moves."*fn40

  B. Federal Agent Jurisdiction

  The federal officer removal statute can override the well-pleaded complaint rule.*fn41 "Suits against federal officers may be removed despite the nonfederal cast of the complaint," but the federal officer's defense must raise an issue of federal law.*fn42 Thus, persons acting under color of any federal office or agency may remove a case to federal court, despite the absence of a federal cause of action, when their removal petition alleges a colorable federal defense and there is a causal nexus between the federal direction and the conduct at issue.*fn43

  C. Procedural Requirements for Removal

  In addition to demonstrating the presence of federal jurisdiction, a defendant must comply with the removal procedures in section 1446 of Title 28. Specifically, section 1446(b) requires a defendant to file a notice of removal thirty days after receiving the initial pleading.*fn44

  The thirty-day period is strictly construed.*fn45 It is "triggered by formal service" of the summons and complaint.*fn46 However, section 1446(b) also states: If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.*fn47

 When a case is removable, but the grounds in the initial complaint are "obscured, omitted, or misstated," a defendant "has thirty days from the revelation of grounds for removal to file a notice of removal."*fn48 The purpose of the thirty-day rule is:

"to deprive the defendant of the undeserved tactical advantage that [it] would have if [it] could wait and see how [it] was faring in state court before deciding whether to remove . . .; and to prevent the delay and waste of resources involved in starting a case over in a second court after significant proceedings . . . in the first court."*fn49
Conversely, the second sentence of section 1446(b) preserves the defendant's right to remove a case to federal court upon receiving notice that the case is removable.*fn50

  In order to satisfy section 1446(b), a defendant must show (1) that the original complaint was not removable on its face at the time it was filed*fn51 and (2) that another paper changed the status of the case, making it clear that the complaint was removable.*fn52 But, where federal officer jurisdiction is claimed, it is not necessary for jurisdictional facts to appear "on [the] surface of the complaint;" the removal petition may supply the jurisdictional basis for removal in the notice itself, if the complaint does not.*fn53 Nonetheless, because section 1446(b) requires that a defendant have notice of removability*fn54 the trigger for removal occurs when the initial pleading or other paper contains unequivocal facts that alert the defendant to a claim of federal officer jurisdiction.*fn55 Further, "since removal statutes are construed in favor of remand, it [is] not unreasonable for defendants to refrain from filing a removal notice upon receipt of . . . an ambiguous complaint."*fn56 Even a defendant who engages in extensive litigation in the state court cannot be barred from the right to remove in the absence of adequate notice.*fn57 Finally, "the `amended pleading, motion, order or other paper' must emanate from either the voluntary act of the plaintiff in the state court, or other acts or events not the product of the removing defendant's activity."*fn58 V. DISCUSSION

  A. Shell Oil's Notice of Removal Was Timely

  In their first objection, plaintiffs claim that because the Second Amended Complaint contained allegations that Shell Oil's MTBE-containing gasoline harmed plaintiffs, Shell Oil's Notice of Removal should have been filed within thirty days of that Complaint. Specifically, Plaintiffs point to four paragraphs in the Second Amended Complaint which refer to (1) the fact that Shell Oil manufactured gasoline containing MTBE, (2) that "MTBE . . . can enter the human body . . . through inhalations of vapors," it can be absorbed by contact with skin, and it can be consumed in liquid, (3) that "MTBE . . . released into the ground, the potable water supply, and groundwater" is a contaminant within the definition of section 3.06 of the Illinois Environmental Protection Act, and (4) that MTBE had contaminated the potable water supply in a three-mile radius from the Pipe Line leak.*fn59 With the exception of the first allegation, each of these allegations was contained in every Complaint prior to the Third Amended Complaint.*fn60 If these allegations were sufficient to give Shell Oil notice of the action's removability, the case was removable in 2001.

  However, plaintiffs' original Complaints alleged only that Shell Oil's Pipe Line had leaked and contaminated the potable water and groundwater supply covering a particular tract of land. In contrast, the Third Amended Complaint claimed that Shell Oil was strictly liable for its decision to use MTBE, a defective product, and for not providing adequate warnings of the risks posed by MTBE or conducting adequate studies of its environmental qualities.*fn61 The federal officer defense may be raised only where a defendant's decision to use MTBE is challenged. The allegations in the Third Amended Complaint gave Shell Oil unequivocal notice that the federal officer defense was available to it. By contrast, the bare allegation in the first three Complaints that MTBE contaminated plaintiffs' property because of Shell Oil's negligence in maintaining the Pipe Line was not sufficient to provide notice to Shell Oil of a federal officer defense.*fn62 In addition, the extensive litigation in the state court which occurred before Shell Oil had notice that the case was removable, as noted above, cannot bar removal.*fn63 Shell Oil's Notice of Removal was timely filed.

  B. Shell Oil Sufficiently Alleged that It Met the Requirements of Removal Pursuant to Section 1442(a)

  In their second and third objections, plaintiffs dispute Judge Bernthal's finding that Shell Oil acted under federal agency direction during the time covered by the Complaint.*fn64 In their Motion for Remand, plaintiffs claimed that Shell Oil was not acting under color of a federal office when it caused plaintiffs' injuries because the "time of the conduct of which plaintiffs complain" was 1988, and the Congressional programs Shell Oil claimed required it to use MTBE were not adopted until 1990 and 1995.*fn65 In response, Shell Oil asserted that plaintiffs had alleged groundwater contamination "from continuous and/or additional releases of MTBE-containing gasoline . . . occurring to the present."*fn66

  In his R & R, Judge Bernthal observed that the plaintiffs' claims did not rest solely on the 1988 pipeline spill because plaintiffs had alleged acts that continued through the time of the RFG program.*fn67 The R & R made specific reference to allegations that damages resulted from pipeline leakage that was never permanently sealed off and allegations that Shell Oil "maintained and controlled a `continuing source of contamination"' from the time of the spill until the filing of the Complaint.*fn68 Plaintiffs, in turn, argue that those allegations do not refer to MTBE.*fn69 Indeed, plaintiffs claim that they never alleged that MTBE spilled from the Pipe Line after 1988.*fn70

  While plaintiffs' argument is creative, it does not comport with a plain reading of the Third Amended Complaint. Plaintiffs alleged in that Complaint that "Shell Oil took affirmative actions that led to the past, present, and continuing contamination with MTBE."*fn71 In addition, plaintiffs alleged that "gasoline constituents, including MTBE, continue to persist in surface water and groundwater in the general vicinity of the release, indicating that an additional subsurface Pipe Line leak or spill has occurred or, . . . that leakage from the original Pipe Line release location was never permanently sealed off."*fn72 Plaintiffs also point to the deposition of Steven Schuler, a longtime employee of Shell Pipe Line, who testified on July 18, 2005, in a different case, that no pipeline leakage occurred after 1988.*fn73 Based on this testimony, plaintiffs claim that Shell Oil should not be allowed to assert that MTBE contamination occurred subsequent to 1988.*fn74

  This evidence is irrelevant. As noted earlier, a defendant must satisfy its burden of proving that removal was appropriate as of the time of removal.*fn75 The Third Amended Complaint alleged that Shell Oil's actions to the present day caused their harm. This was the allegation Shell Oil considered at the time of removal. This Court has already found that it has federal agent jurisdiction over some of the MTBE cases pending before it.*fn76 Shell Oil has shown that it acted under the direction of a federal office when it used MTBE-containing gasoline during the time period alleged in the Complaint.*fn77


  For the reasons set forth above, Judge Bernthal's Report is accepted and plaintiffs' objections are denied. The Clerk of the Court is directed to close this motion (docket # 771). A conference is scheduled for November 15, 2005, at 4.30 p.m. in Courtroom 15C.



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