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The Fourth Circuit Court Of Appeals Holds Federal Question Jurisdiction Does Not Exist Where Plaintiff Brings Only State Law Claims Demanding Relief In Addition To Epa Remedies

In W. Virginia State Univ. Bd. of Governors v. Dow Chem. Co., No. 20-1712, 2022 WL 90242 (4th Cir. Jan. 10, 2022), the Fourth Circuit Court of Appeals held that it lacks federal jurisdiction over state law claims brought by West Virginia State University Board (“WSVU”) against Dow Chemical Company, Bayer Corporation, Bayer CropScience LP, Bayer CropScience Holding, Inc., Rhone-Poulenc, Inc., Rhone-Poulenc AG Co., Rhone-Poulenc AG Company, Inc., and Aventis CropScience USA, LP for pollution of groundwater on the WSVU campus.

Since at least 1984, the neighboring chemical manufacturing plant and wastewater treatment unit (the “Institute Facility”) owned by the Union Carbide Corporation (“UCC”) had been known to the Environmental Protection Agency (“EPA”) to have contaminated groundwater.  UCC is a subsidiary of Dow Chemical Company.  In 1984, the EPA responded to this issue by initiating a corrective permitting action to identify and remediate solid waste management units (“SWMUs”) at the facility.  The permit was to be issued pursuant to the federal Resource Conservation and Recovery Act (“RCRA”).

The EPA’s permit requirements set forth potential enforcement actions against the owner of the Institute Facility in the event the facility failed to comply with the terms of the permit.  Since 1988, the EPA has instituted various corrective actions at the Institute Facility.

In 2013, an engineering firm ran tests for the EPA on the groundwater at the Institute Facility and found an elevated risk of exposure to contaminants by ingestion of the water or inhalation.  The engineer recommended in part that the EPA place an environmental covenant on the property prohibiting the use of groundwater and requiring a vapor barrier for new buildings on the property.  Dow Chemical submitted to the EPA a Corrective Measures Proposal Amendment incorporating the engineer’s recommendations in order to address the groundwater contamination.

On October 24, 2018, the EPA issued a final decision to grant the RCRA permit to UCC on the grounds that the WSVU and neighboring residential properties were on a public water source and did not use the groundwater.  Defendants then approached neighboring properties, including the WSVU, to request they sign a covenant not to use the groundwater. 

The WSVU refused to sign the covenant without compensation from Defendants.  Defendants refused to pay, so WSVU filed suit in the Circuit Court of Kanawha County, West Virginia.  The suit sought included claims for negligence, interference with business expectancy, public and private nuisance, trespass, and strict liability. WSVU also sought a declaratory judgment, permanent and injunctive relief, and punitive damages.  The injunctive relief requested was far in excess of the requirements of the EPA.

Defendants removed the lawsuit to the Southern District Court of West Virginia on federal question jurisdiction and federal officer jurisdiction grounds.  WSVU sought to remand, and the District Court remanded the case, concluding that it lacked subject matter jurisdiction.

On appeal, the Fourth Circuit first examined federal officer jurisdiction. Under federal officer jurisdiction, private actors may remove to federal court when they (1) acted under the direction of a federal officer, (2) have a colorable federal defense, and (3) are engaged in government-directed conduct that is causally related to the Plaintiffs’ claims.  The Fourth Circuit held that Defendants were not “acting under” a federal officer.  The archetypal case where a defendant is “acting under” a federal officer is where the federal government hires an independent contractor to perform tasks the government would otherwise have to perform.  The Fourth Circuit held that Defendants were merely complying with federal law, not acting under the federal government.

The Fourth Circuit next examined whether federal question jurisdiction existed.  Generally, where a Plaintiff’s Complaint is based on state law causes of action, there is no federal question jurisdiction despite the Defendants’ reliance on defenses found in federal law.  There is a “special and small” exception to the general rule where “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.”  Defendants argued (1) that Plaintiff’s Complaint essentially attacks the EPA’s cleanup order and (2) that the RCRA preempts the state law claims. 

The Fourth Circuit found that the order issued by the EPA was not a cleanup order, and that Plaintiff’s claims were based on seeking state law relief in addition to the environmental covenant required by the EPA.  Further, the savings clause of the RCRA defeated Defendants’ argument that the state law claims were preempted.  The savings clause stated that nothing in the RCRA shall restrict any right a person may have under statute or common law to seek enforcement of standards with regard to hazardous waste.  On these bases, the Fourth Circuit held that federal question jurisdiction did not exist.  The District Court’s holding was affirmed, and the case was remanded to the Circuit Court.