State of Montana v. Talen Montana, LLC et al
ORDER adopting in part Findings and Recommendations re 144 Findings and Recommendations.; denying 12 Motion to Remand; denying 14 Motion to Dismiss. Signed by Judge Dana L. Christensen on 10/10/2017. (HEG)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
STATE OF MONTANA,
TALEN MONTANA, LLC, f/k/a PPL
Montana, LLC, and NORTHWESTERN
CORPORATION, d/b/a NorthWestern
Energy, a Delaware Corporation,
United States Magistrate Judge Jeremiah C. Lynch entered Findings and
Recommendations in this case on January 23, 201 7, recommending denial of
Plaintiff the State of Montana's ("the State") Objection and Motion to Dismiss
Defendant Talen Montana, LLC's ("Talen") Consent to Removal (Doc. 14). Judge
Lynch further recommended granting the State's Motion to Remand (Doc. 12).
Both Talen and Defendant NorthWestern Corporation ("NorthWestern") timely
filed objections and are therefore entitled to de novo review of the specified
findings and recommendations to which they object. 28 U.S.C. § 636(b)(l). The
portions of the findings and recommendations not specifically objected to will be
reviewed for clear error. 28 U.S.C. § 636(b )(1 )(A); McDonnell Douglas Corp. v.
Commodore Bus. Mach., Inc., 656 F.2d 1309, 1313 (9th Cir. 1981). Clear error
exists if the Court is left with a "definite and firm conviction that a mistake has
been committed." United States v. Syrax, 235 F.3d 422, 427 (9th Cir. 2000)
For the reasons stated below, Judge Lynch's Findings and
Recommendations are adopted as to the State's Motion to Dismiss Talen's
Consent to Removal. However, the Court rejects the Findings and
Recommendations regarding the State's Motion to Remand.
In 2003, PPL Montana, LLC ("PPL"), was sued by parents of Montana
schoolchildren in the Missoula division of this Court based upon diversity
jurisdiction. The plaintiffs alleged that PPL was operating hydroelectric facilities
on state-owned riverbeds and argued that the riverbeds were part of Montana's
school trust lands which entitled plaintiffs to compensation for PPL' s use of the
property. The parents were dismissed for lack of standing after the State
intervened as a party plaintiff. PPL then moved to dismiss the case for lack of
subject matter jurisdiction asserting that the State is not a citizen for purposes of
diversity jurisdiction. The Court granted PPL's motion and dismissed the case.
In 2004, PPL filed suit in state court seeking a declaration that the State was
not entitled to compensation for PPL' s use of the riverbeds. The State
counterclaimed seeking a declaration that it did own the riverbeds and was entitled
to collect rent from PPL for their use. The state court granted summary judgment
to the State. The state court found the riverbeds of the Clark Fork, Missouri, and
Madison rivers were navigable and accordingly held that the State owned the
riverbeds through navigability for title under the Equal Footing Doctrine. The
Montana Supreme Court affirmed the state district court in PPL Montana, LLC v.
State ofMontana, 229 P.3d 421, 443 (Mont. 2010), concluding the rivers were
navigable as a matter of law at the time of statehood in 1889, meaning the State
acquired title to the riverbeds at that time under the Equal Footing Doctrine.
PPL petitioned the United States Supreme Court for a writ of certiorari,
which was granted on the sole issue of whether the Montana Supreme Court erred
in its application of the navigability for title doctrine. PPL Montana, LLC v.
Montana, 132 S. Ct. 1215 (2012). The Supreme Court reversed and remanded,
holding that the Montana Supreme Court erred in disregarding the segment-bysegment approach to navigability for title, and by relying on evidence of presentday recreational use to assess navigability at the time of statehood. Id. at 1229,
In September 2013, NorthWestern entered into a purchase and sale
agreement for the acquisition of PPL's hydroelectric facilities in Montana,
including the facilities at issue here. (Doc. 1-1 at 4.) The acquisition was
approved by the Montana Public Service Commission in September 2014. Id. In
June 2015, PPL Montana, LLC changed its legal name to Talen Montana, LLC.
(Docs. 1-1 at 4; 13-3 at 2-3.)
Before further pursuing litigation, the State and Talen stipulated in late
March 2016 that the State would be realigned as the Plaintiff and Talen would be
realigned as the Defendant. (Doc. 13-3 at 3.) The parties also stipulated to
bifurcate issues of liability and damages, with all claims or defenses relating to
navigability at the time of statehood to be adjudicated first. Id. Six days later, on
March 31, 2016, the State filed its complaint on remand naming both Talen and
NorthWestern as Defendants. (Doc. 13-4.) The State asks for a declaration that it
owns the land occupied by Defendants' hydroelectric facilities and seeks to
recover rental payments.
On April 20, 2016, NorthWestern filed a notice of removal invoking this
Court's federal question jurisdiction. (Doc. 1.) Talen consented in writing to the
removal. (Doc. 1-3.) The State has since filed two motions challenging the
propriety ofNorthWestern's removal and the subject matter jurisdiction of this
Court. First, the State filed a Motion to Remand (Doc. 12) arguing that
NorthWestern has not met its burden of establishing federal question subject
matter jurisdiction (Doc. 13). Second, the State filed an Objection and Motion to
Dismiss Talen's Consent to NorthWestern's Notice of Removal (Doc. 14)
asserting that Talen should be judicially estopped from consenting to removal
based on federal question jurisdiction, meaning that NorthWestern cannot satisfy
the requirement that all defendants consent to removal (Doc. 15).
Motion to Dismiss Talen's Consent to Removal
The Court agrees with Judge Lynch that the State's Objection and Motion to
Dismiss Talen's Consent to NorthWestern's Notice of Removal (Doc. 14) should
be denied. No party objects to this finding and recommendation. Thus, reviewing
for clear error, the Court finds none and this motion will be denied. Judge Lynch
correctly concluded: 1) that the later-served defendant rule should apply to
NorthWestern; 2) applying the waiver doctrine to an earlier-served defendant
would prevent all defendants from consenting to removal which would deprive the
later-served defendant of its right to remove and defeat the purpose of the laterserved defendant rule; and 3) the litigation conduct of Talen, as the earlier-served
defendant, has no effect on NorthWestern's right of removal under the later-served
defendant rule. (Doc. 144 at 9-13.)
Motion to Remand
The State asserts that remand is appropriate in this case because
NorthWestern, as Talen's successor in interest, is bound by Talen's choice of a
state forum and because the Defendants cannot demonstrate that this case arises
under federal law for purposes of federal question jurisdiction. (Doc. 13.)
Specifically, the State argues that neither the invocation of the Equal Footing
Doctrine itself nor the application of the navigability-for-title test under the Equal
Footing Doctrine are sufficient grounds for federal question jurisdiction. (Id. at
16-28.) Further, the State argues that Defendants have provided insufficient
evidence of a claim of interest by the United States in the property at issue to wrest
exclusive jurisdiction in this Court under the Federal Quiet Title Act ("FQTA").
(Id. at 28-32.)
Judge Lynch first concluded that NorthWestern was not bound by Talen's
choice of a state forum. (Doc. 144 at 17.) Second, Judge Lynch concluded that
Montana law creates the State's causes of action and even though the federal
constitutional Equal Footing Doctrine is implicated, it does not create the causes
of action and the implication alone is insufficient for establishing federal question
jurisdiction. (Id. at 20.) Third, Judge Lynch concluded that application of the
navigability-for-title test to the facts of this case does not "necessarily implicate
any substantial federal issues" sufficient to establish federal question jurisdiction.
(Id. at 35.) Lastly, Judge Lynch found that the Defendants could not establish that
the United States claims an interest in the property at issue or that there is a
dispute between the United States and the State as to title to the property, both of
which are necessary for this Court to exercise exclusive jurisdiction under the
FQTA. (Id. at 48.) For these reasons, Judge Lynch recommended granting the
State's Motion to Remand. (Id. at 50.) Defendants object to this recommendation.
(Docs. 154; 155.)
Successor in Interest
The Court agrees with Judge Lynch's analysis and conclusion regarding the
State's argument that remand is proper because NorthWestern is Talen's successor
in interest and is therefore bound by Talen' s original choice of a state forum.
Neither party objects to this specific finding. Accordingly, this Court exercises
clear error review. There is no clear error in Judge Lynch's conclusion that both
Fed. R. Civ. P. 25(c) and Mont. R. Civ. P. 24(c) are inapposite because the State
did not move to substitute or join NorthWestern under these rules. Instead, the
State filed a complaint on remand naming both Talen and NorthWestern as
defendants. (Doc. 13-4.) Accordingly, NorthWestern has its own right to initiate
removal. This Court finds no clear error in Judge Lynch's conclusion that
NorthWestern is not bound by Talen's choice of a state forum in 2004. (Doc. 144
at 17.) However, NorthWestern must still meet its burden of establishing that
removal is proper based on federal question jurisdiction.
Arising Under Federal Jurisdiction
The federal question statute gives the United States district courts original
jurisdiction over "all civil actions arising under the Constitution, laws, or treaties
of the United States." 28 U.S.C. § 1331. A case "arises under" federal law for
purposes of§ 1331 when the plaintiff (1) pleads a cause of action created by
federal law, or (2) pleads a state law claim which implicates "significant federal
issues." Grable & Sons Metal Products, Inc. v. Darue Engraving &
Manufacturing, 545 U.S. 308, 312 (2005). Under the well pleaded complaint rule,
whether a federal question is presented must be determined by looking to the face
of the plaintiffs complaint "unaided by the answer or by the petition for removal."
California ex rel. Lockyer v. Dynergy, Inc., 375 F.3d 831, 838 (9th Cir. 2004)
(quoting Gully v. First National Bank, 299 U.S. 109, 113 (1936)).
As to the first form of"arising under" jurisdiction, Judge Lynch concluded
that NorthWestern had not met its burden of showing that jurisdiction exists.
(Doc. 144 at 20.) Judge Lynch acknowledged that the Equal Footing Doctrine
plays a central role in this litigation, stating that "the State claims title to the
disputed riverbeds based on the Equal Footing Doctrine." (Id. at 18.) However,
Judge Lynch reasoned that although the Equal Footing Doctrine "is a creature of
federal constitutional law," it does not create an independent cause of action. (Id.
at 19.) Turning to NorthWestem's argument that the State must prove the
navigability of the underlying riverbeds to be entitled to claim rent which
necessarily implicates the Equal Footing Doctrine, Judge Lynch concluded that the
implication was insufficient to create jurisdiction. (Id. at 20.) Finding that the
State's state law claims certainly implicate the Equal Footing Doctrine, Judge
Lynch held that the implication of a federal constitutional doctrine alone does not
mean the claims are created by federal law "for the purposes of establishing
federal question jurisdiction." (Id. at 20.) Judge Lynch concluded that the State's
claims for compensation are created by Montana law, not federal law.
Accordingly, Judge Lynch held that the first form of"arising under" jurisdiction
was not satisfied because the State's complaint did not identify a federally created
cause of action. (Id.)
Objecting to this specific finding, Defendants argue that this case arises
under federal law because "Montana's title claim is conferred by the Constitution
itself." (Docs. 155 at 23; 156.) Defendants assert that the State's claim for
declaratory relief is not a substantive right or cause of action in itself, but is the
medium used to assert a substantive right created "exclusively from federal law"
which equates to a determination of State ownership of the disputed riverbeds
under the Equal Footing Doctrine. (Doc. 155 at 23-24.) This Court agrees.
When the vindication of a right under state law necessarily turns "on some
construction of federal law," the claim arises under federal law for purposes of
federal question jurisdiction and 28 U.S.C. § 1331. Franchise Tax Bd. v.
Construction Laborers Vacation Trust for S. Cal., 463 U.S. 1, 9 (1983); North
Carolina v. Alcoa Power Generating, Inc., 853 F.3d 140, 146 (4th Cir. 2017). As
was recently addressed by the United States Court of Appeals for the Fourth
Circuit in North Carolina v. Alcoa Power Generating, Inc., the relevant question
is "whether the right that [the State] seeks to vindicate-the right to title of
riverbed land as determined by the river's navigability vel non at statehood-turns
on construction of federal law." 853 F .3d at 146. This Court finds that it does. In
order to be viable, the State's claims for compensation require a declaration that
the State gained title to the lands at issue through a construction of the navigability
for title test under the Equal Footing Doctrine. PPL Montana, LLC v. Montana,
565 U.S. 576, 587 (2012).
The United States Supreme Court has long recognized that title to navigable
waters and their riverbeds vested in each State are an "aspect of sovereignty
obtained when separating from the British Crown and becoming a State." Alcoa,
853 F.3d at 147 (citing Martin v. Waddell's Lessee, 41 U.S. 367, 410 (1842)).
When the revolution took place, the people of each state became sovereign and "in
that character held the absolute right" to all their navigable waters and riverbeds
for their common use, "subject only to the rights since surrendered" through the
Constitution to the "general government." Waddell's Lessee, 41 U.S. at 410. In
order to eliminate the distinction between states that acquired independence "by
force of arms and those which acquired it by peaceful consent" of established
states, the Constitution says the latter "must be admitted into the union on an equal
footing with the rest." Pollard's Lessee v. Hagan, 44 U.S. 212, 216 (1845).
Under the Equal Footing Doctrine, each State "receives absolute title to the beds
of navigable waterways within its boundaries upon admission to the Union."
Oregon v. Corvallis Sand & Gravel Co., 429 U.S. 363, 372 (1977). The Supreme
Court clarified that "the State's title to lands underlying navigable waters within
its boundaries is conferred not by Congress but by the Constitution itself." Id. at
3 74 (emphasis added).
Under the Equal Footing Doctrine, navigability at the time the State joined
the Union determines whether title passed to the State or "remained in the United
States." United States v. Utah, 283 U.S. 64, 75 (1931). "The question of
navigability ... is a federal question." Id. This is so even when the dispute
concerns the factual sufficiency for a finding of navigability. See Id. When
deciding the present case, the Court reiterated that "any ... questions of
navigability for determining state riverbed title are governed by federal law." PPL
Montana, 565 U.S. at 591 (citing Utah, 283 U.S. at 75; United States v. Oregon,
295 U.S. 1, 14 (1935)). Federal jurisdiction flows from "the constitutional nature
of state ownership of navigable waters" under the Equal Footing Doctrine. Alcoa,
853 F.3d at 149. Since the State cannot claim rents without a declaration that the
rivers are navigable, the State's claims tum on the construction of federal law and
there is federal question jurisdiction under 28 U.S.C. § 1331.
The State responds by arguing that the Equal Footing Doctrine does not
create a cause of action and "simply" grants later-admitted states the benefit of the
navigability in fact rule. (Doc. 160 at 10.) Navigability for title is the federal
common law progeny of the navigability in fact rule. "The Court has explained
the elements of this test" over a century of jurisprudence beginning with "a basic
formulation" of the navigability in fact rule in The Daniel Ball. See PPL
Montana, 565 U.S. at 590-95 (recalling and enumerating the evolution of the
"navigability in fact" rule into the distinct "navigability for title" test used in this
case). However, for the reasons stated above, the State's argument is
unpersuasive. The State has pled causes of action that require the construction of
federal law: navigability for title.
Second, the State argues that Defendants confuse cases that arise under
federal law with cases that apply federal law. (Doc. 160 at 11.) The State claims
that this case merely applies federal law because it is "well established" that state
property law governs equal footing lands despite the "initial application of federal
law for determining navigability." (Id.) The State quotes Oregon v. Corvallis
Sand and Gravel Co., 429 U.S. 363, 378-79 (1977), as support for this assertion:
If the lands at issue did pass under the equal-footing doctrine, state
title is not subject to defeasance and state law governs subsequent
dispositions .... Under our federal system, property ownership is not
governed by a general federal law, but rather by the laws of the
(Doc. 160 at 11.) However, the Court in Corvallis Sand and Gravel was deciding
whether federal common law continued to control title to property after title was
originally conferred to the State of Oregon under the Equal Footing Doctrine, not
whether title had been conferred at all. In deciding this issue, the Court stated that
once title had vested under the Equal Footing Doctrine, "the force of that doctrine
was spent," and subsequent dispositions of title would be controlled by state law.
Corvallis Sand and Gravel, 429 U.S. at 371. The Court then quoted Wilcox v.
Jackson, 38 U.S. 498, 499 (1839), to clarify that:
[W]henever the question in any Court, state or federal, is, whether a
title to land which had once been the property of the United States has
passed, that question must be resolved by the laws of the United
States; but that whenever, according to those laws, the title shall have
passed, then that property, like all other property in the state, is
subject to state legislation ....
Corvallis Sand and Gravel, 429 U.S. at 377. The State's argument puts the cart
before the horse. Here, the issue before the Court is "if the lands at issue did pass
under the equal-footing doctrine." Id. at 378. State law is inapplicable to the
determination of this question. Without federal law, the State's state law claims
are not viable.
For the foregoing reasons, the Court finds that the vindication of the State's
state law claims necessarily tum upon the construction of federal law and,
therefore, arise under federal law for the purposes of federal question jurisdiction
under 28 U.S.C. § 1331. Having jurisdiction over this matter on these grounds,
the Court refrains from addressing Judge Lynch's remaining Findings and
Recommendations on this subject.
Accordingly, IT IS ORDERED that Judge Lynch's Findings and
Recommendations (Doc. 144) are ADOPTED IN PART.
The State's Objection and Motion to Dismiss Talen's Consent to
NorthWestem's Notice of Removal (Doc. 14) is DENIED.
The State's Motion to Remand (Doc. 12) is DENIED.
DATED this 10th day of October, 2017.
Dana L. Christensen, Chief istrict Judge
United States District Court
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?