United States District Court, D. Minnesota
Brian A. Farlow, Hayley Ellison, Worthy W. Walker, Barbara L. Wohlrabe, and David W. Elrod, Gruber Hurst Elrod Johansen Hail Shank, LLP, 1445 Ross Ave, Suite 2500, Dallas, TX 75202; David T. Schultz and Julian C. Zebot, Maslon LLP, 90 South 7th Street, Suite 3300, Minneapolis, MN 55402, for Plaintiff.
Douglas H. Flaum, Kevin P. Broughel, and Shahzeb Lari, Paul Hasting LLP, 75 East 55th Street, New York, NY 10022; Eric A. Hirsch, Fried Frank Harris Shriver & Jacobson LLP, One New York Plaza, New York, NY 10004; Lousene M. Hoppe and Nicole M. Moen, Fredrikson & Byron, PA, 200 South 6th Street, Suite 4000, Minneapolis, MN 55402-1425, for Defendants.
MEMORANDUM OPINION AND ORDER
SUSAN RICHARD NELSON, District Judge.
This matter is before the Court on Defendant's Motion to Amend the May 4, 2015 Order to Certify for Interlocutory Appeal [Doc. No. 884]. For the reasons set forth below, the Court denies Defendant's motion.
Although the facts of this matter are thoroughly detailed in prior orders of this Court, the Court finds it prudent to recite the detailed procedural posture of this case, particularly given the unfortunately inaccurate account provided in Defendant's brief. (See Def.'s Mem. at 1-2 [Doc. No. 885].)
Plaintiff Great Lakes Gas Transmission Limited Partnership ("Plaintiff" or "Great Lakes") filed this case in October 2009, alleging that the above named Defendants failed to make all payments due under a contract ("Contract") that was initially executed in 2006 between Plaintiff and Minnesota Steel Industries ("MSI"). (See First Am. Compl. ¶ 20 [Doc. No. 35]; Ellison Aff., Ex. 2 "Contract" [Doc. No. 681-2].) The Contract, otherwise known as the Transportation Services Agreement ("TSA"), was effective July 1, 2009 through March 31, 2024. (See First Am. Compl. ¶ 17 [Doc. No. 35.) The Contract explicitly incorporated the terms of a gas tariff ("Tariff") on file with the Federal Energy Regulatory Commission ("FERC"). (See id.)
In 2007, Defendant ESML purchased MSI, and "expressly and/or impliedly assumed all of [MSI's] liabilities, " including MSI's obligations under the Contract at issue in this case. (See id. ¶ 16; see also First Am. Answer ¶ 19 [Doc. No. 314].) In its First Amended Complaint, Plaintiff alleged that the Court had subject matter jurisdiction under 28 U.S.C. § 1332(a)(1), because the matter in controversy exceeded the value of $75, 000 and was between citizens of different states. (See First Am. Compl. ¶ 9 [Doc. No. 35].)
On September 1, 2011, Defendants filed a Motion to Dismiss for Lack of Subject Matter Jurisdiction [Doc. No. 354]. Specifically, Defendants argued that the Court did not have diversity jurisdiction because complete diversity of citizenship did not exist between the parties. (See Defs.' Rule 12 Mot. to Dismiss Great Lakes' First Am. Compl. For Lack of Subject-Matter Jurisdiction at 2 [Doc. No. 354].) The parties thoroughly briefed the issue of diversity jurisdiction, but did not address whether the Court had federal question jurisdiction. The briefing was likely limited to diversity jurisdiction because Plaintiff did not allege federal question jurisdiction in the Complaint. Before the Court had an opportunity to rule on the jurisdictional issue raised, the parties filed a Stipulation on February 29, 2012, stating "that [Defendants] have no objections to the Court's subject matter jurisdiction in their dispute with Great Lakes, and that [Defendants] will not raise any objections to the Court's subject matter jurisdiction either in this proceeding or in any appellate proceeding related to this proceeding." (Stipulation ¶ 1 [Doc. No. 392].) Thus, the Court was under the impression that issues pertaining to subject matter jurisdiction in this case were put to rest.
Accordingly, litigation proceeded and the Court addressed the merits of Great Lakes' claims and Defendants' defenses. On March 15, 2012, the Court issued an order granting Plaintiff's Motion Dismiss for Failure to State a Claim and to Strike Defendant's Pleadings and dismissing ESML's counterclaims [Doc. No. 397]. On March 19, 2013, the Court issued an Order finding that Defendants were liable for anticipatorily breaching the Contract, as a matter of law [Doc. No. 559]. Great Lakes sought, and still seeks, to "recover damages for [Defendants'] breach of contract based on its Tariff rate, which is the reservation charges due under the TSA." (See Pl.'s Mem. in Opp'n at 14 [Doc. No. 429].) Pre-trial, the Court must determine the rate of prejudgment interest that applies to Plaintiff's damages and which FERC Tariff reservation rate applies for calculating the damages. Thus, the only remaining issues for trial are: (1) the discount rate to apply to future damages; and (2) whether the discount rate to apply to future damages is pre- or post-tax. Trial was initially scheduled to begin October 27, 2014 [Doc. No. 808].
When this case was on the eve of trial, Defendants alerted the Court via letter [Doc. No. 811] that they believed that the Court in fact lacked diversity jurisdiction. Defense counsel explained that they "first became aware" of the issue when they were preparing their trial brief. (See Flaum Letter at 1 [Doc. No. 811].) Specifically, Defendants uncovered that Plaintiff's initial disclosure about the parties' citizenship was incomplete as Great Lakes failed to disclose the citizenship of TC PipeLines, LP's hundreds or thousands of public unitholders. (See id.) When Plaintiff initially filed this case, the case law was not as clear as it is today about whether public unitholders' citizenship should be considered when determining whether a court sits in diversity jurisdiction. The Court assumes that defense counsel's belated awareness about this issue stems from the fact that Defendants changed counsel over the course of this case's multiple year history.
Affording the parties an opportunity to present their positions on the issue of subject matter jurisdiction, the Court permitted Plaintiff to File a Motion for Leave to File a Second Amended Complaint to assert federal question jurisdiction, and permitted Defendant to file a Motion to Dismiss on the issue of subject matter jurisdiction. The parties duly filed their respective motions. The Court carefully studied the parties' briefing and the relevant case law. On May 4, 2015, the Court issued an Order [Doc. No. 879] (1) denying Plaintiff's Motion for Leave to File Second Amended Complaint [Doc. No. 812], and (2) denying Defendant Essar Steel Minnesota LLC's Motion to Dismiss for Lack of Subject Matter Jurisdiction [Doc. No. 856]. The Court held that resolution of Plaintiff's breach of contract claim raises a necessarily disputed and substantial federal question.
The Court then held a telephonic status conference with the parties on May 13, 2015. During this conference, the Court permitted Defendant to file a motion requesting an interlocutory appeal on the issue of the Court's subject matter jurisdiction over this case. Defendant filed this motion [Doc. No. 884] and a supporting memorandum [Doc. No. 885] on May 22, 2015. Plaintiff filed its response brief on June 5, 2015 [Doc. No. 888].
Defendant's supporting memorandum [Doc. No. 885] frankly mischaracterizes this Court's May 4 Order. Although the Court spent over fifty pages carefully addressing and distinguishing relevant case law, Defendant carelessly accuses the Court of not "cit[ing] any relevant authority for its position." (See Def.'s Mem. at 3 [Doc. No. 885].) Unfortunately, in the fog of Defendant's anger about the Court's ruling finding subject matter jurisdiction (a position Defendant endorsed for years until the eve of trial), Defendant distorts the record, requiring the Court, once again, to carefully explain its ruling.
While courts of appeals have jurisdiction over "all final decisions of the district courts, " 28 U.S.C. § 1291, under certain circumstances, a district court may determine that an otherwise non-final order should be certified for interlocutory appeal under 28 U.S.C. § 1292(b). See 28 U.S.C. § 1292(b). Section 1292(b) provides:
When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order.
Id. Thus, the three criteria for certification under this provision are: (1) the order involves a controlling question of law; (2) there is substantial ground for difference of opinion as to that controlling question of law; and (3) certification will materially advance the ultimate termination of litigation. White v. Nix, 43 F.3d 374, 377 (8th Cir. 1994) (citations omitted).
Although the statute grants district courts the discretion to certify orders for interlocutory appeal, "[it] has... long been the policy of the courts to discourage piecemeal appeals because most often such appeals result in additional burdens on both the court and the litigants." Id. at 376 (internal quotations and citation omitted). Due to this additional burden, motions for certification should be "granted sparingly and with discrimination." Id . (internal quotations and citation omitted). The legislative history of section 1292 indicates that "it was to be used only in extraordinary cases where decision of an interlocutory appeal might avoid protracted and expensive litigation. It was not intended merely to provide review of difficult rulings in hard cases." Union Cnty., Iowa v. Piper Jaffray & Co., 525 F.3d 643, 646 (8th Cir. 2008) (quoting United States Rubber Co. v. Wright, 359 F.2d 784, 785 (9th Cir. 1966)). The movant must meet a heavy burden of establishing that the case is "an exceptional one in which immediate appeal is warranted." White, 43 F.3d at 376.
Defendant requests that the Court amend the May 4, 2015 Order ("May 4 Order") to certify the following question for interlocutory review: "whether the Court has federal question jurisdiction over Plaintiff's claims, in particular, Count One?" (See Def.'s Mem. at 3 [Doc. No. 885].) ESML also requests that the Court stay this litigation pending resolution of this motion and any appellate proceedings that follow. (See id.)
A. Whether the Order Involves a Controlling Question of Law
A controlling question of law is a legal question and not "a matter of the discretion of the trial court." White, 43 F.3d at 377 (citing Garner v. Wolfinbarger, 430 F.2d 1093, 1096-97 (5th Cir. 1970), cert. denied, 401 U.S. 974 (1971). "[A] question of law is controlling' if reversal of the district court's order would terminate the action." Schwendimann v. Arkwright Advanced Coating, Inc., No. 11-cv-820 (ADM/JSM), 2012 WL 5389674, at *3 (D. Minn. Nov. 2, 2012) (alterations in original) (citing Klinghoffer v. S. N.C. Achille Lauro, 921 F.2d 21, 24 (2d Cir. 1990)).
Whether the Court has federal question jurisdiction, and therefore subject matter jurisdiction, is a controlling question of law. See Schwendimann, 2012 WL 5389674, at *3 (finding that controlling question of law existed where reversal of district court's order would deprive the court of subject matter jurisdiction); Linville v. ConAgra, Inc., No. 1:04-CV-00004-WRW, 2004 WL 3167119, at *6 (E.D. Ark. May 19, 2004) aff'd, 186 Fed.App'x 704 (8th Cir. 2006) (same). Reversal of the Court's finding of federal question jurisdiction would terminate this action and result in dismissal of Plaintiff's case. Accordingly, the first element required for certification of an interlocutory appeal is satisfied.
B. Whether Substantial Ground for Difference of Opinion Exists
Defendant also argues that a substantial ground for difference of opinion exists in this case, stating that the Court's Order "cited virtually no authority supporting the exercise of federal question jurisdiction" and "is contrary to the existing case law, including controlling Supreme Court and Eighth Circuit precedent." (See Def.'s Mem. at 6 [Doc. No. 885].) ESML argues that the Court's jurisdictional finding is "unprecedented" and string cites several cases which it believes are contrary to the Court's Order. (See id. at 7.) However, only two of those cases are binding on this Court: (1) Pan American Petroleum Corp. v. Superior Court of Delaware, 366 U.S. 656 (1961), and (2) Central Iowa Power Co-op v. Midwest Independent Transmission System Operator, Inc., 561 F.3d 904, 913 (8th Cir. 2009). (See id.) "At the very least, " ESML argues that the Court's Order represents a "very close issue." (See id. (citing Hr'g Tr. 64:12-22, Dec. 12, 2014 [Doc. No. 867]).)
The Court disagrees. First, the Court's Order was exclusively and explicitly based on Supreme Court and Eighth Circuit precedent. In fact, the Court expressly distinguished this case from Pan American and Central Iowa Power Co-Op in its May 4 Order. (See 5/4/15 Order at 38-39 [Doc. No. 879].) Although the Court stated during a hearing on December 12, 2014, that whether the Court had federal question jurisdiction was a "very close issue, " at that time the parties had not yet submitted comprehensive briefing on the issue, and the Court did not have the benefit of carefully reviewing the parties' position papers or the applicable case law. Once the Court had the opportunity to review the parties' briefing and carefully study the relevant case law, the Court held that resolution of Plaintiff's breach of contract claim raised a necessarily disputed and substantial federal question. Thus, the Court's finding of jurisdiction does not "fl[y] in the face" of controlling precedent, but rather explicitly relies on controlling precedent. (Cf. Def.'s Mem. at 7 [Doc. No. 885].) The Court addresses Defendant's remaining arguments below.
1. The May 4 Order Does Not Violate Well-Pleaded Complaint Rule
Despite the Court's thorough analysis in its May 4 Order, Defendant persists in arguing that the Order violates the well-pleaded complaint rule. Defendant misconstrues the well-pleaded complaint doctrine and blatantly mischaracterizes the Court's May 4 Order.
Federal question jurisdiction exists if the "well-pleaded complaint" establishes jurisdiction through one of two means, or portals. Williams v. Ragnone, 147 F.3d 700, 702 (8th Cir. 1998) (citing Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 27-28 (1983)). The first portal to federal question jurisdiction exists when "federal law creates the cause of action." Id . The second portal exists if the "plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law.'" Franchise Tax Bd., 463 U.S. at 28; see also Louisville & N.R. Co. v. Rice, 247 U.S. 201, 203 (1918) (explaining that "[a] suit arises under an act of Congress when it really and substantially involves a dispute or controversy respecting the validity, construction or effect of such a law, upon the determination of which the result depends'") (internal quotations and citation omitted). To determine whether a case fits within the second portal, "the question is, does a state-law claim necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities." Grable & Sons Metal Prods., Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 314 (2005).
Here, the Court held that federal question jurisdiction exists via the second portal, or because Great Lakes' right to relief on its breach of contract claim necessarily depends on resolution of a substantial question of federal law. Below the Court addresses Defendant's concerns about whether the Court's May 4 Order conforms to the wellpleaded complaint rule.
a. Court's Consideration of the Tariff
First, Defendant argues that the Court's May 4 Order did not identify any facts in the First Amended Complaint supporting federal question jurisdiction. (See Def.'s Mem. at 11 [Doc. No. 885].) Specifically, Defendant takes issue with the fact that the First Amended Complaint does not attach the Tariff that governs the parties' relationship, or reference any Tariff provisions explicitly. (See id.)
While the Court ordinarily does not consider matters outside the pleadings on a motion to dismiss, see Fed.R.Civ.P. 12(d), the Court may consider documents that are necessarily embraced by the pleadings, Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697 n.4 (8th Cir. 2003). "When deciding a motion to dismiss, a court may consider the complaint and documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading." Kushner v. Beverly Enters., Inc., 317 F.3d 820, 831 (8th Cir. 2003) (internal quotations and citation omitted). Similarly, a court may consider public records on a motion to dismiss. See Levy v. Ohl, 477 F.3d 988, 991 (8th Cir. 2007) (citing Papasan v. Allain, 478 U.S. 265, 269 n.1 (1986); Stahl v. United States Dep't of Agric., 327 F.3d 697, 700 (8th Cir. 2003)).
Here, the Tariff was necessarily embraced by the pleadings. Plaintiff explicitly stated in its First Amended Complaint that the Contract between the parties "include[d] the maximum reservation rate for the Contract's transportation path as reflected on Great Lakes FERC Gas Tariff, Second Revised Volume No.1 (Tariff'), Eighth Revised Sheet No. 4." (See First Am. Compl. ¶ 17 [Doc. No. 35].) Plaintiff also alleged that the Tariff required Great Lakes to "reserve 55, 000 dekatherms of gas transportation capacity in its pipeline... to transport natural gas." (See id. ¶ 18.) Because the content of portions of the Tariff are alleged in the operative complaint and Defendants did not question the authenticity of the Tariff, the Court properly considered the Tariff when deciding Defendant's Motion to Dismiss. See Mattes, 323 F.3d at 697 n.4; Kushner, 317 F.3d at 831.
Moreover, the Tariff is a public record, and thus, may also be considered by the Court. As the Court explained in its May 4 Order, federal tariffs, like the one in this case, carry the same legal force as federal regulations, and are thus considered federal law. Central Iowa Power Co-op, 561 F.3d at 913; MCI Telecomms. Corp. v. Garden State Inv. Corp., 981 F.2d 385, 387 (8th Cir. 1992) (explaining that "federal tariffs are the law, not mere contracts"). Federal laws and regulations are clearly matters of "public record." Therefore, the Court properly considered the contents of the operative Tariff when ...