Elawyers Elawyers
Washington| Change

VINMAR OVERSEAS, LTD. v. OceanCONNECT, LLC, Consolidated with Civ. A (2012)

Court: District Court, S.D. Texas Number: infdco20120801803 Visitors: 3
Filed: Jul. 30, 2012
Latest Update: Jul. 30, 2012
Summary: ORDER LEE H. ROSENTHAL, District Judge. A premotion conference in this consolidated action is scheduled for Wednesday, August 1, 2012 at 9:00 a.m. in Courtroom 11-B. This conference was scheduled to discuss a potential motion by the United States, a third-party defendant in this action, to stay all discovery pending resolution of the United States's motion to dismiss the third-party claim against it. ( See Docket Entry No. 43). Also pending in this action are two motions from No. H-11-462
More

ORDER

LEE H. ROSENTHAL, District Judge.

A premotion conference in this consolidated action is scheduled for Wednesday, August 1, 2012 at 9:00 a.m. in Courtroom 11-B. This conference was scheduled to discuss a potential motion by the United States, a third-party defendant in this action, to stay all discovery pending resolution of the United States's motion to dismiss the third-party claim against it. (See Docket Entry No. 43).

Also pending in this action are two motions from No. H-11-4629: OceanConnect's motion to dismiss, stay the proceedings, or for a more definite statement, (Docket Entry No. 2); and Vitol's motion to remand, (Docket Entry No. 12). With respect to Vitol's motion to remand, this court recently issued a memorandum order granting a plaintiff's motion to remand in a similar commercial dispute involving Renewable Identification Numbers. See NIC Holding Corp. v. Green Diesel LLC, Civ. A. No. H-12-0579, slip op. (S.D. Tex. June 29, 2012). That memorandum order is attached as an appendix to this order. For the August 1 hearing, the parties should come prepared to discuss the effect of that order on the remand motion in this case.

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION NIC HOLDING CORP., Plaintiffs, v. CIVIL ACTION NO. H-12-0579 GREEN DIESEL LLC and FUEL STREAMERS INC., Defendants.

MEMORANDUM AND ORDER

This commercial dispute between the plaintiff, NIC Holding Corp., and the defendants, Green Diesel LLC and Fuel Streamers Inc., was originally filed in the 190th Judicial District Court of Harris County, Texas. NIC Holding alleged two claims under Texas law, one for breach of contract1 and one for conversion. (Docket Entry No. 1, Ex. B, ¶¶ 19, 22). Currently before the court are three motions: Fuel Streamers's motion for a more definite statement under Federal Rule of Civil Procedure 12(e), (Docket Entry No. 3); Green Diesel's motion to dismiss under Rules 12(b)(6), 12(b)(7), and 19(a), to stay the proceedings, or for a more definite statement under Rule 12(e), (Docket Entry No. 4); and NIC Holding's motion to remand, (Docket Entry No. 5). Because the motion to remand questions this court's subject-matter jurisdiction, it must be addressed first.

According to the complaint, in June 2010, NIC Holding entered into a contract with Green Diesel and Fuel Streamers for the purchase of Renewable Identification Numbers ("RINs"). (Id., ¶ 10). RINs are a creation of federal EPA regulations pursuant to the Clean Air Act. (See id., ¶ 8; Docket Entry No. 1, ¶ 2); see also generally Nat'l Petrochemical & Refiners Ass'n v. EPA, 630 F.3d 145 (D.C. Cir. 2010). NIC Holding paid almost $257,000 for over 856,000 RINs. (Docket Entry No. 1, Ex. B, ¶¶ 10, 13). The contract between the parties stated that the transferred RINs were valid and had good title. (Id., ¶ 14). After the transfer from Green Diesel and Fuel Streamers, NIC Holding "discovered that the RINs lacked good title and were fraudulently generated." (Id., ¶ 16). NIC Holding immediately and repeatedly demanded that Green Diesel and Fuel Streamers "perform under its contractual obligations." (Id.; see also id., ¶¶ 14-15). According to NIC Holding, Green Diesel and Fuel Streamers—Fuel Streamers having assumed Green Diesel's obligations, (id., ¶ 17)— failed to take the appropriate action, rendering them in breach of the contract.

NIC Holding filed suit against the defendants in Texas state court. The defendants removed, citing federal question jurisdiction. According to the defendants, "the fundamental legal question raised by NIC Holding[] Corp.'s claims" is the validity of the RINs, which is a federal question. (Docket Entry No. 1, ¶ 2 (emphasis in original)). NIC Holding disagrees that its lawsuit involves a federal question, and has moved to remand. The defendants, as the removing parties, thus bear the burden of demonstrating that a federal question exists. Gutierrez v. Flores, 543 F.3d 248, 251 (5th Cir. 2008). "Because removal raises significant federalism concerns, the removal statute is strictly construed and any doubt as to the propriety of removal should be resolved in favor of remand." Id. (internal quotation marks omitted).

"A federal question exists `only [in] those cases in which a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiffs right to relief necessarily depends on resolution of a substantial question of federal law.'" Singh v. Duane Morris LLP, 538 F.3d 334, 337-38 (5th Cir. 2008) (quoting Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 27-28 (1983)). "In other words, federal question jurisdiction exists where (1) resolving a federal issue is necessary to resolution of the state-law claim; (2) the federal issue is actually disputed; (3) the federal issue is substantial; and (4) federal jurisdiction will not disturb the balance of federal and state judicial responsibilities." Id. at 338.

According to the defendants, all four requirements are met: (1) resolving the validity of the transferred RINs—a federal issue due to their being a creation of federal law—is necessary to the resolution of NIC Holding's breach-of-contract claim; (2) the issue is disputed because the parties disagree about the validity of the RINs; (3) this issue is substantial because "Clean Air Act issues. . . pervade the entire transactions upon which NIC Holdings' complaint is based"; and (4) exercising federal jurisdiction will not raise federalism concerns because "this case involves interpretation of a federal program with a national aim." (Docket Entry No. 7, ¶ 9). NIC responds that there is no dispute as to the RINs' invalidity: under federal regulations, "[w]hat constitutes a valid RIN is within the domain of the EPA[,]" and the EPA already determined that they were invalid. (Docket Entry No. 10, ¶¶ 4-5). Therefore, to the extent any federal issue is involved, it is not substantial to determining whether the defendants' failure to transfer valid RINs to NIC Holding breached the parties' contract and, if so, the resulting damages.

The court agrees with NIC Holding. First, it is unclear that there is a disputed federal issue necessary to resolve the state-court claims. The defendants do not dispute that the EPA has found the RINs invalid. It is the EPA's determination—not whether it is correct under federal law—that is asserted as the basis for NIC Holding's breach-of-contract claim.

Even assuming, however, that a disputed federal issue exists, it is clear that the issue is not substantial. "[F]ederal jurisdiction demands not only a contested federal issue, but a substantial one, indicating a serious federal interest in claiming the advantages thought to be inherent in a federal forum." Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 313 (2005). "What [the Supreme Court's opinions in] Grable and Empire Healthchoice Assurance teach is that something more is required for a federal interest to be `substantial' than the mere fact that the state court will be asked to follow federal standards"—that is, apply federal law—"in the context of adjudicating a state law claim." RX.com, Inc. v. O'Quinn, 766 F.Supp.2d 790, 796 (S.D. Tex. 2011). In Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804 (1986), "the Court held that where Congress has provided no private remedy for the violation of a federal drug regulatory statute, the fact that [a] violation of the statute is an element of a state tort claim is insufficient to establish a substantial federal interest." Singh, 538 F.3d at 338-39. As in Merrell Dow, neither Congress nor the EPA have established a private remedy for transferring an invalid (or fake) RIN. That NIC Holding may have to prove in state court that the RINs were invalid under the applicable federal regulations thus is not in itself sufficient to establish a substantial federal interest. To hold otherwise would mean that every case involving an allegedly invalid RIN presents a substantial federal question so as to trigger federal jurisdiction. "[A] state-law claim can involve federal subject matter without involving a substantial federal issue." Windle v. Synthes USA Prods., LLC, Civ. A. No. 3:11-CV-2591-D, 2012 WL 1252550, at *7 (N.D. Tex. Apr. 13, 2012) (emphases in original). To the extent that federal law is at all applicable—again, it appears undisputed that the EPA found the RINs to be invalid, and that is the crux of the breach-of-contract claim—it is "only tangentially relevant to an element of a state [contract] claim." Singh, 538 F.3d at 339.

NIC Holding's motion to remand, (Docket Entry No. 5), is granted. This case is remanded to the 190th Judicial District Court of Harris County, Texas. All pending motions are remanded for the state court to resolve.

SIGNED on June 29, 2012, at Houston, Texas.

FootNotes


1. NIC Holding also sought a declaratory judgment under Texas law with respect to the contract. (Docket Entry No. 1, Ex. B, ¶¶ 20-21).
Source:  Leagle

Can't find what you're looking for?

Post a free question on our public forum.
Ask a Question
Search for lawyers by practice areas.
Find a Lawyer