Adkins Energy, Inc., et al v. Dominion Transmission, Inc. et al

Filing 49

ORDER GRANTING PLAINTIFFS' MOTION TO REMAND: Granting #9 Motion to Remand; DISMISSING CASE; case remanded to Circuit Court of Marshall County. Signed by District Judge John Preston Bailey on 2/2/17. (soa)(copy to Clerk, Circuit Court of Marshall Co., WV)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
Wheeling

ADKINS ENERGY, INC., et al.,
Plaintiffs,
v.

Civil Action No. 5:16-cv-151
(BAILEY)

DOMINION TRANSMISSION INC., et al.,
Defendants.
ORDER GRANTING PLAINTIFFS’ MOTION TO REMAND
Pending before this Court is the Plaintiffs’ Motion to Remand [Doc. 9],1 which was
filed on October 24, 2016. Defendants filed their response [Doc. 30] on December 2, 2016.
Plaintiffs replied on December 16, 2016 [Doc. 36]. The Motion is ripe for disposition. For
the reasons that follow, the Plaintiffs’ Motion to Remand [Doc. 9] is GRANTED.
Background and Procedural History
This case was originally filed in the Circuit Court of Marshall County, West Virginia
[Doc. 1]. The plaintiffs are independent producers of natural gas in West Virginia, who
allege defendants forced into long-term, ten-year, fixed-price contracts. [Doc. 1-1 at ¶ 1].
Defendant Dominion Transmission, Inc. (“DTI”) is a natural gas transmission company,
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Also pending is the Motion to Dismiss of Defendant Riley Natural Gas Company
[Doc. 15]; Defendants Dominion Field Services, Inc. and Joseph Vanzant’s Motion to
Dismiss Plaintiffs’ First Amended Complaint [Doc. 17]; and Defendant Dominion
Transmission, Inc. and Dominion Resources, Inc.’s Motion to Dismiss Plaintiffs’ First
Amended Complaint [Doc. 19]. This Court must first necessarily address the issue of its
jurisdiciton.
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which, plaintiffs allege, in unlawful coordination with its affiliate, defendant Dominion Field
Services, Inc. (“DFS”), and defendant Riley Natural Gas Company (“Riley”), forced
unconscionable contracts on the various independent natural gas producing plaintiffs. (Id.
at ¶¶ 2-4).
Plaintiffs allege DTI and DFS conspired to present DFS as a separate and
independent entity, and in so doing, DFS assumed fiduciary duties to plaintiffs. (Id. at ¶ 6).
DFS allegedly promoted itself to plaintiffs as an expert in gas marketing and shipping and
presented as an investment opportunity reserved space on a new pipeline known as the
Gateway Project. (Id. at ¶¶ 3, 6, 7). Plaintiffs allege DFS and Riley represented that only
those producers that signed 10-year “firm transportation” contracts would be able to
transport their gas using the Gateway Project. (Id. at ¶¶ 8-9). Through the negotiation
process, plaintiffs allege, inter alia, that DFS obtained their confidential business
information and projections for future gas production, which defendants used to their
advantage, knowing plaintiffs had no alternatives, and threatened that refusal to sign the
contracts would result in them being “shut in.” (Id. at ¶¶ 10-12, 22).
Plaintiffs allege they were further subject to unreasonably short deadlines in which
to make their decision, that numerous misrepresentations were made upon which plaintiffs
relied, that they were required to pay a fixed fee every month to ship gas regardless of
whether any was actually produced, and that their gas was often times not shipped on the
Gateway Project to the contracted location. (Id. at ¶¶ 12-15, 18). Plaintiffs’ position asserts
that they are challenging these adhesion contracts and the defendants’ alleged tortious
conduct in securing them and performing on them exclusively under state law principles.
Plaintiffs’ First Amended Complaint thus asserts the following causes of action:
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Count I - Breach of Fiduciary Duty; Count II - Aiding and Abetting Breach of Fiduciary Duty;
Count III - Breach of Contract/Breach of the Implied Covenant of Good Faith and Fair
Dealing Under the Common Law and/or the Uniform Commercial Code; Count IV - Fraud;
Count V - Breach of Joint Venture; Count VI - Unjust Enrichment; Count VII Unconscionability/Rescission Under the Common Law and/or the Uniform Commercial
Code; Count VIII - Fraudulent Inducement; Count IX - Declaratory Judgment of Force
Majeure; Count X - Acts Constituting Civil Conspiracies; Count XI - Negligence; Count XII Negligent Misrepresentation; and Count XIII - Violation of W.Va. Code § 46A-6-101 et seq.
(Id. at 1). As relief, plaintiffs pray for judgment against the defendants for compensatory
damages, various injunctive and declaratory relief, and punitive damages. (Id. at pp. 4748).
On September 23, 2016, defendants Dominion Transmission Inc. and Dominion
Resources, Inc., with the consent of their co-defendants, removed this case to this Court
asserting federal question jurisdiction pursuant to 28 U.S.C. §§ 1441 and 1446 [Doc. 1].
Specifically, the defendants assert this action falls within the jurisdictional provision of the
Natural Gas Act (“NGA”), 15 U.S.C. § 717w, et seq. (Id.). The plaintiffs timely filed the
pending Motion to Remand [Doc. 9].
Standard of Review
“We begin with the undergirding principle that federal courts, unlike most state
courts, are courts of limited jurisdiction, created by Congress with specified jurisdictional
requirements and limitations. Accordingly, a party seeking to adjudicate a matter in federal
court must allege and, when challenged, must demonstrate the federal court's jurisdiction
over the matter. If a plaintiff files suit in state court and the defendant seeks to adjudicate
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the matter in federal court through removal, it is the defendant who carries the burden of
alleging in his notice of removal and, if challenged, demonstrating the court's jurisdiction
over the matter.” Strawn v. AT & T Mobility, 530 F.3d 293, 296 (4th Cir. 2008) (citations
omitted).
Federal courts “‘are obliged to construe removal jurisdiction strictly because of the
significant federalism concerns implicated’ and that ‘if federal jurisdiction is doubtful, a
remand to state court is necessary.’ Md. Stadium Auth. v. Ellerbe Becket Inc., 407 F.3d
255, 260 (4th Cir. 2005) (internal quotation marks, citations, and alterations omitted); see
also Shamrock Oil [& Gas Co. v. Sheets], 313 U.S. at 109 (‘Due regard for the rightful
independence of state governments, which should actuate federal courts, requires that they
scrupulously confine their own jurisdiction to the precise limits which the statute has
defined.’ (internal quotation marks omitted)).” Palisades Collections LLC v. Shorts, 552
F.3d 327, 333-34 (4th Cir. 2008).
As this Court has previously noted, “[a]ll doubts about the propriety of removal
should be resolved in favor of retaining state court jurisdiction,” and thus remanding a case
to state court. Vitatoe v. Mylan Pharmaceuticals, Inc., 2008 WL 3540462, at *2 (N.D.W.
Va. Aug. 13, 2008)(Keeley, J.) (citing Hartley v. CSX Transp., Inc., 187 F.3d 422, 425 (4th
Cir. 1999)).

Finally, when considering a motion to remand, the Court is limited to

considering the record at the time of removal. See Lowrey v. Ala. Power Co., 483 F.3d
1184, 1213-15 (11th Cir. 2007).
Applicable Law
When an action is removed from state court, a federal district court is required to first

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determine whether it has original jurisdiction over the plaintiffs’ claims. District courts have
original jurisdiction to hear cases involving a federal question, those cases that “arise
under” federal law or the Constitution. 28 U.S.C. § 1331. The clearest cases are those
where federal law creates the cause of action asserted. Am. Well Works Co. v. Layne
& Bowler Co., 241 U.S. 257, 260 (1916). Pursuant to the well-pleaded complaint rule, a
case “arise[s] under” federal law “only when a federal question is presented on the face of
the plaintiff’s properly pleaded complaint.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392
(1987). The existence of a federal defense is therefore not typically sufficient to establish
federal question jurisdiction. Id. at 398.
Most relevant to the instant jurisdictional inquiry, in a limited number of
circumstances, state-law claims may be sufficient to establish federal question jurisdiction.
“Where state law creates the cause of action, federal-question jurisdiction will nonetheless
lie if the ‘plaintiff’s right to relief necessarily depends on resolution of a substantial question
of federal law.’” Columbia Gas Transmission Corp. v. Drain, 191 F.3d 552, 557 (4th Cir.
1999) (quoting Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 27-28
(1983)). However, “the mere presence of a federal issue in a state cause of action does
not automatically confer federal-question jurisdiction.”

Merrell Dow Pharm. Inc. v.

Thompson, 478 U.S. 804, 813 (1986).
Importantly, district courts must inquire whether “a state-law claim necessarily
raise[s] a federal issue, actually disputed and substantial, which a federal forum may
entertain without disturbing any congressionally approved balance of federal and state
judicial responsibility.” Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545

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U.S. 308, 314 (2005). “That is, federal jurisdiction over a state law claim will lie if a federal
issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of
resolution in federal court without disrupting the federal-state balance approved by
Congress.” Gunn v. Minton, 133 S.Ct. 1059, 1065 (2013). This is a “special and small
category” of cases. Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677,
699 (2006). The Supreme Court of the United States has distinguished cases that involve
“nearly ‘pure issue[s] of law’ . . . ‘that [can] be settled once and for all’” from those that are
“fact-bound and situation specific.” Id. at 700-01. Or, as Justice Cardozo put it, a
“common-sense accommodation of judgment to [the] kaleidoscopic situations” that present
a federal issue, in “a selective process which picks the substantial causes out of the web
and lays the other ones aside.” Gully v. First Nat. Bank in Meridian, 299 U.S. 109, 11718 (1936).
Discussion
As an initial matter, the defendants wholly fail to fit their arguments into the four
Grable factors. Nevertheless, defendants cast their conclusory assertions that there exist
substantial questions of federal law on which plaintiffs’ state-law claims necessarily depend
by attempting to establish such nexus by emphasizing that DTI is an interstate natural-gas
pipeline company that is governed by the Natural Gas Act (“NGA”) and regulated by the
Federal Energy Regulatory Commission (“FERC”). [Doc. 30]. Defendants assert Federal
law governs DTI’s conduct in developing the Gateway Project, its contracts for
transportation capacity on it, and its relationship with its marketing affiliate, DFS. (Id.).
Thus, defendants attempt to manufacture federal jurisdiction by intertwining their FERC and

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NGA obligations in constructing and maintaining the Gateway Project with the plaintiffs’
contracts to use the same. This Court is not persuaded.
“Merrell Dow should be read in its entirety as treating the absence of a federal
private right of action as evidence relevant to, but not dispositive of, the ‘sensitive
judgments about congressional intent’ that § 1331 requires. The absence of any federal
cause of action affected Merrell Dow’s result two ways. The Court saw the fact as worth
some consideration in the assessment of substantiality. But its primary importance
emerged when the Court treated the combination of no federal cause of action and no
preemption of state remedies for misbranding as an important clue to Congress’s
conception of the scope of jurisdiction to be exercised under § 1331. The Court saw the
missing cause of action not as a missing federal door key, always required, but as a
missing welcome mat, required in the circumstances, when exercising federal jurisdiction
over a state misbranding action would have attracted a horde of original filings and removal
cases raising other state claims with embedded federal issues. For if the federal labeling
standard without a federal cause of action could get a state claim into federal court, so
could any other federal standard without a federal cause of action. And that would have
meant a tremendous number of cases.” Grable, 545 U.S. at 318.
“When a removing party seeks to invoke the court’s ‘arising under’ jurisdiction, 28
U.S.C. § 1331, the federal question typically must be evident from the face of the plaintiff’s
well-pleaded complaint.” Eller v. Jackson Kelly PLLC, 2011 WL 672054, *4 (S.D. W.Va.
Feb. 14, 2011) (citing Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S.
1, 10 (1983); Custer v. Sweeney, 89 F.3d 1156, 1165 (4th Cir. 1996)). However, “[e]ven

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if state law creates the claims asserted by the plaintiff, federal question jurisdiction
nonetheless is proper in cases in which ‘the plaintiff’s right to relief necessarily depends on
resolution of a substantial question of federal law, in that the federal law is a necessary
element of one of the well-pleaded . . . claims.’” Id. (quoting Pinney v. Nokia, Inc., 402
F.3d 430, 442 (4th Cir. 2005) (emphasis added). Thus, “[i]n order to remove a case in
which state law creates the plaintiff’s cause of action, a defendant ‘must establish two
elements: (1) that the plaintiff’s right to relief necessarily depends on a question of federal
law, and (2) that the question of federal law is substantial.’” Id. (quoting Dixon v. Coburg
Dairy, Inc., 369 F.3d 811, 816 (4th Cir. 2004)); see also Grable & Sons Metal Prods., Inc.
v. Darue Eng’g & Mfg., 545 U.S. 308, 314 (2005) (“[D]oes the state-law claim necessarily
raise a stated federal issue, actually disputed and substantial, which a federal forum may
entertain without disturbing any congressionally approved balance of federal and state
judicial responsibilities[?]”). As a final guide, “[t]he Fourth Circuit has stated that it is a
‘small class of cases’ where state law creates a plaintiff’s claim, but federal jurisdiction is
nonetheless proper.” Id. at *7 (quoting Pinney, 402 F.3d at 442).
For instance, defendants assert that any inquiry into the defendants’ alleged
conspiracy to deprive plaintiffs of “reasonable access to transportation of their natural gas,”
would require a court to determine “whether” DTI complied with federal regulations. [Doc.
30 at p. 8]. Such inquiry, however, would not require the court to construe the regulations
in any substantial way. Similarly, defendants argue that any duty owed in plaintiffs’ statelaw negligence claim would require interpretation of the FERC license. (Id. at p. 9). Any
such duty, however, would be determined under West Virginia law.

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In Eller v. Jackson Kelly PLLC, 2011 WL 672054, *9 (S.D. W.Va. Feb. 14, 2011),
the Honorable Thomas E. Johnston rejected a similar argument that a prima facie case of
fraudulent misrepresentation would require a demonstration that the defendant violated
federal regulations promulgated under Black Lung Benefits Act (“BLBA”):
Not one element of Plaintiffs’ claims requires resolution of this, or any other,
federal question. A court may well turn to the issue of compliance with the
BLBA’s provisions as a proxy or indicator of whether Jackson Kelly
perpetrated a fraud as alleged, but nothing in the laws of West Virginia
requires illegal conduct to satisfy the elements of common law fraudulent
misrepresentation. Even if Jackson Kelly’s conduct fully complied with all
applicable BLBA standards, Plaintiff’s could still establish every element of
their fraud claims; conversely, if Jackson Kelly failed to comply with BLBA
standards, Plaintiffs would not automatically establish fraudulent
misrepresentation under West Virginia law.
Id.
Defendants next assert that whether DTI acted in concert with DFS raises a
substantial federal question because federal law governs their relationship. [Doc. 30 at 9].
It is simply not enough that a federal regulation applies to such conduct. “For if the federal
labeling standard without a federal cause of action could get a state claim into federal court,
so could any other federal standard without a federal cause of action.” Grable, 545 U.S.
at 318. Additionally, defendants again fail to establish how this “necessarily raise[s] a
stated federal issue, actually disputed and substantial, which a federal forum may entertain
without disturbing any congressionally approved balance of federal and state judicial
responsibilities.” Id. at 314.
Similarly, defendants argue that the plaintiffs’ aiding-and-abetting claim necessarily
requires the resolution of substantial questions of federal law. [Doc. 30 at p. 10]. Again,
defendants rely on their assertion that because FERC regulations govern the relationship

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between DTI and DFS, “a substantial question of federal law [] must be resolved to
adjudicate” the claim. (Id.). This Court fails to appreciate how the plaintiffs would be
required to establish the violation of a federal regulation to prove any elements of their
claims. Rather, these claims appear to hinge on the parties’ contracts, which appear to
arise under state law. Even if a question hypothetically arose which implicated a federal
regulation, again, defendants fail to establish how this “necessarily raise[s] a stated federal
issue, actually disputed and substantial, which a federal forum may entertain without
disturbing any congressionally approved balance of federal and state judicial
responsibilities.” Grable, 545 U.S. at 314.
Defendants raise the same argument regarding the claims alleging an improper
relationship between DFS and DTI; i.e., fraud, conspiracy, and negligence. For the same
reasons, this Court finds FERC regulation of that relationship does not confer federalquestion jurisdiction. See e.g., Taylor v. Lewis, 2011 WL 743747, *3-4 (E.D. Mo. Feb. 23,
2011) (no “arising under” jurisdiction despite reliance upon federal Housing Quality
Standards to support state negligence claim); Tropio v. Dixieline Builders Fund Control,
Inc., 2009 WL 1549574, *2 (S.D. Ca. June 1, 2009) (no “arising under” jurisdiction despite
reliance upon Federal Reserve Regulation Q to support state unfair competition claim);
Bolden v. KB Home, 618 F.Supp.2d 1196, 1206 (C.D. Ca. 2008) (no “arising under”
jurisdiction despite reliance upon federal Uniform Standards and Professional Appraisal
Practice to support state unfair competition claim).
Defendants also claim the alleged unfairness in the terms of plaintiffs’ contracts,
specifically the ten-year term and the fixed-price aspect, involve substantial questions of

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federal law “[b]ecause such claims have the effect of challenging the reasonableness” of
the same terms in the FERC-approved contracts between DTI and DFS. (Id. at 13). In
support, the defendants cite to Bryan v. BellSouth Comms., Inc., 377 F.3d 424, 429 (4th
Cir. 2004), in which the Court held that any claim “that seeks to alter the terms of the
relationship between carrier and consumer set forth in a [contract] filed [with a federal
administrative agency] presents a federal question.” In that case, the Court’s holding
hinged on the fact that, specific to that case, “‘an award of damages . . . would, effectively,
change the rate paid by the customer to one below the filed rate paid by other customers.’”
Id. at 429 (quoting Hill v. BellSouth Telecomms., Inc., 364 F.3d 1308, 1316 (11th Cir.
2004)). In this case, the damages sought do not implicate the filed rate. And while not
dispositive, it is worth noting that the First Amended Complaint does not make any mention
of FERC, the NGA, or FERC-approved rates.
The Supreme Court in Grable queried: “does the state-law claim necessarily raise
a stated federal issue, actually disputed and substantial, which a federal forum may
entertain without disturbing any congressionally approved balance of federal and state
judicial responsibilities[?]” Upon careful consideration of the plaintiffs’ several state-law
claims, this Court must answer in the negative. Indeed, it would appear to be a “small and
special category” of cases where state law creates a plaintiff’s claim, but federal jurisdiction
is nonetheless proper. Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. at
699.
Conclusion
Based upon the foregoing, this Court finds that the defendants have failed to

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overcome their burden to demonstrate this Court’s jurisdiction over this matter.
Accordingly, this Court hereby GRANTS the Plaintiffs’ Motion to Remand [Doc. 9]. As
such, this matter is hereby REMANDED to the Circuit Court of Marshall County, West
Virginia.
It is so ORDERED.
The Clerk is directed to transmit copies of this Order to counsel of record herein and
to the Clerk of the Circuit Court of Marshall County, West Virginia.
DATED: February 2, 2017.

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