Fifth Circuit Affirms Remand of Louisiana Coastal Zone Lawsuits…Again

IEL_Energy Law Advisors_CZMA Cases

Kelly Ransom

Kelly Ransom

July 18, 2023 09:07 AM

Fifth Circuit Affirms Remand of Louisiana Coastal Zone Lawsuits…Again

Kelly Ransom, Kelly Hart Pitre

On October 17, 2022, the U.S. Court of Appeals for the Fifth Circuit affirmed a Louisiana federal district court’s order remanding the lead case among forty-two lawsuits filed on behalf of numerous Louisiana parishes asserting claims against various oil and gas companies under the Louisiana State and Local Coastal Resources Management Act of 1978 (“CZMA Cases”). 1 The decision follows a jurisdictional battle that began in 2013 and has entailed two rounds of removals and remand orders and multiple Fifth Circuit opinions. While the procedural path to this most recent Fifth Circuit decision was full of twists and turns, the court ultimately concluded that there is no federal-officer removal jurisdiction, and the CZMA Cases belong in Louisiana state court.

A. 2013 to 2021: Removal, Remand, Repeat, and Appeal

Plaquemines Parish and Jefferson Parish filed the first twenty-eight of the CZMA Cases in state court in 2013. Other south Louisiana parishes soon followed suit by filing over a dozen additional CZMA lawsuits. Both the Louisiana Department of Natural Resources and the Louisiana Attorney General intervened in the individual lawsuits on behalf of the State of Louisiana. The defendants’ first round of removals of the CZMA Cases was unsuccessful, and the cases were remanded in 2015.

Back in state court, the plaintiffs served an expert report in Parish of Plaquemines v. Rozel Operating Co. that addressed the defendants’ operations and activities during World War II. That expert report, known as the Rozel report, included a certification that it represented the Louisiana Department of Natural Resources’ position in all of the CZMA Cases. Based on the Rozel report, the defendants removed the CZMA Cases once again in May 2018 based on the federal-officer removal statute and federal question jurisdiction. According to defendants, the second removals were timely because they occurred within thirty days of receiving the Rozel report, which was an “other paper from which it may first be ascertained that the case is one which is or has become removable.”2

The plaintiffs promptly moved to remand, arguing in part that the second removals were untimely. The federal district court agreed that removal was “simply too late” and rejected both the federal-officer and federal question grounds for removal.3 The plaintiff’s remand motion was 1 Par. of Plaquemines v. Chevron USA, Inc., et al., No. 22-30055, 2022 WL 9914869 (5th Cir. Oct. 17, 2022). 2 28 U.S.C. §1446(b)(3). 3 Parish of Plaquemines v. Riverwood Prod. Co., et al., No. 18-5217, 2019 WL 2271118 (E.D. La. May 28, 2019). 4 Parish of Plaquemines v. Chevron USA, Inc., et al., 969 F.3d 502, 507 (5th Cir. 2020), opinion withdrawn and superseded on reh’g, 7 F.4th 362 (5th Cir. 2021) (quoting 28 U.S.C. § 1446(b)(3) (emphasis added in original)). 5 Parish of Plaquemines v. Chevron USA, Inc., et al., 7 F.4th 362 (5th Cir. 2021).6 Id. at 371.7 Latiolais v. Huntington Ingalls, Inc., 951 F.3d 286 (5th Cir. 2020). therefore granted, and the defendants appealed to the U.S. Court of Appeals for the Fifth Circuit.

On August 10, 2020, the Fifth Circuit affirmed the district court’s remand order finding the second removal untimely. The Court rejected the defendants’ argument that it was not until the Rozel report was produced that it became apparent that the plaintiffs’ claims were based in part on wartime activities:

The Rozel Report simply repeated information from a 1980 Louisiana Coastal Resources Program Final Environmental Impact Statement (FEIS) that the Parishes filed with the court before the companies’ first removal attempt in 2013. The FEIS discusses many of the specific wells involved in this litigation by referring to their unique serial numbers. And those serial numbers refer to wells the companies drilled before or during World War II. Accordingly, the Rozel Report is not a “paper from which it may first be ascertained that the case is one which is or has become removable.” 4

The defendants successfully petitioned the Fifth Circuit for reconsideration, and almost a year to the day after issuing the 2020 opinion, the court reversed its previous decision on the timeliness of removal.5 This time, the court reasoned that, “in contrast to the petitions’ vague citations to Louisiana regulations covering numerous aspects of oil production, the Rozel report identified, for the first time, specific conduct that the parishes alleged was unlawful.”6

With respect to the jurisdictional issues, the Fifth Circuit affirmed its previous holding that there was no federal question jurisdiction but directed the federal district court to resolve the federal-officer jurisdiction issue under the fourpart test set forth in Latiolais v. Huntington Ingalls, Inc., a 2020 Fifth Circuit decision overruling an old federal-officer jurisdiction causal-nexus test.7

B. 2022: The Remaining Issue and Its Resolution…Maybe

By 2022, the only remaining remand issue in the CZMA Cases was whether removal based on federalofficer jurisdiction was proper. Under the new Latiolais test, a defendant must show that (1) it has asserted a colorable federal defense, (2) it is a “person” within the meaning of the statute, (3) it has acted pursuant to a federal officer’s directions, and (4) the charged conduct is connected or associated with an act pursuant to a federal INDUSTRY UPDATES officer’s directions.8 The federal-officer jurisdiction issue in the CZMA Cases focused on whether the defendants’ wartime exploration and production activities satisfied the third “acting under” prong and the fourth “associated or connected with” prong of the Latiolais test.

The defendants argued that they acted under the federal government’s control during World War II and shared an “unusually close and special relationship with the government,” and even a contractual relationship. They cited evidence of the government’s creation of the Petroleum Administration for War (“PAW”), which exercised war powers to integrate oil companies into government war efforts. PAW directives and other government orders lifted antitrust law limitations on oil producers and refiners and imposed production quotas and other mandates aimed at ensuring fulfilment of government contracts for refined petroleum. Defendants claimed to be acting as government subcontractors during this time by supplying the product that refiners needed to fulfill their government contracts. And because plaintiffs’ CZMA claims are based on alleged damage to wetlands and coastal erosion that they claim resulted from excessive production and operation, including those during World War II, the defendants’ wartime production directed by the government is “connected to or associated with” the charged conduct in the CZMA Cases.

Plaintiffs responded that the defendants’ evidence reflected only federal government directives to refiners, not operators or producers. Because those directives did not impose any mandate on producers, they did not show that the federal government exerted any control over the exploration and production side of the industry during World War II. At best, the evidence reflected that the defendants were simply subject to certain regulations, according to the plaintiffs, and this did not satisfy the third “acting under” prong of Latiolais.

In January 2022, U.S. District Court Judge for the Eastern District of Louisiana Martin Feldman once again granted the plaintiffs’ motion to remand.9 The district court concluded that “defendants have not demonstrated that they were doing any more than complying with regulation.” The court rejected the defendants’ argument that the government’s contracts with refiners sufficed to create a contractual relationship with upstream producers. Likewise, Judge Feldman found that providing product to refiners did not make producers government subcontractors and noted that there was no document in the record evidencing any such subcontract. Though the district court acknowledged that it need not address the “connected or associated with” prong given its conclusion that defendants failed to satisfy the third prong of the test, it did so “for the same of completeness” and found that the “associated or connected with” prong of the Latiolais test was satisfied. 8 Id. at 296. 9 Parish of Plaquemines v. Riverwood Prod. Co., et al., No. 18-5217, 2022 WL 101401, at *8 (E.D. La. Jan. 11, 2022). 10 Parish of Plaquemines v. Chevron USA, Inc., et al., No. 22-30055, 2022 WL 9914869, at *3 (5th Cir. Oct. 17, 2022).

In a per curiam opinion, a three-judge panel of the Fifth Circuit agreed with Judge Feldman and affirmed the district court’s remand order.10 The court found that there is no federal-officer jurisdiction because the producers did not act under the federal government’s direction during World War II. The Fifth Circuit rejected the defendants’ argument that they had an unusually close and special relationship and explained “merely being subject to federal regulations is not enough” to be “acting under” a federal officer’s or agency’s direction. The court also rejected the defendants’ positions that they shared a contractual relationship with the government and that they were federal subcontractors because they provided the essential product to refineries, which were contractually obligated to deliver to the government during wartime. Like the district court, the Fifth Circuit noted the absence of any document evidencing a subcontract to support the defendants’ government subcontractor argument. Having found that the “acting under” prong was not satisfied, the court affirmed the district court’s remand order without addressing the final prong of the Latiolais test.

Absent reversal of the Fifth Circuit’s 2022 decision, the CZMA Cases will return to the state district courts in the South Louisiana parishes where originally filed. But days after the Fifth Circuit’s decision, the defendants moved for a fourteen-day extension to petition the court for rehearing, signaling that the fight over federal-officer jurisdiction may not quite be finished yet

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