The U.S. Court of Appeals for the Fifth Circuit has ruled that a lawsuit filed in state court by several Louisiana parishes and the State of Louisiana against 42 oil and gas producers based on activities dating back to World War II must return to federal district court for a determination of whether it meets the test for removal to federal court. The Fifth Circuit had previously affirmed two federal district court decisions remanding the cases to Louisiana state courts on the basis that the producers’ motions were not timely. The decision represents an important step forward for the producers’ efforts to get the cases to federal court where they belong, rather than face a more than likely hostile Louisiana state judiciary and jury with hundreds of millions of dollars in potential civil penalties at stake.

As we previously posted last December, joining a diverse group of amici that include the Texas Oil & Gas Association, Louisiana Association of Business and Industry, the U.S. Chamber of Commerce, and others, TCJL filed as amicus curiae in Plaquemines Parish v. Chevron USA, Inc., et al (No. 19-30492). Several Louisiana parishes, joined by the State of Louisiana, sued Chevron and dozens of oil and gas producers in Louisiana state courts, claiming that the companies violated the Louisiana State and Local Coastal Zone Management Act of 1978 (“SLCRMA”) by failing to obtain permits in accordance with the Act. The parishes claim damages relating back to producers’ conduct performed at the direction and control of the federal government during World War II.

During the War, Congress suspended antitrust laws for the industry, allowing the federal government to gather the producers’ predecessors into a consolidated exploration and production engine under the supervision and control of a new agency, the Petroleum Administration for War (“PAW”).  The PAW micromanaged oil and gas operations, telling the producers where and how to drill, rationing the use of steel and materials for roads, and setting statewide quotas for the production of oil and gas to produce the high octane fuel necessary for the war effort.  The parishes claim that the producers should have followed certain “prudent practices,” many of which conflict directly with federal mandates that the they were directed to follow during the War.  The parishes particularly target pre-1980 dredging activities exclusively governed by federal law prior to the SLCRMA, raising substantial federal issues that the producers asked the Fifth Circuit to review.

Chevron and the other producers removed the cases to federal court under 28 U.S.C. § 1442, which permits removal of cases involving a federal officer, or those acting under the direction of a federal officer, and 28 U.S.C. § 1331, which grants federal jurisdiction to cases involving a federal question.  Plaintiffs moved to remand.  Two district courts took up the remand motions first, one granting remand because it found removal was untimely, and the other denying remand, finding that the allegations in the petition were insufficient to trigger the removal clock.  The cases were consolidated on appeal and, in a cursory opinion, the panel initially held that the producers’ removal based on the expert report was untimely.  The panel concluded that a list of serial numbers of wells, attached as an exhibit to the petitions, gave the producers notice that World War II activity was at issue sufficient to trigger the deadline to remove.  The panel’s opinion did not address the timeliness of the federal question ground for removal, which, as the arishes themselves conceded, raised timeliness issues distinct from the federal officer removal.

TCJL’s brief urged the Fifth Circuit to review the panel’s decision en banc and consider the federal grounds for removal raised by Chevron and the producers. In a second opinion, Circuit Judges Ho, Engelhardt, and Oldham denied en banc review but granted rehearing, withdrew their prior opinion, and remanded the case to the federal district court for a reconsideration of the producers’ removal motion in light of the Fifth Circuit’s decision in Latiolais v. Huntington Ingalls, Inc., 951 F.3d 286 (5th Cir. 2020). The panel held that the expert report filed by the parishes revealed a new theory of liability for the first time, so the producers’ removal motion based on federal officer jurisdiction was indeed timely. On remand, the federal district court must now decide whether the litigation may be removed to federal court under 28 U.S.C. §1442 (federal officer jurisdiction). The panel agreed with the lower courts that the case presents no federal question upon which to base removal. The panel noted that since the district court initially determined that no federal officer jurisdiction existed either, the Fifth Circuit issued the Latiolais decision, which overruled a line of prior decisions holding that federal officer jurisdiction required a causal nexus between the defendant’s actions under color of federal office and the plaintiff’s claims. Under a Latiolais analysis, in order to remove the producers’ must now show that: (1) they have asserted a colorable federal defense; (2) they are “persons” within the meaning of the statute; (3) they acted pursuant to a federal officer’s directions; and (4) the charged conduct is connected to or associated with an act pursuant to a federal officer’s directions.

This case represents yet another in a national assault on the oil and gas industry from state and local jurisdictions attempting to use the courts to achieve policy changes they cannot achieve through the ballot box and the legislative process. We are pleased that the Fifth Circuit recognized the importance of the jurisdictional issue and ordered the federal district court to conduct the Latiolais analysis.

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