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In re Methyl Tertiary Butyl Ether ("Mtbe") Products Liability Litigation

United States District Court, S.D. New York

March 30, 2015

IN RE: METHYL TERTIARY BUTYL ETHER (

Robin Greenwald, Esq., Robert Gordon, Esq., William A. Walsh, Esq., Weitz & Luxenberg, P.C., New York, NY, Liaison Counsel for Plaintiffs.

Michael Axline, Esq., Miller, Axline, & Sawyer, Sacramento, CA, Counsel for the Commonwealth.

Peter John Sacripanti, Esq., James A. Pardo, Esq., Lisa A. Gerson, Esq., Stephen J. Riccardulli, Esq., McDermott Will & Emery LLP, New York, NY, Liaison Counsel for Defendants.

James P. Tuite, Esq., Akin Gump Strauss Hauer & Feld LLP, Washington, D.C., Counsel for LAC.

MEMORANDUM OPINION AND ORDER

SHIRA A. SCHEINDLIN, District Judge.

I. INTRODUCTION

This is a consolidated multi-district litigation ("MDL") relating to contamination - actual or threatened - of groundwater from various defendants' use of the gasoline additive methyl tertiary butyl ether ("MTBE") and/or tertiary butyl alcohol, a product formed by the breakdown of MTBE in water. On December 23, 2014, defendant Lukoil Americas Corporation ("LAC") moved to dismiss the Commonwealth of Pennsylvania's (the "Commonwealth") complaint for lack of personal jurisdiction.[1]

The overarching question presented in that motion is straightforward: can the Court exercise personal jurisdiction over LAC in this action? Arguing in the affirmative, the Commonwealth intends to prove that at all relevant times, LAC was acting through its now-bankrupt subsidiary Getty Petroleum Marketing Inc. ("GPMI"), such that the Court should pierce the corporate veil between the two entities to establish personal jurisdiction over LAC (the "Veil-Piercing Theory"). In support of the Veil-Piercing Theory, the Commonwealth alleges that GPMI had significant contacts with Pennsylvania, where this action was originally filed.[2] Therefore, at a January 15, 2015 status conference, I directed LAC and the Commonwealth to engage in limited jurisdictional discovery relating to the Veil-Piercing Theory.[3]

Jurisdictional discovery is presently on hold because the parties dispute the applicable legal standard for veil-piercing, which necessarily bears on the sufficiency of LAC's responses to the Commonwealth's discovery requests. At a March 5, 2015 conference, counsel for LAC asserted that the laws of Maryland, where GPMI was incorporated, govern the Veil-Piercing Theory.[4] The Commonwealth countered that the federal common law of the Third Circuit should apply.[5] I then directed the parties to brief the choice-of-law issue, which is now fully submitted.[6] For the following reasons, I conclude that Maryland law governs the Veil-Piercing Theory.

II. DISCUSSION

The central question before the Court - whether Maryland law or Third Circuit law applies to the Veil-Piercing Theory - requires the resolution of two subsidiary issues. First, I must decide whether the appropriate source of law for evaluating jurisdictional veil-piercing in this action is federal common law or the law of the forum state (here, Pennsylvania). This inquiry is unusually complex because in this case, where the Commonwealth has brought only state law claims, federal jurisdiction is premised neither on diversity of citizenship nor a violation of a specific federal statute, but instead on a federal statute providing for removal on the basis of a federal defense. However, deciding between federal common law and state law is not the end of the matter. Second, if I determine that Pennsylvania law applies, I must then review Pennsylvania's choice-of-law principles to determine whether the laws of Maryland, as opposed to those of Delaware, Pennsylvania, or New York, govern the Veil-Piecing Theory.

A. Federal Common Law Does Not Apply to the Veil-Piercing Theory

The main source of disagreement between the parties is whether this action's removal from Pennsylvania state court to federal court pursuant to Section 1503 of the Energy Policy Act of 2005 (the "EPA") essentially converted a state-law dispute into a federal question case requiring the application of federal common law to the jurisdictional analysis.[7] Because the Notice of Removal in this action states that the case "arises under" federal law in the context of a potential federal preemption defense, the Commonwealth urges this Court to apply a federal common law standard of corporate separateness to the jurisdictional question.[8] LAC contends that, in the absence of any federal causes of action here, federal jurisdiction is premised on nothing more than a possible federal defense; as such, the action does not raise a federal question.

The Commonwealth dismisses the importance of LAC's distinction between traditional federal question cases and the instant federal case by relying heavily on Keeton v. Hustler Magazine, Inc. for a distinction of its own: that in all "federal question" cases, personal jurisdiction must be evaluated separately from the question of a party's liability.[9] As such, the Commonwealth contends that choice-of-law rules may be relevant to liability issues, but never to personal jurisdiction, which is always governed by federal law and decided before analyzing ...


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