Great Lakes Gas Transmission Limited Partnership v. Essar Steel Minnesota, LLC et al

Filing 879

ORDER denying 812 Motion to Alter/Amend/Supplement Pleadings; denying without prejudice 835 Motion in Limine; denying without prejudice 842 Motion in Limine; denying 856 Motion to Dismiss for Lack of Jurisdiction (Written Opinion). Signed by Judge Susan Richard Nelson on 05/04/2015. (SMD)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Great Lakes Gas Transmission Limited
Partnership,

Case No. 09-cv-3037 (SRN/LIB)

Plaintiff,
MEMORANDUM OPINION
AND ORDER

v.
Essar Steel Minnesota, LLC; Essar Steel
Limited f/k/a Essar Steel Holdings, Ltd.;
Essar Steel India Limited f/k/a Essar Steel
Limited; and Essar Global Fund Ltd. f/k/a
Essar Global Limited,
Defendants.

Brian A. Farlow, Hayley Ellison, Worthy W. Walker, Barbara L. Wohlrabe, and David
W. Elrod, Elrod PLLC, 500 North Akard Street, Suite 3000, Dallas, TX 75201; 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.

SUSAN RICHARD NELSON, United States District Judge
I.

INTRODUCTION
This matter is before the Court on the following motions: (1) Defendant Essar

Steel Minnesota LLC’s Motion to Dismiss for Lack of Subject Matter Jurisdiction [Doc.
No. 856]; (2) Plaintiff’s Motion for Leave to File Second Amended Complaint [Doc. No.
812]; (3) Plaintiff’s Motion in Limine [Doc. No. 835]; and (4) Defendant’s Motion in

Limine [Doc. No. 842]. For the reasons set forth below, the Court denies Defendant’s
Motion to Dismiss and Plaintiff’s Motion for Leave to File Second Amended Complaint;
and the Court denies, without prejudice, Plaintiff’s and Defendant’s Motions in Limine.
II.

BACKGROUND
A. The Parties
Although the facts of this matter are thoroughly detailed in prior orders of this

Court, the Court discusses the relevant facts of the case below. Plaintiff Great Lakes Gas
Transmission Limited Partnership (“Plaintiff” or “Great Lakes”) is a partnership entity
composed of: “(1) TransCanada GL, Inc., a corporation organized under the laws of the
state of Delaware, (2) TC GL Intermediate Limited Partnership, a Delaware limited
partnership, and (3) Great Lakes Gas Transmission Company, a corporation organized
under the laws of the state of Delaware.” (See First Am. Compl. ¶ 2 [Doc. No. 35].) One
of these partners, TC GL Intermediate Limited Partnership is, in turn, composed of: (1)
TC PipeLines GP, Inc., a Delaware corporation, and (2) TC PipeLines, LP, which is a
publicly-traded Delaware master limited partnership. (See id. ¶ 3.) TC PipeLines, LP is
composed of public unitholders and two partners, TC PipeLines, GP, Inc. and TransCan
Northern Ltd. (See id. ¶¶ 2–4; see also Pl.’s Mem. at 37–38 [Doc. No. 862].)
Essar Steel Minnesota, LLC (“ESML” or “Defendant”) is a Minnesota limited
liability corporation with its principal place of business in Minnesota. (See First Am.
Compl. ¶ 5 [Doc. No. 35].) Essar Steel Holdings Ltd. is a foreign company that is
incorporated under the laws of Mauritius and has its principal place of business in
Mauritius. (See id. ¶ 6.) Essar Steel Limited is a foreign company that is incorporated
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under the laws of India, has a principal place of business in India, and is registered to
conduct business in the State of New York. (See id. ¶ 7.) Essar Global Limited is a
foreign company incorporated under the laws of the Cayman Islands with offices in Asia,
Africa, Europe, and the Americas, and although it has its principal place of business in
Dubai, it has an office in the State of New York. (See id. ¶ 8.)
In Plaintiff’s First Amended Complaint, the controlling version of the Complaint
in this case, Great Lakes alleges that the Court has diversity jurisdiction over this case as
the matter in controversy exceed $75,000 and is between citizens of different States. (See
id. ¶ 9.)
B. The Contract and the Parties’ Dispute
The underlying controversy between the parties stems from Defendants’ breach of
contract. The contract (“Contract”) was initially executed in 2006 between Plaintiff and
Minnesota Steel Industries (“MSI”). (Ellison Aff., Ex. 2 “Contract” [Doc. No. 681-2].)
However, in 2007, Defendant ESML purchased MSI, and “expressly and/or impliedly
assumed all of [MSI’s] liabilities,” including MSI’s contractual obligations. (See First
Am. Compl. ¶ 16 [Doc. No. 35]; see also First Am. Answer ¶ 19 [Doc. No. 314].) ESML
is affiliated with several foreign entities, which are also Defendants in this action – Essar
Steel Limited, formerly known as Essar Steel Holdings, Ltd.; Essar Steel India Limited,
formerly known as Essar Steel Limited; and Essar Global Fund Ltd., formerly known as
Essar Global Limited (“Foreign Essar Defendants”).
The Contract required Great Lakes, a regulated interstate natural gas pipeline, to
transport up to 55,000 dekatherms of natural gas firm capacity per day on MSI’s behalf.
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(See First Am. Compl. ¶ 17 [Doc. No. 35.) The Contract, otherwise known as the
Transportation Services Agreement (“TSA”), was effective July 1, 2009 through March
31, 2024. (Id.) In exchange for Plaintiff’s transportation of natural gas, the Contract
required MSI to pay Great Lakes the maximum reservation rates and charges on a
monthly basis, pursuant to the applicable rate schedule reflected in Plaintiff’s gas tariff
(the “Tariff”) on file with the Federal Energy Regulatory Commission (“FERC”). (Id.)
The TSA specifically provides:
This Agreement shall incorporate and in all respects be subject to the
“General Terms and Conditions” and the applicable Rate Schedule (as
stated above) set forth in Transporter’s [Plaintiff’s] FERC Gas Tariff,
Second Revised Volume No. 1, as may be revised from time to time.
Transporter may file and seek Commission approval under Section 4 of the
Natural Gas Act (NGA) at any time and from time to time to change any
rates, charges or provisions set forth in the applicable Rate Schedule (as
stated above) and the “General Terms and Conditions” in Transporter’s
FERC Gas Tariff, Second Revised Volume No. 1, and Transporter shall
have the right to place such changes in effect in accordance with the NGA,
and this Agreement shall be deemed to include such changes and any such
changes which become effective by operation of law and Commission
Order, without prejudice to Shipper’s [ESML’s] right to protest the same.

(See Moen Decl., Ex. 5 “TSA,” ¶ 12 [Doc. No. 859-1].) Thus, the TSA expressly
incorporated the terms of the Tariff.
In addition, pursuant to the Contract, MSI was obligated to pay all applicable
surcharges. (First Am. Compl. ¶ 17 [Doc. No. 35].) The parties agree that the Tariff
“provide[d] terms and conditions that govern[ed] the parties’ rights and obligations.”
(See 10/4/12 Hr’g Tr. at 33, 35, 41 (statements by ESML’s counsel) [Doc. No. 470].)

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In October 2009, Great Lakes filed this action against the above named
Defendants, alleging that ESML failed to make the first payment of $190,190 due on
August 17, 2009, and has failed to make all subsequent payments. (See generally Compl.
[Doc. No. 1]; First Am. Compl. ¶ 20 [Doc. No. 35].) Plaintiff alleges four counts against
Defendants. In Count One, Great Lakes alleges that ESML is liable for breach of
contract and anticipatory repudiation. (See id. ¶¶ 48–54.) Plaintiff contends that because
“both the Tariff and the TSA form the contract between Great Lakes and Essar, the claim
for breach of contract by necessity is based on both.” (See Pl.’s Mem. at 2 [Doc. No.
862].) In Count One, Great Lakes additionally argues that ESML is liable for damages
for breaching the Contract. (See First Am. Compl. ¶ 53 [Doc. No. 35].)
In Count Two, Plaintiff claims that “[u]nder the equitable theories or remedies of
piercing the corporate veil, alter ego and/or mere instrumentality, the corporate structures
of each of the Essar entities should be disregarded, and each of the foreign Essar entities
should be held liable for the damages recoverable by Great Lakes as a result of [ESML’s]
breach of and anticipatory repudiation of the Contract.” (See id. ¶ 58.) In Count Three,
Plaintiff claims that “[a]s a result of the Essar entities’ joint enterprise or joint venture,
each of the foreign Essar entities should be held liable for the damages recoverable by
Great Lakes as a result of the breach and anticipatory repudiation of the Contract.” (See
id. ¶ 61.) Finally, in Count Four, Great Lakes alleges that because ESML was acting as
the agent for the foreign Essar entities, all of the foreign Essar entities should be held
liable for the damages suffered by Great Lakes. (See id. ¶ 63.)

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C. Procedural Posture
As this case was filed several years ago, the Court has already had the opportunity
to rule on the merits of Plaintiff’s breach of contract claim and has determined that
Defendants breached the Contract and are therefore liable for paying Plaintiff damages.
The amount of damages due remains an unsettled issue, however.
In the Fall of 2014, the parties were preparing for trial on the appropriate discount
rate to apply to the damages due to Plaintiff. Plaintiff filed a Motion in Limine [Doc. No.
835], as did Defendants [Doc. No. 842]. When this case was on the eve of trial,
Defendants alerted the Court via letter [Doc. No. 811] that they believed that the Court
lacked subject matter jurisdiction to decide this case. 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.) Defense counsel argued that if any of the public unitholders was a
Minnesota citizen, then diversity jurisdiction is incomplete in this case. (See id. at 2.)
The Court permitted Plaintiff to file a Motion for Leave to File a Second Amended
Complaint to assert federal question jurisdiction. (See Hr’g Tr. 4:7–12, Oct. 15, 2014
[Doc. No. 855].) Plaintiff duly filed this motion [Doc. No. 812], and submitted a
memorandum in support [Doc. No. 814]. In Plaintiff’s proposed Second Amended
Complaint, Great Lakes sought to add a section alleging subject matter jurisdiction
pursuant to 28 U.S.C. § 1331 and the Natural Gas Act, 15 U.S.C. § 717u, because
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according to Plaintiff its claims “depend on resolution of substantial predicate questions
of federal law.” (See Proposed Second Am. Compl. [Doc. No. 815-2].) Defendants filed
briefing in response to Plaintiff’s motion and continued to raise concerns about the
Court’s subject matter jurisdiction in this case. (See Defs.’ Mem. in Opp’n at 1–4 [Doc.
No. 823].) The Court heard oral argument on Plaintiff’s motion on October 16, 2014.
During the October 16, 2014 hearing, the Court instructed Defendants to file a
formal Motion to Dismiss. (See Hr’g Tr. 4:18–22 [Doc. No. 855].) Defendant ESML
filed a Motion to Dismiss for Lack of Subject Matter Jurisdiction on October 31, 2014
[Doc. No. 856]. Defendant also filed a memorandum in support [Doc. No. 858], a
declaration and several attachments [Doc. No. 859]. In response, on November 21, 2014,
Plaintiff filed an opposition memorandum [Doc. No. 863], with an affidavit and an
exhibit [Doc. No. 863]. On December 5, 2014, ESML filed a reply brief [Doc. No. 864].
The Court heard oral argument on Defendant’s motion on December 12, 2014.
III.

MOTION TO DISMISS

A. Standard of Review
Defendant argues that the Court lacks subject matter jurisdiction to hear this case
and seeks dismissal pursuant to Federal Rule of Civil Procedure 12(b)(1). (See Def.’s
Mot. to Dismiss [Doc. No. 856].) “Federal courts are courts of limited jurisdiction. The
requirement that jurisdiction be established as a threshold matter springs from the nature
and limits of the judicial power of the United States and is inflexible and without
exception.” Godfrey v. Pulitzer Pub. Co., 161 F.3d 1137, 1141 (8th Cir.1998) (internal
quotations and citations omitted). Accordingly, this Court is obligated to dismiss any
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action over which it lacks federal subject matter jurisdiction. E.g., Steel Co. v. Citizens
For A Better Environment, 523 U.S. 83, 94 (1998).
On a motion to dismiss under Rule 12(b)(1) for lack of subject matter jurisdiction,
the court must first “distinguish between a ‘facial attack’ and a ‘factual attack.’” Osborn
v. United States, 918 F.2d 724, 729 n.6 (8th Cir. 1990). If the movant presents only a
facial attack, the court must confine itself to the pleadings and the nonmoving party
receives the same protections as it would defending against a motion brought under Rule
12(b)(6). Id. Thus the court “must accept all factual allegations in the pleadings as true
and view them in the light most favorable to the nonmoving party.” Hastings v. Wilson,
516 F.3d 1055, 1058 (8th Cir. 2008).
Where, in contrast, the movant presents a factual attack, the court may consider
matters outside the pleadings and the non-moving party does not have the benefit of the
safeguards of Rule 12(b)(6). Osborn, 918 F.2d at 729 n.6. But the motion is not thereby
converted into one for summary judgment. Capitol Leasing Co. v. FDIC, 999 F.2d 188,
191 (7th Cir. 1993) (stating that court could not “have transformed the motion to dismiss
into one for summary judgment” because “the question of jurisdiction is inappropriate for
summary judgment”). Here, Defendant presents a factual attack because ESML’s
argument is based on jurisdictional facts that were not included in the pleadings, such as
the citizenship of one entity that was not adequately disclosed on the face of Plaintiff’s
First Amended Complaint.
A court may have subject matter jurisdiction either because it has diversity
jurisdiction, pursuant to 28 U.S.C. § 1332, or federal question jurisdiction, pursuant to 28
8

U.S.C. § 1331. Defendant argues that this Court lacks both diversity jurisdiction and
federal question jurisdiction. (See Def.’s Mem. at 3, 6 [Doc. No. 858].) Below, the
Court addresses its subject matter jurisdiction under § 1332 and § 1331.
B. Diversity Jurisdiction
The First Amended Complaint alleges that this Court has diversity jurisdiction
over this case, pursuant to 28 U.S.C. § 1332(a)(1) and (a)(2). (See First. Am. Comp. ¶ 9
[Doc. No. 35].) Diversity jurisdiction “requires an amount in controversy greater than
$75,000 and complete diversity of citizenship of the litigants.” OnePoint Solutions, LLC
v. Borchert, 486 F.3d 342, 346 (8th Cir. 2007) (citing 28 U.S.C. § 1332(a)); see E3
Biofuels, LLC v. Biothane, LLC, No. 14-1894, 2015 WL 1314936, *2 (8th Cir. Mar. 25,
2015). “Complete diversity of citizenship exists where no defendant holds citizenship in
the same state where any plaintiff holds citizenship.” OnePoint Solutions, LLC, 486 F.3d
at 346. “When one of the parties to the action is a limited partnership, the citizenship of
each general and limited partner must be considered in determining whether complete
diversity of citizenship exists.” Barclay Square Properties v. Midwest Fed. Sav. & Loan
Ass’n of Minneapolis, 893 F.2d 968, 969 (8th Cir. 1990) (citing Stouffer Corp. v.
Breckenridge, 859 F.2d 75, 76 (8th Cir. 1988)); see Buckley v. Control Data Corp., 923
F.2d 96, 97 (8th Cir. 1991) (explaining that “for diversity purposes, the citizenship of a
limited partnership is the citizenship of each of its partners, both general and limited”).
Here, Plaintiff has failed to establish the citizenship of one of its limited partners,
TC PipeLines, LP. TC PipeLines, LP is a publicly-traded Delaware master limited
partnership (MLP) with public unitholders and two partners. (See First Am. Compl. ¶¶
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2–5 [Doc. No. 35].) “A master limited partnership is a limited partnership whose
interests (known as ‘common units’) are publicly traded.” Wood v. Walton, No. WDQ–
09–3398, 2010 WL 458574 at *1 n. 3 (D. Md. Feb.2, 2010) (citing Ann E. Conaway
Stilson, The Agile Virtual Corporation, 22 Del. L. Corp. L. 497, 524–25 (1997)).
Although Plaintiff alleged the citizenship of two of TC PipeLines, LP’s partners in its
First Amended Complaint, it did not allege the citizenship of TC PipeLines, LP’s public
unitholders. (See First Am. Compl. ¶ 3 [Doc. No. 35].) However, during oral argument,
Plaintiff’s counsel stated that, likely, at least one unitholder’s citizenship is Minnesota,
and therefore, TC PipeLines, LP is not completely diverse from Defendants. (See Hr’g
Tr. 16:11–14.)
Plaintiff contends that the unitholders’ citizenship should not be considered when
determining the citizenship of TC PipeLines, LP. (See Pl.’s Mem. at 38 [Doc. No. 862].)
Great Lakes argues that “[a]t the time this lawsuit was filed in federal court, no authority
squarely addressed the citizenship of MLPs.” (See id. at 39.) Specifically, Plaintiff
asserts that “no controlling authority from the Supreme Court or the Eighth Circuit
requires consideration of an MLP’s public unitholders for purposes of determining its
citizenship.” (See id. at 38.) The Court disagrees.
The Supreme Court’s holding in Carden v. Arkoma Associates, 494 U.S. 185
(1990), controls. In Carden, the Court held that a limited partnership’s citizenship is
determined by the citizenship of all of its general and limited partners. Id. at 195 (finding
that “[i]n sum, we reject the contention that to determine, for diversity purposes, the
citizenship of an artificial entity, the court may consult the citizenship of less than all of
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the entity’s members”). The Court acknowledged that its case law pertaining to
citizenship and diversity jurisdiction is “technical, precedent-bound, and unresponsive to
policy considerations raised by the changing realities of business organization.” Id. at
196. After acknowledging the inconsistency between its own precedent and the realities
of the business world, the Court noted that it was Congress’s role and responsibility to
make “further adjustments.” Id. at 196–97 (finding that “the course we take today does
not so much disregard the policy of accommodating our diversity jurisdiction to the
changing realities of commercial organization, as it honors the more important policy of
leaving that to the people’s elected representatives,” and explaining that Congress made
such a policy decision in 1958 when it passed a law “providing that a corporation shall be
deemed a citizen not only of its State of incorporation but also ‘of the State where it has
its principal place of business’”).
Although the Supreme Court was analyzing the citizenship of limited partnerships
in Carden, as opposed to master limited partnerships, the principles articulated in Carden
apply with equal force to this case. Therefore, TC PipeLines, LP’ citizenship must be
determined by looking at the citizenship of all of its limited partners. See Carden, 494
U.S. at 195; GMAC Commercial Credit LLC v. Dillard Dep’t Stores, Inc., 357 F.3d 827,
829 (8th Cir. 2004) (explaining that “the Supreme Court has repeatedly resisted
extending the corporation exception [about determining citizenship] to other entities,”
and finding that a district court’s diversity jurisdiction in a suit by or against an
unincorporated entity depends on the citizenship of all the members).

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The Court agrees with Plaintiff that these unitholders have “limited influence” on
matters affecting the operations of TC PipeLines, LP. (See Pl.’s Mem. at 40 [Doc. No.
862].) In fact, the unitholders may be more accurately labeled “stockholders” to reflect
the “economic reality of how an MLP’s units are held.” (See id.) However, the
economic reality of the unitholders’ roles and positions is immaterial to the Court’s
holding. See Carden, 494 U.S. at 196–97. Moreover, simply because the Internal
Revenue Code provides that a publicly traded partnership “shall be treated as a
corporation” for purposes of determining taxes, see 26 U.S.C. § 7704(a), does not alter
the fact that partnerships are not treated as corporations for purposes of determining
citizenship. (See Def.’s Reply at 5 [Doc. No. 864]; cf. Pl.’s Mem. 40 [Doc. No. 862].)
Although the Eighth Circuit has not explicitly addressed how courts are to
determine the citizenship of MLPs, at least six district courts outside this Circuit have
addressed this issue. All have held that MLPs should be treated like limited partnerships,
and not corporations, for purposes of determining citizenship. See, e.g., Trafigura AG v.
Enter. Products Operating LLC, 995 F. Supp. 2d 641, 646 (S.D. Tex. 2014) (adhering to
the “bright-line rule announced” in Carden and holding that complete diversity was
lacking in this case because at least a dozen of the unitholders were aliens, and thus there
were aliens on both sides of the litigation, which destroyed complete diversity); Grynberg
v. Kinder Morgan Energy Partners, L.P., No. 14-CV-1832-WJM-KMT, 2014 WL
3586216, *2 (D. Colo. July 21, 2014), appeal docketed, No. 14-1465 (10th Cir. Nov. 6,
2014) (relying on Carden’s “firmly established” rule and holding that petitioner failed to
demonstrate citizenship of unitholders and thus the court could not properly determine if
12

subject matter jurisdiction existed; petitioner claimed that it would be too difficult to
discern the citizenship of those unitholders and therefore failed to satisfy the court’s order
to show cause); Gonyer v. Enbridge Energy, Ltd. P’ship, No. 1:13-CV-796, 2014 WL
1255915, *1–*2 (W.D. Mich. Mar. 26, 2014) (holding that diversity jurisdiction is
destroyed because the citizenship of at least some of the unitholders was the same as the
defendant’s citizenship); Ada Cnty. Highway Dist. v. Nw. Pipeline GP, No. 1:12-CV00184-BLW, 2012 WL 4737869, *1 (D. Idaho Oct. 3, 2012) (finding that removal to
federal court was not objectively reasonable because complete diversity was not
established for one of the relevant entities, which was a master limited partnership; and
noting that the MLP had over 73,000 units, and thus “it would prove very difficult . . . to
demonstrate complete diversity as the citizenship of a limited partnership”); Vosburg v.
Williams Field Servs. Co., No. 3:11-CV-1624, 2011 WL 3881277, *2–*3 (M.D. Pa. Sept.
2, 2011) (holding that the plaintiff failed to allege enough facts to sustain diversity
jurisdiction; and allowing the plaintiff the chance to amend its complaint to allege
citizenship of all the component unitholders); Williams Field Servs. Co., LLC v.
Kalmanowicz, 3:11-CV-1634, 2011 WL 3881471, *2 (M.D. Pa. Sept. 2, 2011) (holding
that the amended complaint failed to show the existence of subject matter jurisdiction
because the plaintiff failed to allege the citizenship of unitholders; and providing the
plaintiff an opportunity to amend its complaint to prove diversity of citizenship). Many
of these courts rely upon the Supreme Court’s holding in Carden.
This Court agrees with several other district courts that have already ruled that
MLPs must be treated as limited partnerships for the purpose of establishing citizenship.
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Although public unitholders may be more functionally equivalent to stockholders in a
corporation, the court is bound to follow Carden, and must determine TC PipeLines, LP’s
citizenship by looking to the citizenship of all of its partners, including the public
unitholders. Because Plaintiff’s counsel declined the opportunity to reconstruct the
public unitholders’ citizenship, and conceded during oral argument that at least one
unitholder’s citizenship is likely Minnesota, the Court holds that complete diversity
between the parties does not exist, and Plaintiff has accordingly failed to establish
diversity jurisdiction in this case.
C. Federal Question Jurisdiction
Although Plaintiff only pled diversity jurisdiction in its First Amended Complaint,
the Court may nevertheless determine that it has federal question jurisdiction based on
the underlying facts alleged in the First Amended Complaint. See Jones v. Freeman, 400
F.2d 383, 387 (8th Cir. 1968) (finding that federal question jurisdiction existed based on
the facts of the case, “although [the facts were] not [pled] artfully”). The Court is
encouraged to construe even inartfully pled facts to find “a remotely plausible federal
claim” particularly when “the parties and the courts have already made [a] vast
expenditure of resources,” as the parties and the Court have done so here. See Pioneer
Hi-Bred Int’l v. Holden Found. Seeds, Inc., 35 F.3d 1226, 1242 (8th Cir. 1994); see also
Mummelthie v. City of Mason City, Ia., 873 F. Supp. 1293, 1305 (N.D. Iowa 1995) aff’d
sub nom., 78 F.3d 589 (8th Cir. 1996).
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,
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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).
A plaintiff may avoid the first type of federal question jurisdiction by exclusively
relying on state law in the complaint. See Caterpillar, Inc. v. Williams, 482 U.S. 386,
392 (1987). Defendants seeking to remove the case to federal court are “not permitted to
inject a federal question into an otherwise state-law claim and thereby transform the
action into one arising under federal law.” Gore v. Trans World Airlines, 210 F.3d 944,
948 (2000).
As to the second portal of federal question jurisdiction, there is no “single, precise,
all-embracing test for jurisdiction over federal issues embedded in state-law claims
between nondiverse parties.” Baker v. Martin Marietta Materials, Inc., 745 F.3d 919, 924
(8th Cir. 2014) (internal quotations and citations omitted). To determine whether a case
fits “within th[is] special and small category,” Empire Healthchoice Assurance, Inc. v.
McVeigh, 547 U.S. 677, 699 (2006), “the question is, does a state-law claim necessarily
raise a stated federal issue, actually disputed and substantial, which a federal forum may
15

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).
The United States Supreme Court has firmly established that access to the federal
courts through either portal may not be established through a federal defense. Caterpillar,
482 U.S. at 393. In Caterpillar, the Supreme Court held that a federal defense, including
a preemption defense, does not provide a basis for removal, “even if the defense is
anticipated in the plaintiff’s complaint, and even if both parties concede that the federal
defense is the only question truly at issue in the case.” Id. (citing Franchise Tax Bd., 463
U.S. at 12). Below, the Court considers whether Plaintiff’s Complaint establishes federal
question jurisdiction under either of the two portals discussed above.
1. Federal Law Does Not Create Plaintiff’s Causes of Action
The Supreme Court discussed this first portal of “arising under” federal question
jurisdiction in Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1
(1983). In Franchise Tax Bd., the Court explained that a “vast majority” of cases that
come within this grant of jurisdiction arise under federal law because federal law creates
the cause of action. See 463 U.S. at 8–9. A claim brought under 42 U.S.C. § 1983 is a
prime example of federal law creating a plaintiff’s cause of action. See 42 U.S.C. § 1983
(2014) (stating that “[e]very person who, under color of any statute, ordinance,
regulation, custom, or usage, of any State or Territory or the District of Columbia,
subjects, or causes to be subjected, any citizen of the United States or other person within
the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured
16

by the Constitution and laws, shall be liable to the party injured in an action at law, suit
in equity, or other proper proceeding for redress . . .”) (emphasis added).
a. Express Cause of Action under the NGA
Here, Defendant argues that federal law does not create an express private cause of
action, under which Plaintiff may sue. (See Def.’s Mem. at 7 [Doc. No. 858].)
Specifically, ESML contends that the Natural Gas Act (“the NGA”) does not provide
Great Lakes with a private cause of action to seek damages for a violation of the Tariff.
(See id.) Plaintiff appears to concede that federal law does not create an express private
cause of action. (See Pl.’s Mem. at 16 (stating “the NGA does not provide a private
cause of action”) [Doc. No. 862].)
The Court holds that although the NGA vests federal district courts with exclusive
jurisdiction over a specific set of cases, the NGA does not create an express right of
action for Plaintiff to sue. Section 717u of the NGA provides that district courts have
“exclusive jurisdiction of violations” of the NGA, or violations of “the rules, regulations,
and orders thereunder, and of all suits in equity and actions at law brought to enforce any
liability or duty created by, or to enjoin any violation of, this chapter or any rule,
regulation, or order thereunder.” See 15 U.S.C. § 717u. The Supreme Court of the
United States explained in Pan American Petroleum Corp. v. Superior Court of Delaware,
that “‘[e]xclusive jurisdiction’ is given [to] the federal courts but it is ‘exclusive’ only for
suits that may be brought in the federal courts. Exclusiveness is a consequence of having
jurisdiction, not the generator of jurisdiction . . .” See 366 U.S. 656, 664 (1961); see also
Manning v. Merrill Lynch Pierce Fenner & Smith, Inc., 772 F.3d 158, 167 n.10 (3d Cir.
17

2014), appeal docketed, No. 14-1132 (U.S. Mar. 18, 2015) (explaining that “[i]n reality,
Pan American stands for the proposition that cases otherwise falling outside the scope of
the district courts’ original jurisdiction are not brought within it by virtue of an exclusive
jurisdiction provision.”) (emphasis original) (citing In re W. States Wholesale Natural
Gas Antitrust Litig., 346 F. Supp. 2d 1123, 1130 (D. Nev. 2004)); Columbia Gas
Transmission, LLC v. Singh, 707 F.3d 583, 591 (6th Cir. 2013) (finding that “[s]ection
717u provides federal jurisdiction, but it does not create an action,” and holding that
section 717u does not provide the plaintiff with access to a federal forum); see also Paul
M. Coltoff, et al., 24 Federal Procedure, Lawyers Edition § 56:676 (2015) (explaining
that “[b]efore federal jurisdiction is exclusive, a case must arise under the Natural Gas
Act”).
Thus, section 717u does not create a cause of action, but merely states that federal
district courts have exclusive jurisdiction over cases that otherwise arise under federal
law or involve a substantial question of federal law. See also Cal. ex rel. Lockyer v.
Dynegy, Inc., 375 F.3d 831, 843 (9th Cir. 2004), opinion amended on denial of reh’g on
other grounds, 387 F.3d 966 (9th Cir. 2004) (explaining that the NGA does not give rise
to a private cause of action for damages); Pacificorp v. Nw. Pipeline GP, No. CV 10-99PK, 2010 WL 3199950, *4 (D. Or. June 23, 2010) report and recommendation adopted,
No. CIV. 10-99-PK, 2010 WL 3219533 (D. Or. Aug. 9, 2010) (same).
Here, Plaintiff’s claims for breach of contract, damages for breach of contract,
corporate veil piercing, joint venture liability, and agency liability do not arise from
federal causes of action expressly created by the NGA. (See First Am. Compl. ¶¶ 48–63
18

[Doc. No. 35].) It is true that, at all material times, Plaintiff’s pipeline has been a
regulated interstate pipeline. (See id. ¶¶ 12–13.) However, Plaintiff is master of its
complaint, see Franchise Tax Bd., 463 U.S. at 22, and Plaintiff may avoid the first portal
of federal question jurisdiction by exclusively relying on state law in its Complaint, see
Caterpillar, 482 U.S. at 392. Here, Plaintiff did not plead that its claims arise from the
NGA because the NGA does not provide an express cause of action for Plaintiff to sue.
Therefore, Great Lakes’ causes of action are not created by the NGA.
Similarly, the Court finds that Plaintiff’s causes of action are not created by the
Tariff. (See Moen Decl., Exs. 6, 7 [Doc. No. 859-2].) Rather, Plaintiff’s right to sue for
breach of contract, corporate veil piercing, joint venture liability, and agency liability is
based on state common law. In sum, the Court finds that Plaintiff has failed to
demonstrate that federal law expressly creates Plaintiff’s causes of action.
b. Implied Cause of Action under the NGA
Although Plaintiff concedes that the NGA does not explicitly provide a private
cause of action, Great Lakes contends that its action arises under federal law because the
NGA requires transporters to charge reasonable rates and refrain from granting a
preference or advantage to any of its shippers. (See Pl.’s Mem. at 27–28 [Doc. No. 862].)
In other words, Great Lakes argues that because section 717c of the NGA prohibits
“undue preference or advantage,” section 717c necessarily also implicitly requires
Plaintiff to collect on its Tariff because Great Lakes would advantage one shipper over
others if it sought “compensation for breach of the tariff from one shipper but not
another.” (See id. at 28); 15 U.S.C. § 717c(b) (providing that “[n]o natural-gas company
19

shall, with respect to any transportation or sale of natural gas subject to the jurisdiction of
the Commission, (1) make or grant any undue preference or advantage to any person or
subject any person to any undue prejudice or disadvantage, or (2) maintain any
unreasonable difference in rates, charges, service, facilities, or in any other respect, either
as between localities or as between classes of service”). The Court reads Plaintiff’s
argument as suggesting that the NGA provides an implied cause of action because it
requires Plaintiff to sue to collect unpaid tariff rates.
Plaintiff analogizes the duty of the transporter to collect tariff rates under the NGA
to a carrier’s duty to collect tariff rates under the Federal Communications Act (“FCA”)
and the Interstate Commerce Act (“ICA”). (See Pl.’s Mem. at 25 [Doc. No. 862].) When
the ICA still had a filed tariff requirement, the ICA mirrored the Federal Communications
Act (“FCA”) in prohibiting carriers from charging, demanding, collecting, or receiving a
greater or less or different compensation than the value specified in the carrier’s tariff.
See 47 U.S.C. § 203(c) (FCA); 49 U.S.C. § 6(7) (1994) (ICA); see Ivy Broad. Co. v. Am.
Tel. & Tel. Co., 391 F.2d 486, 494 (2d Cir. 1968). In Louisville & N.R. Co. v. Rice and
Thurston Motor Lines, Inc. v. Jordan K. Rand, Ltd., the Supreme Court read this
requirement in the ICA as providing “arising under” federal question jurisdiction. See
Rice, 247 U.S. 201, 202 (1918) (holding that the plaintiff’s action arises under federal
law because the ICA required the “carrier to collect and consignee to pay all lawful
charges duly prescribed by the tariff in respect of every shipment,” so that “their duty and
obligation grow out of and depend upon that act”); Thurston, 460 U.S. 533, 535 (1983)
(same). Great Lakes contends that the right to sue under the NGA is similar to the right
20

to sue that the Supreme Court identified in the ICA. (See Pl.’s Mem. at 25 (citing Rice,
247 U.S. at 202; Thurston, 460 U.S. at 535) [Doc. No. 862]). Plaintiff argues that
because courts have held that federal question jurisdiction exists for carriers seeking
unpaid ICA and FCA tariff dues, so too does federal question jurisdiction exist in this
case.
In opposition, Defendant argues that unlike the FCA and the ICA, the NGA does
not require transporters to collect on their tariffs. (See Def.’s Mem. at 20 [Doc. No.
858].) Defendant claims that the NGA does not use precisely the same language as the
FCA and the ICA use to prohibit a shipper from receiving or collecting a greater or less
or different compensation than the value specified in the applicable tariff. See 15 U.S.C.
§ 717c(b). Moreover, ESML argues that the NGA does not require transporters to
enforce their obligation to collect tariff rates because shippers and customers may enter
into private contracts. (See Def.’s Mem. at 20 [Doc. No. 858].)
The Court finds Defendant’s reasoning flawed. First, under 15 U.S.C. § 717c(b),
carriers are prohibited from transporting or selling natural gas in a manner that unduly
preferences or advantages one customer over another. See 15 U.S.C. § 717c(b). A court
could potentially read this provision – in the same way that comparable provisions in the
FCA and ICA have been interpreted – as requiring transporters to collect on their tariffs.
Because the NGA was modeled on the ICA, the FCA, and the Federal Power Act
(“FPA”), a court could interpret analogous provisions of the different statutes similarly.
See Verizon Commc’ns, Inc. v. F.C.C., 535 U.S. 467, 478 n.3 (2002) (noting that the ICA
was “the model for subsequent federal public-utility statutes” such as the FPA, the FCA,
21

and the NGA); Ark. La. Gas Co. v. Hall, 453 U.S. 571, 577 n.7 (1981) (explaining that
because “the relevant provisions of the [NGA and the FPA] ‘are in all material respects
substantially identical,’” the Court “follow[ed] [its] established practice of citing
interchangeably decisions interpreting the pertinent sections of the two statutes.”)
(internal quotations and citations omitted); Northwestern Pub. Serv. Co. v. Mont.-Dakota
Utils. Co., 181 F.2d 19, 22 (D.C. Cir. 1950), aff’d, Mont.-Dakota Utils. Co. v.
Northwestern Pub. Serv. Co, 341 U.S. 246 (1951) (explaining that because “[t]he plan or
scheme of the Federal Power Act is analogous to that of the Interstate Commerce Act,”
decisions decided under the ICA “should be controlling” for cases decided under the
FPA); but see Nw. Cent. Pipeline Corp. v. Mesa Petroleum Co., 576 F. Supp. 1495, 1502
n.10 (D. Del. 1983) (noting that the fact that Thurston does not discuss cases decided
under the NGA may be indicative of the Supreme Court’s belief that “a different rule
should apply” to cases decided under the NGA as opposed to cases decided under the
ICA).
Second, simply because parties subject to the NGA may form private contracts
that incorporate federal tariffs does not suggest that the NGA does not require carriers to
collect on their tariffs. Therefore, although Defendant implies that the existence of
private contracts is incompatible with requiring transporters to collect on their tariffs, the
Court finds that the NGA could simultaneously permit private contracts, which
incorporate FERC tariffs, and require transporters to collect on their tariffs. Accordingly,
the Court finds Defendant’s basis for distinguishing FCA and ICA case law erroneous.

22

However, even assuming that Defendant’s bases for distinguishing FCA and ICA
case law are erroneous, the law is not particularly instructive for the Court to determine
whether Plaintiff’s action “arises under” federal law, for purposes of the first portal of
federal question jurisdiction.
For instance, in Rice, the Supreme Court held that it had federal question
jurisdiction because the plaintiff’s cause of action to recover unpaid fees due under a
tariff, which was filed pursuant to the ICA, arose under federal law. See Rice, 247 U.S.
at 203. Critically, however, the Rice Court did not clarify whether jurisdiction arose
under the first portal, or second portal, of federal question jurisdiction. In other words,
the Court did not clarify whether jurisdiction existed because the ICA created an express
or implied private cause of action for the plaintiff to sue, or jurisdiction existed because
the Court was required to analyze a substantial and disputed federal issue, i.e. provisions
of the federal tariff.
On the one hand, the Supreme Court explained that the action arose under federal
law because the ICA required the “carrier to collect and consignee to pay all lawful
charges duly prescribed by the tariff in respect of every shipment,” so that “their duty and
obligation grow out of and depend upon that act.” Id. at 202. Thus, the Rice Court
ostensibly implied that the ICA provided something comparable to an implied private
cause of action for the plaintiff to bring suit. On the other hand, the Court explained that
it had jurisdiction because resolution of the plaintiff’s claim “necessarily depended upon
construction and effect of that act.” See id. at 203. By making this statement, the
Supreme Court implied that jurisdiction existed because the case rested on a disputed and
23

substantial federal issue because the arbitrating court would necessarily have to interpret
the federal tariff to determine the amount due.
The Supreme Court was similarly vague about the type of federal question
jurisdiction present in Thurston. In Thurston, the Court relied on its holding in Rice to
conclude that it had federal question jurisdiction over the plaintiff’s claim, in which the
plaintiff sought to recover charges that the defendant allegedly failed to pay under a
federal tariff, also filed under the ICA. See Thurston, 460 U.S. at 533–35. The Thurston
Court explained that because the plaintiff’s claim was predicated on provisions in the
federal tariff, then the Court necessarily had federal question jurisdiction under 28 U.S.C.
§ 1337. 1 See id. at 535. As in Rice, in Thurston, the Supreme Court did not clarify
whether federal question jurisdiction existed because the Court read an implied or express
right of action into the ICA, or because the Court considered that the plaintiff’s claim
involved a substantial and disputed federal question because either (1) the arbitrating
court would necessarily have had to interpret the federal tariff to determine the amount
due; and/or (2) the parties disputed the interpretation of the controlling provisions of the
tariff or disputed how those provisions applied to the facts of the case.
Thus, while the Supreme Court held in both Rice and Thurston that federal
question jurisdiction existed, it remains unclear to this Court whether jurisdiction existed
under the first or second portal of federal question jurisdiction. 2 Likely, the Supreme

1

Courts’ analyses for “arising under” jurisdiction pursuant to 28 U.S.C. § 1337 and
28 U.S.C. § 1331 are analogous, if not identical. See Franchise Tax Bd., 463 U.S. at 8–9.
2
The Court similarly finds the basis for the Eighth Circuit’s holding in MCI
Telecommunications Corp. v. Garden State Investment Corp. unclear. See 981 F.2d 385
24

Court was not particularly clear on this issue because it was not until the Court decided
Franchise Tax Bd. in 1983 that the Supreme Court clarified its jurisprudence on the two
portals of federal question jurisdiction. See 463 U.S. 1 (1983).
Because the Court finds that the basis for the Supreme Court’s holding in both
Rice and Thurston is unclear, the Court is hesitant to find that federal question
jurisdiction exists in this case because the NGA creates an implied cause of action under
the first portal of federal question jurisdiction. 3 Cf. Nw. Cent. Pipeline Corp., 576 F.
Supp. at 1502 n.10 (explaining that “[i]t is doubtful whether either the [Natural Gas
Policy Act] or [the Natural Gas Act] would provide [the] defendants with a federal claim
to litigate what is, in essence, a dispute over their sales contract with plaintiff”).
(8th Cir. 1992). In MCI, a telecommunications provider sued the defendant to recover
unpaid service charges of amounts specified in a Federal Communications Commission
(“FCC”) tariff. See id. at 386. The plaintiff alleged that its action “ar[ose] under an act
of Congress regulating commerce, [the FCA,] and thus, federal question jurisdiction
exist[ed] under 28 U.S.C. § 1337(a).” Id.
The MCI Court held that the lawsuit arose under federal law, pursuant to Rice and
Thurston, because “the carrier’s claim for payment [was] necessarily based on the filed
tariff.” See id. at 387 (citing Thurston, 460 U.S. at 535). The plaintiff in MCI alleged
that § 203 of the FCA, 47 U.S.C. § 203 (1988), required it to collect the charges specified
in the tariff. See id. at 386. Upon review, the Court finds that § 203 does not, in fact,
explicitly provide the plaintiff with a federal cause of action. See 47 U.S.C. § 203.
Rather, § 203 of the FCA prohibits carriers from charging, demanding, collecting, or
recovering a greater or less or different compensation than the value specified in the
tariff. See id. § 203(c). Thus, § 203 mirrors a similar provision in the ICA that the
Supreme Court has held serves as a sufficient basis for finding federal question
jurisdiction. See Rice, 247 U.S. at 202; Thurston, 460 U.S. at 535. Similar to the
Supreme Court in Rice and Thurston, in MCI, the Eighth Circuit did not elaborate
whether the plaintiff’s claim was entitled to federal question because it was impliedly
created by federal law, portal one, or necessarily relied on the resolution of a disputed
federal question, portal two. Because of this lack of clarity, the Court finds that the
holding in MCI is also not particularly instructive.
3
As the Court explained in Part III(C)(1)(a), the NGA does not provide an express
private right of action.
25

Moreover, an implied cause of action in a federal statute only exists if it meets all
of the elements of the four-pronged test set out in Cort v. Ash, 422 U.S. 66 (1975). See
also Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1103 (1991). Although a
court must consider all four elements of the Cort test, the “central inquiry” is “whether
Congress intended to create, either expressly or by implication, a private cause of action.”
See Touche Ross & Co. v. Redington, 442 U.S. 560, 575 (1979); see also Transamerica
Mortg. Advisors, Inc. (TAMA) v. Lewis, 444 U.S. 11, 24 (1979).
In City of Gainesville v. Florida Power & Light Co., a district court in Florida held
that based on the four factor test articulated in Cort, the NGA does not provide a private
cause of action. See 488 F. Supp. 1258, 1278–79 (S.D. Fla. 1980) (explaining that
“[n]othing in the legislative history of the Natural Gas Act indicates that Congress
intended to grant any implied private rights of action therein. On the contrary, the
legislative history shows that Congress intended to establish a fairly common ratemaking and regulatory scheme for interstate sales of natural gas. . .”); see also Clark v.
Gulf Oil Corp., 570 F.2d 1138, 1150 (3d Cir. 1977) (stating that “[i]t is not consistent
with the underlying purpose of the regulatory scheme to imply a private remedy in
damages for a breach of the [Natural Gas] Act.”).
While the Court does not necessarily find the holding in City of Gainesville
dispositive, the case is fairly persuasive. Simply because the NGA requires transporters
to charge reasonable rates and refrain from granting a preference or advantage to any of
its shippers (see Pl.’s Mem. at 27–28 [Doc. No. 862]) does not suggest that Congress
intended to create a cause of action.
26

Regardless, the Court finds that the lack of clarity stemming from Rice and
Thurston is ultimately immaterial because the Court holds below that it has federal
question jurisdiction over this case given the disputed and substantial federal issues at
play. Accordingly, the Court declines to rule on whether the NGA creates an implied
cause of action or on whether federal question jurisdiction exists pursuant solely to the
Rice/Thurston “arising under” standard.
2. Substantial Federal Question
In addition to arguing that Plaintiff’s claims are not created by federal law, ESML
contends that Plaintiff failed to establish that the relief Great Lakes seeks necessarily
depends on the resolution of a substantial and disputed question of federal law. (See
Def.’s Mem. at 10 [Doc. No. 858].) Plaintiff disagrees. Great Lakes argues that because
its Tariff is considered federal law, its claims necessarily rely on the construction and
application of federal law. (See Pl.’s Mem. at 15, 19, 27 [Doc. No. 862].)
As a preliminary matter, the Court agrees with Plaintiff that federal tariffs carry
the same legal force as federal regulations, and are thus considered federal law. See
Central Iowa Power Co-op v. Midwest Indep. Transmission Sys. Operator, Inc., 561 F.3d
904, 913 (8th Cir. 2009); 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”).
Although Plaintiff’s claims are based on a contract that incorporates the Tariff, the
Court must ultimately determine if Plaintiff’s “state-law claim[s] 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
27

judicial responsibilities.” Grable, 545 U.S. at 314. Federal question jurisdiction does not
exist merely because a plaintiff’s claim calls upon the application of federal law. See,
e.g., RX.com, Inc. v. O’Quinn, 766 F. Supp. 2d 790, 796 (S.D. Tex. 2011) (holding that
federal question jurisdiction did not exist because the court would not be required to
“determine the meaning of the Sherman Act,” but instead would “merely need to apply
[Sherman Act] . . . law to the facts of this case”). Great Lakes’ state law claims must
“implicate significant federal issues” in order for federal question jurisdiction to exist.
Grable, 545 U.S. at 312. Specifically, “[t]he substantiality inquiry under Grable looks . . .
to the importance of the issue to the federal system as a whole.” See Gunn v. Minton,
133 S. Ct. 1059, 1066 (2013). “[I]t is not enough that the federal issue be significant to
the particular parties in the immediate suit.” See id. The Court proceeds by analyzing
whether Plaintiff’s claims in its First Amended Complaint satisfy this standard.
a. Plaintiff’s Count One
In Count One, Plaintiff alleges that ESML is liable for breaching and anticipatorily
repudiating the Contract, which incorporates the Tariff. (See First Am. Compl. ¶ 48–54
[Doc. No. 35].) Great Lakes also alleges in Count One that ESML must pay “all sums
due under the Contract as a result of breach, as well as all future sums due under the
Contract as a result of the anticipatory repudiation.” (See id. ¶ 53.) In order to determine
whether Count One involves a substantial and disputed federal question, the Court must
look to each element of Plaintiff’s claim and determine whether ruling on Plaintiff’s
claim requires interpretation of one or more disputed Tariff provisions. See Grable, 545
U.S. at 314; Williams, 147 F.3d at 702.
28

1. Necessarily Raised and Actually Disputed Tariff
Provisions
A case “arises under” federal law if the Court must determine a disputed and
substantial federal question when addressing a “necessary element of one of the wellpleaded state claims.” See Franchise Tax Bd., 463 U.S. at 13; Gunn, 133 S. Ct. at 1065
(explaining that federal jurisdiction over a state law claim only lies if the federal issue is
“necessarily raised”); Humphrey v. Sequentia, Inc., 58 F.3d 1238, 1246 (8th Cir. 1995)
(explaining that “‘[t]o bring a case within the statute, a right or immunity created by the
Constitution or laws of the United States must be an element, and an essential one, of the
plaintiff’s cause of action’”) (quoting Gully v. First Nat’l Bank, 299 U.S. 109, 112
(1936)).
Here, in Count One, Plaintiff explicitly sought damages as part of its breach of
contract claim. (See First Am. Compl. ¶ 53 [Doc. No. 35].) According to the parties’
TSA, “any controversy between the parties arising under th[e] Agreement . . . shall be
determined in accordance with the laws of the State of Michigan.” (See TSA § 13 [Doc.
No. 80-2].) Therefore, Michigan law controls Plaintiff’s breach of contract claim. Under
Michigan law, “[a] party asserting a breach of contract must establish by a preponderance
of the evidence that (1) there was a contract (2) which the other party breached (3)
thereby resulting in damages to the party claiming breach.” Miller–Davis Co. v. Ahrens
Const. Co., 495 Mich. 161, 178 (2014) (emphasis added); see also Bd. of Trustees of City
of Pontiac Police & Fire Retiree Prefunded Grp. Health & Ins. Trust v. City of Pontiac,
No. 316680, 2015 WL 1214714 (Mich. Ct. App. Mar. 17, 2015). Thus, damages were an
29

essential or “necessary” element of Plaintiff’s Count One, Gunn, 133 S. Ct. at 1065, and
the Court was required to construe and apply any and all Tariff provisions that affected
whether Plaintiff was entitled to collect damages for ESML’s breach. Specifically, the
Court had to determine whether the motivation underlying ESML’s breach meant that
ESML was not required to pay damages under the Limitation of Liability clause, and
whether the factual events leading to ESML’s breach meant that ESML was not obligated
to pay damages under the Force Majeure and Remedies clauses.
As noted above, the Contract incorporated the Tariff, and here, the Tariff included
a Limitation of Liability provision, which states that:
Except as otherwise provided herein, neither Transporter nor Shipper shall
be liable in damages, whether direct, indirect, consequential or otherwise,
other than for acts of gross negligence, undue discrimination or willful
misconduct and then only to the extent that Force Majeure does not apply,
provided that nothing herein shall limit Transporter’s or Shipper’s liability,
if any, for direct damages resulting from its own negligence.
(See Tariff § 6.13.8 (emphasis added) [Doc. No. 425-5].) Therefore, in order to
adjudicate a “necessarily raised” element of Plaintiff’s Count One, the Court must
interpret the applicability of the Limitation of Liability provision to the facts of
this case.
The Court must also interpret the applicability of two additional Tariff
provisions, the Force Majeure provision and the Remedies provision, to determine
whether ESML must pay the damages that Plaintiff alleges are due in Count One.
The Force Majeure provision of the Tariff provides that neither party is liable for
damages for any act “by or in consequence of” a specific set of events “whether of
30

the kind herein enumerated or otherwise.” (See Tariff § 10.1 [Doc. No. 80-2].)
Thus, in order to determine whether Great Lakes succeeded on the damages
element of its Count One, the Court needed to determine whether ESML’s breach
in this case was caused by an event covered by the Force Majeure clause.
While the Force Majeure clause offered another potential basis for ESML
to limit its liability, the Force Majeure clause itself was limited by the Remedies
provision of the Tariff, which provides:
Such causes or contingencies affecting the performance of the Agreement
by either party, however, shall not relieve it of liability in the event of its
concurring negligence . . . , nor shall such causes or contingencies affecting
the performance of this Agreement relieve either party from its obligation
to make payments of amounts then due thereunder . . .
(See Tariff ¶ 10.2 (emphasis added) [Doc. No. 80-2].) Thus, in order to adjudicate
the merits of Plaintiff’s Count One, the Court was required to analyze the
applicability of at least three Tariff provisions.
In this case, the parties “actually disput[e]” how the Court should interpret
all three of these provisions. See Gunn, 133 S. Ct. at 1065 (explaining that federal
jurisdiction over a state law claim lies only if the federal issue is “actually
disputed”); Grable, 545 U.S. at 314 (requiring the federal issue to be “disputed and
substantial”).
As to the Limitation of Liability provision, Defendant claims that the
provision prohibits Plaintiff from collecting damages on Defendant’s breach. (See
Def.’s Mem. Supp. Mot. for Summ. J. at 10 [Doc. No. 423].) Specifically,
Defendant argues that by placing this language in the Tariff, Great Lakes limited
31

its recovery to the express rights and remedies set forth in the agreement and
waived the right to pursue remedies under common law. (See id.) Plaintiff
disagrees, and argues that “[i]f a shipper has no liability except for gross
negligence, undue discrimination or willful misconduct, Great Lakes simply
cannot enforce any of the other provisions of the Tariff. Such a reading of the
Tariff renders meaningless all other provisions which impose obligations on a
shipper ‘to pay.’” (Pl.’s Opp’n Mem. at 25 [Doc. No. 429].)
As to the Force Majeure and Remedies provisions, Defendants claim that the 2008
financial crisis (“the Great Recession”) qualified as an event covered by the Force
Majeure clause, because the Great Recession prevented them from obtaining financing to
commence construction of the facility, which ESML was required to construct pursuant
to the Contract. (See Defs.’ Mem. in Opp’n to Pl.’s Mot. to Dismiss for Failure to State a
Claim at 9–11, 22–27 [Doc. No. 374].) ESML contends that the global financial
meltdown, demand for steel, and credit freeze were “not of its own making,” (see id. at
25), and therefore the Force Majeure clause applies, and Plaintiff failed to prove the
damages element of its claim in Count One.
In contrast, Plaintiff argues that the “plain language of the Force Majeure
clause is limited by the plain language of the Remedies clause which follows it.”
(See Pl.’s Reply Mem. at 14 [Doc. No. 384].) Specifically, Great Lakes asserts
that ESML’s failure to secure funding for the facility because of the Great
Recession was not an event covered by the Force Majeure clause because although
the clause “includes a laundry list of hardships that may suspend a party’s
32

obligations under the Contract, it does not include financial crises or changes in
financial conditions.” (See 5/15/12 Order at 18 [Doc. No. 397].) Thus, the parties
“actually disput[e]” the proper interpretation and application of necessarily raised
federal issues in this case. See Gunn, 133 S. Ct. at 1065.
Because this particular issue of subject matter jurisdiction was not raised until the
eve of trial, the parties have already submitted briefing about the merits of Plaintiff’s
Count One and the Court has, in fact, already had the opportunity to evaluate the merits
of Plaintiff’s Count One in its May 15, 2012 Order and March 19, 2013 Order. (See
generally 5/15/12 Order at 18 [Doc. No. 397]; 3/19/13 Order [Doc. No. 559].)
In its March 2013 Order, the Court directly addressed the parties’ disagreement
about the meaning and applicability of the Limitation of Liability and Remedies
provisions. The Court explained that the Limitation of Liability provision must be
construed “in the context of the entire Tariff.” (See 3/19/13 Order at 18 [Doc. No. 559].)
Accordingly, the Court explained that given the existence of the Remedies provision of
the Tariff, the Limitation of Liability provision must only apply to select tort damages;
otherwise, the Remedies provision would be “unnecessary.” (See id. at 19, 22.)
Accordingly, the Court held that, coupled with the Remedies clause, the Limitation of
Liability provision did not excuse ESML from paying damages. (See id.)
When adjudicating the merits of Plaintiff’s Count One, the Court also had to
determine the meaning of the Force Majeure provision of the Tariff. In the May 2012
Order, the Court considered whether the Force Majeure clause excused ESML from
paying damages, and thus whether Plaintiff adequately proved the damages element of its
33

Count One. (See 5/15/12 Order at 12–19 [Doc. No. 397].) Although the Force Majeure
clause stated that liability for damages would not attach to breaches caused by events
“whether of the kind herein enumerated or otherwise,” (see Tariff § 10.1 [Doc. No. 802]), the parties disagreed about what events were captured by the term “otherwise.”
When determining which events were captured by the Tariff term “otherwise,” the Court
had to reconcile the Force Majeure provision with the Remedies provision of the Tariff.
(See 5/15/12 Order at 18 [Doc. No. 397].) Ultimately, the Court held that the Force
Majeure clause did not excuse ESML from its obligation to pay damages for its breach.
In sum, the Court’s prior analysis of the merits of Count One further demonstrates that
the federal issues in this case were both necessarily raised and actually disputed.
The Court finds that Plaintiff’s case is similar to City of Chanute, Kansas v.
Kansas Gas and Electric Co., No. 06-4096-JAR-JPO, 2007 WL 1041763 (D. Kan. Apr. 4,
2007). In City of Chanute, the plaintiff sought “construction of a federally filed tariff[,
which was filed pursuant to the Federal Power Act,] and a ruling that [the] defendants
violated the terms of this tariff.” See 2007 WL1041763, at *6. Therefore, the court was
required to construct the terms of the federally filed tariff in order to determine the terms
of the parties’ agreement and whether the defendants were in violation of this agreement.
Id. at *5. The Kansas district court held that it had federal question jurisdiction, pursuant
to 28 U.S.C. § 1331, over the plaintiff’s state law contract claim, because it was required
to construct the terms of the tariff and determine whether the defendants’ actions violated
the terms of the agreement. See id. at *6.

34

Insofar as the City of Chanute Court’s finding of jurisdiction was based on the fact
that it had to construct substantial and disputed terms of the federal tariff, the Court finds
the Kansas court’s ruling persuasive. See id. at *5. Similar to the analysis completed in
City of Chanute, here, the Court also had to interpret several provisions of the federal
Tariff to determine whether Plaintiff is entitled to the damages it seeks in Count One.
While the necessarily raised federal issue in City of Chanute was whether the defendants’
conduct constituted a breach of the tariff, here, the necessarily raised federal issue was
whether ESML was liable for damages. Thus, in both cases, the adjudicating court was
required to determine necessarily raised, substantial and disputed federal questions – the
meaning of different tariff provisions. 4
2. Necessarily Raised and Actually Disputed Issues of
Federal Law Exist Without Addressing Defendants’
Federal Defenses
The Court notes that, in its prior Orders, it considered the Limitation of Liability,
Force Majeure, and Remedies Tariff clauses in the context of considering either the

4

While the Court agrees with the City of Chanute Court’s end result and the main
basis for its holding, the Court disagrees with some of the other bases for jurisdiction that
the City of Chanute Court appears to espouse. For instance, in City of Chanute the court
seems to imply that it has jurisdiction simply because the FPA contains a provision which
vests exclusive jurisdiction in federal courts for violations of the FPA or violations of
regulations promulgated under the FPA. See id. at *3.
Insofar as the court’s ruling is based on this implication, the Court disagrees. As
the Court explained above, see supra Part III(C)(1)(a), a federal statute’s “exclusive
jurisdiction” provision is not a generator of jurisdiction. Assuming that the statute does
not provide a private cause of action for a plaintiff, if a plaintiff merely invokes that
federal statute or a federal tariff promulgated under the statute, then a federal court does
not necessarily have jurisdiction if the parties do not dispute a substantial question about
the statute or the tariff. Rather, federal courts only have exclusive jurisdiction over cases
in which they otherwise already have original jurisdiction.
35

merits of Defendants’ counterclaims or defenses. (See 5/15/12 Order at 12–19 [Doc. No.
397]; Defs.’ First Am. Answer ¶ 49 [Doc. No. 314].) As the Court explained above, a
federal defense does not provide a basis for removal, “even if the defense is anticipated in
the plaintiff’s complaint, and even if both parties concede that the federal defense is the
only question truly at issue in the case.” See Caterpillar, 482 U.S. at 393 (citing
Franchise Tax Bd., 463 U.S. at 12). In fact, even a compulsory federal counterclaim does
not establish “arising under” federal question jurisdiction. See Vaden v. Discover Bank,
556 U.S. 49, 60–61 (2009) (citing Holmes Group, Inc. v. Vornado Air Circulation Sys.,
Inc., 535 U.S. 826, 830 (2002)).
Here, however, the three Tariff provisions discussed above were not solely federal
defenses. Rather, had ESML not raised these defenses, the Court would have still had to
consider and interpret these Tariff provisions when determining the merits of Plaintiff’s
affirmative case for damages in Count One. Specifically, the Court would have had to
determine whether ESML was excused from paying damages by any of the
aforementioned Tariff provisions.
Construing the meaning of these three Tariff provisions was essential to
determining whether Plaintiff was entitled to relief for Count One. This is in stark
contrast to other cases, in which courts have held that federal law was not an essential
element of the plaintiffs’ claims. For instance, Plaintiff’s case is distinguishable from
Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667 (1950). Although Skelly Oil
involved actors, such as the respondent-natural gas company, that were subject to
regulation under the NGA, the core of the dispute in the case was not based on a federal
36

tariff promulgated under the NGA. See 399 U.S. at 669–70. Rather, the contract
underlying the respondent’s breach of contract claim was a collateral contract between
the respondent-natural gas company and the petitioner-petroleum supply company that
did not incorporate a federally filed tariff. See id. The contract claim also did not require
a federal court to construe any provision of the NGA or a federally filed tariff. See id.
Therefore, it’s unsurprising that the Supreme Court determined that federal question
jurisdiction did not exist in the case. See id. at 674. The Skelly Oil Court clarified that
even if the respondent had “sought damages from petitioners or specific performance of
their contracts,” federal question jurisdiction would not lie. See id. at 672. Federal
question jurisdiction clearly would not lie in either of these instances, because neither
seeking damages nor seeking specific performance would alter the fact that the
underlying contract did not incorporate a federal tariff and the contract claim did not
require the Court to construe any federal provision to determine the merits of the
respondent’s claim.
In contrast, here, even without directly considering Defendants’ defenses, the
Court would have had to construe disputed provisions of the Tariff in order to adjudicate
the merits of Plaintiff’s claim for damages in Count One. Again, the Court reiterates that
although Defendants raised federal defenses, the Court would have been required to
interpret at least three Tariff provisions when determining an essential element of
Plaintiff’s Count One. Cf. id. at 673 (explaining that federal court jurisdiction cannot
arise “if a suit for a declaration of rights could be brought into the federal courts merely
because an anticipated defense derived from federal law.”)
37

Plaintiff’s case is also distinguishable from Central Iowa Power Co-op. v.
Midwest Independent Transmission System Operator, Inc., 561 F.3d 904 (8th Cir. 2009).
In Central Iowa Power Co-op., the Eighth Circuit analyzed whether resolution of the
appellant-plaintiff’s state law claims necessarily implicated substantial and disputed
federal issues. See 561 F.3d 904, 912 (8th Cir. 2009). The Eighth Circuit explained that
the plaintiff’s implied-contract and tort claims did not involve the federal tariff, because
the appellee-defendants were not parties to the tariff, and thus were not bound by the
provisions of the tariff.5 Id. at 914. Accordingly, the court held that federal question
jurisdiction did not exist because although the plaintiff’s claims “implicate[d]” the tariffs,
implication alone was not enough to give rise to federal question jurisdiction. Id. at 917.
The parties in the case also failed to demonstrate that the state law claims challenged a
provision in the tariff. Id. In contrast, here, Plaintiff and Defendants are both parties to
the Tariff at issue, and are bound by its provisions. Moreover, resolution of Plaintiff’s
Count One not only implicated the Tariff, but depended on the Court’s interpretation of
the definition of terms and phrases within the Tariff.

5

The Court notes that in Central Iowa Power Co-op, the federal tariff at issue was
not promulgated under the NGA. Rather, the tariff was promulgated pursuant to the
Federal Power Act (“FPA”). See Central Iowa Power Co-op, 561 F.3d at 908. However,
this difference between the cases is immaterial. “[T]he Supreme Court has held that the
applicable case law for the two Acts is often interchangeable.” Cal. ex rel. Lockyer v.
Dynegy, Inc., 375 F.3d 831, 853 n.8 (9th Cir. 2004), opinion amended on denial of reh’g
on other grounds, 387 F.3d 966 (9th Cir. 2004). For instance, in Arkansas Louisiana Gas
Co. v. Hall, the Supreme Court explained that because “the relevant provisions of the
[NGA and the FPA] are in all material respects substantially identical,” the Court
“follow[ed] [its] established practice of citing interchangeably decisions interpreting the
pertinent sections of the two statutes.” See 453 U.S. 571, 577 n.7 (1981) (internal
quotations and citations omitted).
38

Finally, Plaintiff’s case is also distinguishable from Pan American Petroleum
Corp. v. Superior Court of Delaware, 366 U.S. 656, 663 (1961). In Pan American, a gas
pipeline company initially brought common law contract claims in state court seeking a
refund for overpayment made to defendant producers. See 366 U.S. at 658. Although
both parties were regulated under the NGA, the contract at issue did not implicate the
federal regulatory scheme as it was not the original FERC filed tariff, but was rather a
letter by the gas pipeline company stating that it would pay a higher rate, but would
expect a refund if it prevailed in its legal challenge to the validity of a state commission’s
minimum rate order. See id. at 659. As another court explained, the “contract” at issue
in Pan American was, “in effect, an option contract based on a future litigation event.”
Dynegy, 375 F.3d at 843. The Supreme Court held that it lacked federal question
jurisdiction in Pan American because “[n]o right [was] asserted under the Natural Gas
Act,” 366 U.S. at 663, and the Court was “not called upon to decide the extent to which
the Natural Gas Act reinforces or abrogates the private contract rights . . . in
controversy,” id. at 664.
Unlike the state law option contract in Pan American, here, the Court is called
upon to decide the extent to which the Tariff, which is considered federal law, reinforces
or abrogates Plaintiff’s right to recover damages. Thus, here, the disputed provisions of
the Tariff raise actually disputed issues of federal law.
3. Substantiality of Actually Disputed Federal Issues
As to the substantiality of the federal issues in this case, the Court finds that the
federal issues that the Court must decide are “significant to the federal system as a
39

whole,” as opposed to only being “significant to the particular parties in the immediate
suit.” See Gunn, 133 S. Ct. at 1066.
In Grable, the Supreme Court explained that the meaning of the federal tax
provision at issue was “substantial” because the Government had a strong interest in
being able to recover delinquent taxes, not only in Grable, but in future cases as well.
See 545 U.S. at 315. In contrast, in Gunn, the Supreme Court held that the relevant
federal issue “carrie[d] no such significance.” See 133 S. Ct. at 1067. The Court
explained that although the federal patent issue was actually disputed, the dispute was
merely hypothetical as it would “not [have] change[d] the real-world result of the prior
[underlying] federal patent litigation.” See id.
Here, the Court holds that its resolution of the actually disputed federal issues in
this case – the interpretation and application of the Tariff provisions – is significant to the
federal system as a whole. See id. at 1066–67. Likely, many tariffs contain liability
limitation provisions that are similar, if not identical, to the provisions at issue in this
case. See, e.g., Hill v. MCI WorldCom Commc’ns, Inc., 141 F. Supp. 2d 1205, 1214
(S.D. Iowa 2001) (interpreting the limitation of liability provision in the controlling tariff,
which stated that “[i]n no event shall [the defendant] be liable to customer for any
indirect, special, incidental, consequential, exemplary or punitive loss or damage of any
kind, including lost profits . . . by reason of any act or omission in its performance under
this tariff”); In re Birch Telecom, Inc., No. 05-12237 (PJW), 2009 WL 1531792, *3
(Bankr. D. Del. June 2, 2009) (explaining that the relevant tariff in the cases provided
that “The Company [Debtors] will not be liable for any direct, indirect, incidental,
40

special, consequential, exemplary or punitive damages to Customer or User [A–Tech] as
a result of any Company service, equipment or facilities, or the acts or omissions or
negligence of the Company, Company’s employees or agents.”); IPCO Safety Corp. v.
WorldCom, Inc., 944 F. Supp. 352, 355 n.3 (D.N.J. 1996) (stating that the relevant tariff
provides, in relevant part, that “LDDS shall not be liable for any direct, indirect,
consequential, special, actual, or punitive damages, or for any lost profits of any kind or
nature whatsoever arising out of any defects or any other cause.”).
Therefore, in future NGA tariff violation cases, courts may look to the way in
which this Court interpreted the Tariff provisions here, and applied those provisions to
the particular facts of this case, in order to determine whether a defendant is liable for
damages in a similar case. Accordingly, the way in which this Court constructs and
applies that provision to the facts of this case may be instrumental in affecting how future
courts interpret and apply similar provisions. In sum, the Court concludes that Plaintiff’s
Count One raises an “actually disputed and substantial” question of federal law. See
Grable, 545 U.S. at 314.
4. Dispute of this Federal Issue Will Not Disrupt the
Federal-State Balance
As the Court noted above, federal jurisdiction over a state law claim will only lie if
the federal issues at play are “capable of resolution in federal court without disrupting the
federal-state balance approved by Congress.” See Gunn, 133 S. Ct. at 1065. In Grable,
the Supreme Court held that federal question jurisdiction existed because “the meaning of
the federal [tax] statute [was] actually in dispute,” and the federal issue was significantly
41

“substantial.” See Grable, 545 U.S. at 315. Central to the Court’s substantiality holding
was that deciding the meaning of the federal tax provision at issue would not disrupt the
federal-state balance. See id. at 319.
Here, like the parties in Grable, the parties dispute the meaning of provisions in
the Tariff, and they contest the construction and effect of these Tariff provisions.
Moreover, as in Grable, the Court’s construction of the Tariff provisions also does not
disrupt “Congress’s intended division of labor between state and federal courts.” See id.
at 319. In this situation, Congress does not appear to have put out a “welcome mat meant
[to] keep out.” See id. In other words, the language of the NGA does not evidence
Congress’s intent to keep these types of cases out of federal court. Rather, the fact that
the NGA includes section 717u, which provides federal courts “exclusive jurisdiction”
over cases involving violations of regulations promulgated pursuant to the NGA, is
evidence of the fact that Congress affirmatively sought to provide a federal forum for
certain cases, such as this one.
5. The Court has Original and Exclusive Jurisdiction
Because this case involves substantial and disputed federal questions, the Court
has original jurisdiction pursuant to 28 U.S.C. § 1331 and 28 U.S.C. § 1337, and has
exclusive jurisdiction, pursuant to section 717u of the NGA. See 15 U.S.C. § 717u. As
the Court discussed above, section 717u vests federal district courts with exclusive
jurisdiction over cases that otherwise arise under federal law or involve a substantial
question of federal law.

42

The Court notes that Plaintiff’s case is distinguishable from Merrell Dow
Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804 (1986). In Merrell Dow, the Supreme
Court held that it lacked original jurisdiction because the plaintiffs’ negligence claim,
which was based in part on a theory that the defendant manufacturer violated the U.S.
Food, Drug, and Cosmetic Act (“FDCA”), did not involve a substantial and disputed
federal issue. See 478 U.S. at 817. The Court explained that because the FDCA did not
contain a private cause of action for FDCA violations, it would “flout, or at least
undermine, congressional intent to conclude that the federal courts might nevertheless
exercise federal-question jurisdiction and provide remedies for violations of that federal
statute.” See id. at 812.
In contrast, here, simply because the NGA does not provide an express or implied
private right of action for Plaintiff does not mean that Congress intended to preclude a
federal remedy for violations of the NGA. Rather, the fact that the NGA includes section
717u, which provides federal courts with “exclusive jurisdiction” over cases involving
violations of the NGA, is evidence of the fact that Congress affirmatively sought to
provide a federal forum for cases, such as this one, that involve substantial and disputed
federal issues.
The Court emphasizes, however, that jurisdiction in this case is not generated by
15 U.S.C. § 717u. Rather, jurisdiction here lies under 28 U.S.C. § 1331 or § 1337. The
fact that section 717u grants exclusive jurisdiction to federal courts only means that
federal courts have exclusive jurisdiction over cases that otherwise fall within the district

43

courts’ original jurisdiction. See Pan Am. Petroleum Corp., 366 U.S. at 664; Manning,
772 F.3d at 167 n.10.
In sum, here, the Court has original jurisdiction because Plaintiff’s Count One
requires the Court to interpret three disputed provisions of a federal regulation – the
Tariff; and the Court has exclusive jurisdiction, pursuant to 15 U.S.C. § 717u, because
Plaintiff alleges a violation of a regulation, promulgated under the NGA.
b. Plaintiff’s Counts Two, Three, and Four
As noted above, in Count Two, Plaintiff claims that “[u]nder the equitable
theories or remedies of piercing the corporate veil, alter ego and/or mere instrumentality,
the corporate structures of each of the Essar entities should be disregarded, and each of
the foreign Essar entities should be held liable for the damages recoverable by Great
Lakes as a result of [ESML’s] breach of and anticipatory repudiation of the Contract.”
(See First Am. Compl. ¶ 58 [Doc. No. 35].) In Count Three, Plaintiff claims that “[a]s a
result of the Essar entities’ joint enterprise or joint venture, each of the foreign Essar
entities should be held liable for the damages recoverable by Great Lakes as a result of
the breach and anticipatory repudiation of the Contract.” (See id. ¶ 61.) And, finally, in
Count Four, Great Lakes alleges that because ESML was acting as the agent for the
foreign Essar entities, all of the foreign Essar entities should be held liable for the
damages suffered by Great Lakes. (See id. ¶ 63.)
Plaintiff’s Counts Two, Three, and Four are based solely on state common law
doctrines. None of these claims require the Court to interpret any additional ambiguous
provisions of the Tariff. Therefore, unlike Count One, the Court finds that Counts Two,
44

Three, and Four do not require additional analysis of an “actually disputed and
substantial” federal question. See Grable, 545 U.S. at 314.
c. FERC’s Refusal to Take the Case Doesn’t Alter the Court’s
Ruling
ESML correctly notes that FERC dismissed ESML’s complaint because the
Commission determined that (1) it had no special expertise in “straight-forward
contractual matters;” (2) there was no need for “uniformity of interpretation when dealing
with a contract dispute over damages resulting from the termination of an agreement;”
and (3) the issue of anticipatory repudiation of the TSA was not important in relation to
the Commission’s regulatory responsibilities. (See Moen Decl., Ex. 4 “FERC Order
Dismissing ESML’s Complaint” at 6 [Doc. No. 859-1].) FERC is given primary
jurisdiction over disputes requiring its unique expertise or suits regarding the
reasonableness of FERC-approved rates, pursuant to the “filed rate doctrine.” (See
3/19/13 Order at 14 [Doc. No. 559].) Because ESML’s complaint did not pertain to
whether the rate between the parties was “just and reasonable,” FERC correctly declined
to hear the case. (See id. at 14–16.)
However, simply because FERC does not have jurisdiction over this case because
the filed rate doctrine does not apply does not mean that the contractual dispute in this
case does not involve a substantial and disputed question of federal law. While “Great
Lakes is not challenging the rates in the Contract or Tariff, nor is it seeking to impose
terms that are not found in these two documents” (Def.’s Mem. at 18 [Doc. No. 858]), the
parties do dispute the meaning and application of relevant Tariff provisions. Therefore,
45

in this case, Plaintiff’s case is a “breach of contract lawsuit arising under state law,” (see
id. at 11; Moen Decl., Ex. 3 “Great Lakes’ Answer to ESML’s FERC Complaint” at 1, 9
[Doc. No. 859-1]), which also involves substantial and disputed questions of federal law.
d. Distinguishing Non-Controlling Authority
Both parties cite non-controlling case law to bolster their arguments. Although the
cases do not control the Court’s holding, the Court discusses and distinguishes a handful
of them below.
1. Cases Cited by Defendant
Defendant argues that this case is similar to (1) Monforte Exploration L.L.C. v.
ANR Pipeline Co., No. H-09-3395, 2010 WL 143712 (S.D. Tex. Jan. 7, 2010); and (2)
PJM Interconnection, LLC v. City Power Mktg., LLC, No. 1:12-cv-01779-RGA, 2013
WL 1498656 (D. Del. Apr. 12, 2013). The Court finds both cases distinguishable.
In Monforte, the parties, similar to the parties in this case, had entered into a
contractual transportation agreement for the transportation and storage of natural gas.
See 2010 WL 143712, *1. Pursuant to a FERC tariff, the defendant then issued an order
that allegedly contradicted the substance of the private contractual agreement between the
parties. Id. at *2. Accordingly, the plaintiff brought a state court action alleging that by
issuing the order, the defendant breached the parties’ contract. Id. The plaintiff’s
complaint did not invoke the tariff. Id. Only the defendant claimed that the tariff gave it
the right to disregard the parties’ contract. Id. at *4–*6. And since a federal defense,
including a preemption defense, does not provide a basis for removal, see Caterpillar, 482

46

U.S. at 393, the court granted the plaintiff’s motion to remand the case to state court.
Monforte, 2010 WL 143712, at *6.
Here, the link between the parties’ contract and the FERC Tariff differs from the
connection between the parties’ contract and the FERC tariff in Monforte. In Monforte,
the question before the Court was essentially whether a FERC tariff preempted the
distinct, private contract. In contrast, here, the Court must analyze disputed provisions of
the FERC Tariff, which are incorporated within the parties’ contract, to determine the
merits of Plaintiff’s affirmative claims. Therefore, Monforte is further afield than
Defendant admits.
The Delaware District Court’s decision in PJM Interconnection, LLC is also
distinguishable. In PJM Interconnection, LLC, the plaintiff, which ran an electronic
transmission grid and operated under FERC, brought a breach of contract claim against
defendants, which were members of the electricity market. See 2013 WL 1498656, at *1.
Although the plaintiff initially filed the case in state court, the defendants removed the
case to federal court. See id. The plaintiff then sought to remand the case back to state
court, arguing that because its claim did not “implicate the tariff and challenge its terms,”
no federal question jurisdiction existed. See id. at *2. The Delaware district court held
that federal question jurisdiction did not exist because the plaintiff’s state law claims did
not challenge FERC’s tariff rates and did not challenge an earlier FERC decision
ordering the defendants to repay the plaintiff. See id. at *3.
Although the PJM Interconnection, LLC Court may have reached the proper result
in remanding the case to state court – because perhaps the plaintiff’s claims did not raise
47

substantial and disputed issues of federal law – its analysis of federal question
jurisdiction was nonetheless flawed. As Plaintiff explains, the district court “erroneously
implied that in order to confer federal question jurisdiction, the complaint must
‘challenge the tariff rates themselves.’” (See Pl.’s Mem. at 8 n.7 (citing PJM
Interconnection, LLC, 2013 WL 1498656, at *2) [Doc. No. 862].) In fact, had the
plaintiff challenged the reasonableness of the tariff rates, then the federal court should
have denied hearing the case because FERC has primary jurisdiction over cases involving
the reasonableness of rates. See Ark. La. Gas Co. v. Hall, 453 U.S. 571, 578 (1981);
Board of Public Works, City of Blue Earth, Minn. V. Wis. Power and Light Co., 613 F.
Supp. 2d 1122, 1130 (D. Minn. 2009).
Here, although Plaintiff’s claim for damages in Count One rests on the underlying
state law breach of contract claim, the damages element of the claim requires analysis
and interpretation of disputed provisions of the Tariff. Therefore, unlike the plaintiff’s
contract claim in PJM Interconnection, LLC, the Court properly has federal question
jurisdiction in this case. Therefore, both Monforte and PJM Interconnection, LLC, are
inapposite to the case before the Court.
2. Cases Cited by Plaintiff
Similar to Defendant, Plaintiff also cites inapplicable precedent from outside the
Eighth Circuit. It argues that the circumstances here are similar to those in (1) Pacificorp
v. Northwest Pipeline GP, No. CV. 10-99-PK, 2010 WL 3199950 (D. Or. June 23, 2010),
report and recommendation adopted, 2010 WL 3219533 (D. Or. Aug. 9, 2010); and (2) T

48

& E Pastornio Nursery v. Duke Energy Trading and Marketing, LLC, 268 F. Supp. 2d
1240 (S.D. Cal. 2003).
In Pacificorp, the Oregon district court held that federal question jurisdiction
existed because the plaintiff sought to enforce obligations that fell squarely within the
exclusive jurisdiction provision of the NGA. See 2010 WL 3199950, at *6. However,
the court explained that it was “reluctant to reach this conclusion in light of the Supreme
Court’s statement in Pan American that the Natural Gas Act’s exclusive jurisdiction
provision is not a ‘generator of jurisdiction.’” See id. at *6 n.3. (citing Pan Am., 366
U.S. at 664). Nonetheless, the Pacificorp Court felt bound to reach to its holding because
of Ninth Circuit precedent, specifically, Sparta Surgical Corp. v. Nat’l Ass’n of Sec.
Dealers, Inc., 159 F.3d 1209 (9th Cir. 1998), and Cal. ex. rel. Lockyer v. Dynegy, Inc.,
375 F.3d 831 (9th Cir. 2004), in which the Ninth Circuit held that “‘the rule that state law
claims cannot be alchemized into federal causes of action by incidental reference has no
application when relief is partially predicated on a subject matter committed exclusively
to federal jurisdiction.’” See Pacificorp, 2010 WL 3199950, at *6 n.3 (quoting Dynegy,
Inc., 375 F.3d at 843 n.10). The Pacificorp Court explained that Sparta and Dynegy
make clear that federal question jurisdiction exists “where a party [simply] invokes
jurisdiction under a federal statute that vests exclusive jurisdiction in the federal courts.”
See id. at *5.
The Supreme Court expressly stated in Pan American that the NGA’s exclusive
jurisdiction provision is not a “generator of jurisdiction.” See Pan Am., 366 U.S. at 664.
Thus, simply because a plaintiff has a state law claim that “incidentally references” or
49

“invokes” a federal statute that vests exclusive jurisdiction in federal courts, does not
suggest that a court has de facto federal question jurisdiction. As the Court explained
above, Pan American counsels the Court to conclude that the NGA’s exclusive
jurisdiction provision does not create jurisdiction in this case. See supra Part III(C)(1)(a).
Rather, federal question jurisdiction exists here because Plaintiff’s claim for damages
requires the Court to interpret substantial and disputed provisions of the federal Tariff.
Accordingly, insofar as Pacificorp’s ruling is based on the fact that simple invocation of a
statute that vests exclusive jurisdiction in federal courts is sufficient to find federal
question jurisdiction, the Court disagrees, and finds Pacificorp distinguishable. 6
T & E Pastornio Nursery is similarly distinguishable. In T & E Pastornio Nursery,
the plaintiffs’ state law contract claims stemmed from the defendants’ alleged breach of
their obligations under a federal tariff. See 268 F. Supp. 2d at 1247. The California
district court held that because the FPA vested the federal courts with “exclusive
jurisdiction” for violations of regulations promulgated under the FPA, the court
necessarily had jurisdiction over the plaintiffs’ claims. See id. As in Pacificorp, the T &
E Pastornio Nursery Court’s analysis was based on the Ninth Circuit’s holding in Sparta
Surgical. See id. (citing Sparta Surgical, 159 F.3d at 1212). The court explained that

6

The Court notes that reading Pacificorp as a whole, it appears that the Oregon
court’s ruling was based primarily on the fact that a mere invocation of the NGA’s
exclusive jurisdiction provision was sufficient to find jurisdiction. However, the
Pacificorp Court also noted that it had federal question jurisdiction because the plaintiff’s
contract and negligence causes of action “turn[ed] on the meaning of provisions in the
FERC-filed tariff.” See 2010 WL 3199950, at *6. Insofar as this disputed federal issue
formed the true basis of the court’s holding, the Court finds the Pacificorp Court’s ruling
persuasive.
50

jurisdiction existed not under 28 U.S.C. § 1331, but under 16 U.S.C. § 825p – the
exclusive jurisdiction provision of the FPA. See id. at n.5.
The Court finds T & E Pastornio Nursery unpersuasive for the same reasons that
Pacificorp was unpersuasive. Just as the exclusive jurisdiction provision of the NGA is
not a “generator of jurisdiction,” Pan Am., 366 U.S. at 664, the exclusive jurisdiction
provision of the FPA is similarly not a generator of jurisdiction. Therefore, insofar as T
& E Pastornio Nursery’s ruling is based on the fact that simple invocation of a statute that
vests exclusive jurisdiction in federal courts is sufficient to find federal question
jurisdiction, the Court disagrees.
IV.

MOTION TO AMEND
In Plaintiff’s Motion for Leave to File Second Amended Complaint, Great Lakes

seeks to add sections to its Complaint, alleging that, in addition to diversity jurisdiction,
this Court also has federal question jurisdiction pursuant to 28 U.S.C. § 1331 and 15
U.S.C. § 717u. (See Ellison Aff., Ex. 2, “Plaintiff’s Proposed Second Amended
Complaint” ¶ 10 [Doc. No. 815-2].) Great Lakes argues that federal question jurisdiction
exists here based on federal defenses raised by Defendants, such as ESML’s argument
that it was excused from performance by the Force Majeure clause. (See id. ¶ 54.) In
response, Defendants argue that Plaintiff should not be permitted to amend its Complaint
because (1) Plaintiff cannot show good cause under Fed. R. Civ. P. 16(b); (2) amendment
would be futile; (3) amendment would cause Defendants undue prejudice; (4) Plaintiff
has acted with undue delay and bad faith; and (5) amendment is not permissible under 28
U.S.C. § 1653. (See Defs.’ Mem. in Opp’n at 14–30 [Doc. No. 823].)
51

“Although leave to amend typically is granted liberally under Federal Rule of
Civil Procedure 15, different considerations apply when a party seeks amendment beyond
the deadline set in a scheduling order.” Weber v. Travelers Home & Marine Ins. Co.,
801 F. Supp. 2d 819, 830 (D. Minn. 2011) (citing Morrison Enters., LLC v. Dravo Corp.,
638 F.3d 594, 610 (8th Cir. 2011) (explaining that “[w]hen a party moves for leave to
amend outside the district court’s scheduling order, Fed. R. Civ. P. 16(b), not the more
liberal standard of [Rule 15], governs.”). Pursuant to Rule 16(b) of the Federal Rules of
Civil Procedure, a “schedule may be modified only for good cause and with the judge’s
consent.” See Fed. R. Civ. P. 16(b)(4). “The primary measure of Rule 16’s ‘good cause’
standard is the moving party’s diligence in attempting to meet the case management
order’s requirements.” Bradford v. DANA Corp., 249 F.3d 807, 809 (8th Cir. 2001)
(citing Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992)). Only
if the Court determines that the moving party demonstrates good cause may the Court
then proceed to evaluate other factors such as “‘[t]he existence or degree of prejudice to
the party opposing the modification.’” Bradford, 249 F.3d at 809 (quoting Johnson, 975
F.2d at 609).
In this case, the magistrate judge, who was originally assigned to this case,
permitted Plaintiff to amend its Complaint once before Defendants served a responsive
pleading. (See 1/14/10 MJ Order at 2 [Doc. No. 20].) Although this court order was not
in the form of a formal scheduling order, it served the same purpose as a deadline set in a
scheduling order. Therefore, further amendment of the Complaint was subject to the
standards set in Rule 16. See Weber, 801 F. Supp. 2d at 830.
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Here, Plaintiff fails to establish good cause for its tardy motion seeking to amend
its complaint because it has not shown that it was diligent in attempting to meet the
magistrate judge’s scheduling order. See Bradford, 249 F.3d at 809. Great Lakes claims
that although it only alleged diversity jurisdiction in its First Amended Complaint,
“federal question jurisdiction has been present in the case since [October 2009],” when
this action was commenced. (See Pl.’s Mem. at 2 [Doc. No. 814].) Assuming Plaintiff
correctly states that federal question jurisdiction has always been present in this case,
Plaintiff was not diligent in seeking amendment. 7 See, e.g., Sherman v. Winco
Fireworks, Inc., 532 F.3d 709, 717 (8th Cir. 2008) (reversing the district court’s finding
of good cause because the defendant admitted that in May 2006 it was aware of the
affirmative defense it sought to add to its answer, but the defendant failed to seek
amendment until January 2007); Barstad v. Murray County, 420 F.3d 880, 883 (8th Cir.
2005) (affirming the district court’s finding that the plaintiffs failed to establish good
cause to amend their complaint because the plaintiffs “knew of the claims they sought to
add when they filed the original complaint”); Freeman v. Busch, 349 F.3d 582, 589 (8th
Cir. 2003) (affirming the district court’s finding that the plaintiff failed to establish good
cause to amend her complaint because there was “no reason why punitive damages could
not have earlier been alleged”).
7

Although Defendants earlier stipulated that they would not object to the Court’s
exercise of subject matter jurisdiction (see Stipulation at 2–3 [Doc. No. 392]), such a
stipulation is an insufficient basis for the Court to find good cause. Pursuant to Fed. R.
Civ. P. 8(a)(1), a plaintiff’s complaint must include “a short and plain statement of the
grounds for the court’s jurisdiction.” See Fed. R. Civ. P. 8(a)(1). A stipulation, which is
a separate document from the controlling complaint in a case, does not satisfy the
jurisdictional statement required by Rule 8(a)(1).
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Moreover, the proposed amendments that Plaintiff seeks to make to its Complaint
are futile. The amendments do not directly address and lay out the manner in which the
Court must interpret the substantial and disputed federal questions at issue in this case.
Rather, Great Lakes appears to argue that federal question jurisdiction exists either
simply because its Contract invokes federal law, or because evaluating Defendants’
defenses requires interpretation of federal law. (See Proposed Second Am. Compl. ¶¶ 10,
54 [Doc. No. 815-2].) As the Court explained above, these are not bases for federal
question jurisdiction to lie. Rather, federal question jurisdiction exists in this case
because the Court must interpret at least three disputed Tariff provisions when analyzing
Plaintiff’s affirmative claim for damages in Count One. Therefore, Great Lakes’
proposed amendments in this case would be futile. Accordingly, Plaintiff’s Motion for
Leave to File Second Amended Complaint is denied.
The Court notes, however, that simply because it denies Plaintiff’s motion does
not alter the Court’s ruling on Defendant’s Motion to Dismiss for Lack of Jurisdiction.
The Court may still find subject matter jurisdiction, even if a complaint fails to explicitly
allege the proper basis for jurisdiction. See Jones v. Freeman, 400 F.2d 383, 387 (8th
Cir. 1968). Because this Court prefers substance over form, it finds that federal question
jurisdiction exists in this case even without Plaintiff’s amendment.
V.

MOTIONS IN LIMINE
Plaintiff’s Motion in Limine was filed on October 9, 2014 [Doc. No. 835], and

Defendant’s Motion in Limine was filed soon after on October 14, 2014 [Doc. No. 842].
The underlying issues in this case have evolved since both motions were filed. Given the
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Court’s most recent rulings and the fact that several months have passed since the parties
were initially preparing for trial, the Court finds that it is appropriate to deny both
motions without prejudice. The Court will be in a better position to decide motions in
limine when they are filed anew. When the Court issues a new trial date, the Court will
set a new motion in limine schedule. Based on the forthcoming schedule, the parties will
be welcome to either re-file their motions or file new motions.
THEREFORE, IT IS HEREBY ORDERED THAT:
1. Defendant Essar Steel Minnesota LLC’s Motion to Dismiss for Lack of
Subject Matter Jurisdiction [Doc. No. 856] is DENIED.
2. Plaintiff’s Motion for Leave to File Second Amended Complaint [Doc. No.
812] is DENIED.
3. Plaintiff’s Motion in Limine [Doc. No. 835] is DENIED, without prejudice.
4. Defendant’s Motion in Limine [Doc. No. 842] is DENIED, without
prejudice.
5. The parties will participate in a telephonic status conference on Wednesday, May
13, 2015 at 3:30 pm CST. The Court will separately provide call-in information
to the parties.

Dated: May 4, 2015

s/Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge

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