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Prairie Horizon Agri-Energy, LLC v. Tallgrass Interstate Gas Transmission, LLC

United States District Court, D. Kansas

December 29, 2014

PRAIRIE HORIZON AGRI-ENERGY, LLC, Plaintiff,
v.
TALLGRASS INTERSTATE GAS TRANSMISSION, LLC, Defendant.

MEMORANDUM AND ORDER

J. THOMAS MARTEN, District Judge.

Before the court is plaintiff Prairie Horizon Agri-Energy, LLC's Motion to Remand (Dkt. 8). This case arises out of the delivery of allegedly contaminated natural gas to plaintiff's ethanol production facility. Plaintiff filed this action in Kansas state court alleging negligence and breach of contract against defendant Tallgrass Interstate Gas Transmission, LLC. Defendant removed to this court pursuant to 28 U.S.C. §§ 1441(a) and 1331. Plaintiff now moves the court to remand the matter for lack subject of matter jurisdiction. As discussed below, the motion is denied.

I. Background

Consistent with the court's obligation to evaluate the original complaint in a removal analysis, the background information below is derived therefrom. Plaintiff is a Kansas LLC with its principal place of business in Phillipsburg, Kansas, where it owns and operates an ethanol production facility. Defendant is a Colorado LLC with its principal place of business in Overland Park, Kansas.

On August 1, 2011, plaintiff entered a "Form of Firm Transportation Service Agreement" ("the contract") with defendant's predecessor, Kinder Morgan Interstate Gas Transmission, LLC, to transport, supply, and deliver natural gas to plaintiff's ethanol facility. Defendant owns and operates the transmission pipeline that supplies plaintiff's ethanol facility. The terms of the agreement are fixed by defendant's schedule of rates and charges ("tariff") filed with the Federal Energy Regulation Commission ("FERC") pursuant to the Natural Gas Act of 1938 ("NGA"), 15 U.S.C. § 717 et. seq. A quality provision in the tariff allegedly requires that the gas delivered to plaintiff's facility be "free from foreign material or oil."

On March 27, 2013, defendant's pipeline allegedly injected a large quantity of foreign material and oil into plaintiff's facility causing catastrophic damage. Plaintiff brought this two-count action in the District Court of Phillips County, Kansas on July 3, 2014. Count I alleges negligence and Count II alleges a breach of the contract's quality provision. Defendant filed a notice of removal on July 31, 2014. Plaintiff filed this Motion to Remand for lack of subject matter jurisdiction on September 2, 2014.

II. Legal Standard for Removal

"The district courts of the United States... are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute." Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552 (2005) (internal quotation and citation omitted). Federal subject matter jurisdiction is essential to "every cause under review in the federal courts." Firstenberg v. City of Santa Fe, N.M., 696 F.3d 1018, 1022 (10th Cir. 2012). A civil action brought in state court may be removed to federal court pursuant to 28 U.S.C. § 1441 if "federal subject-matter jurisdiction would exist over the claim." Hansen v. Harper Excavating, Inc., 641 F.3d 1216, 1220 (10th Cir. 2011); accord Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987). The court must remand the action "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction." 28 U.S.C. § 1447(c). Federal courts have original subject matter jurisdiction over questions of federal law and over actions between parties of diverse citizenship if the amount in controversy exceeds $75, 000. 28 U.S.C. §§ 1331, 1332. Where, as here, the parties are not diverse, removal is only proper under federal question jurisdiction. Caterpillar, 482 U.S. at 392.

III. Analysis

Federal question jurisdiction exists for claims "arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. The well-pleaded complaint rule requires that the federal controversy be "disclosed on the face of the complaint, unaided by the answer or by the petition for removal." Gully v. First Nat'l Bank, 299 U.S. 109, 112-13 (1936); accord Karnes v. Boeing Co., 335 F.3d 1189, 1192 (10th Cir. 2003). A federal defense cannot be the basis for removal. Caterpillar, 482 U.S. at 392-93. "The well-pleaded complaint rule makes the plaintiff the master of his claim." Nicodemus v. Union P. Corp., 440 F.3d 1227, 1232 (10th Cir. 2006) (quotation omitted). He may avoid federal jurisdiction by relying solely on state law, but not "by omitting federal issues that are essential to his... claim." Id. ; accord Caterpillar, 482 U.S. at 392.

"A case arises under federal law if its well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law." Morris v. City of Hobart, 39 F.3d 1105, 1111 (10th Cir. 1994) (internal quotation and citation omitted). Thus, two prongs of federal question jurisdiction exist: actions created by federal law and actions that require resolution of a substantial question of federal law.

The court first notes that the federal law at issue here, the NGA, contains no provision under which aggrieved parties may directly seek relief. Therefore, neither negligence nor breach of contract is a federally created claim in this case.

A. "Substantial Question" Jurisdiction

The determinative question before the court is whether the traditionally state-law claims of negligence and breach of contract turn on a substantial question of federal law where the duty in question is memorialized in a contract recorded as a FERC tariff under the NGA. The court finds that ...


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