     Case: 16-30269   Document: 00513811540     Page: 1   Date Filed: 12/23/2016




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT
                                                                  United States Court of Appeals
                                                                           Fifth Circuit

                                                                         FILED
                                 No. 16-30269                    December 23, 2016
                                                                    Lyle W. Cayce
ENABLE MISSISSIPPI RIVER TRANSMISSION, L.L.C.,                           Clerk


             Plaintiff - Appellant

v.

NADEL & GUSSMAN, L.L.C.; NADEL & GUSSMAN RUSTON, L.L.C.,

             Defendants - Appellees


                Appeal from the United States District Court
                   for the Western District of Louisiana


Before STEWART, Chief Judge, and SMITH and DENNIS, Circuit Judges.
CARL E. STEWART, Chief Judge:
      Plaintiff-Appellant Enable Mississippi River Transmission, LLC
(“Enable”), which operates a federally regulated natural gas storage facility,
sued, alleging that a natural gas well operated by Defendants-Appellees Nadel
& Gussman, LLC and Nadel & Gussman Ruston, LLC (collectively “Nadel”)
was producing gas from this storage facility. The district court dismissed for
lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure
12(b)(1). After appealing, Enable filed a motion to disqualify opposing counsel.
We AFFIRM the dismissal and DENY, as moot, the motion to disqualify.
               I. FACTUAL AND PROCEDURAL HISTORY
      Enable owns the West Unionville Gas Storage Facility (“West
Unionville”) in Lincoln Parish, Louisiana. Nadel operates the Sanderlin No. 1
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Well, which produces natural gas from the Vaughn Sand geological formation
near West Unionville.
      West Unionville is owned and operated by Enable pursuant to a
Certificate of Public Convenience and Necessity issued by the Federal Energy
Regulatory Commission (“FERC”) as authorized by the Natural Gas Act
(“NGA”). 1 West Unionville is part of Enable’s interstate natural gas pipeline
system. Enable transports gas and injects it underground, where it can be
withdrawn and shipped through its pipelines as needed. In a gas storage
facility some of the gas injected underground is non-effective, which means
that it cannot be withdrawn through normal means. The present suit arose
when Enable discovered that West Unionville had an unusually large amount
of non-effective gas.
      Enable conducted a study and concluded that the gas was leaking from
West Unionville through a passageway in the geologic formation.                After
examining the publicly available production data of nearby natural gas wells,
Enable found a correlation between the times it was injecting natural gas into
its storage facility and increased production at those wells. Enable alleges in
these proceedings that Nadel’s Sanderlin No. 1 Well is producing gas from
West Unionville.
      Enable brought this suit against Nadel in federal district court, seeking
a declaratory judgment pursuant to 28 U.S.C. § 2201 to determine the
ownership of the natural gas in West Unionville. Additionally, Enable sought
an accounting of the gas produced from the Sanderlin No. 1 Well, disgorgement
of the profits enjoyed by Nadel for producing storage gas, an injunction
requiring Nadel to plug the Sanderlin No. 1 well and any other wells producing
storage gas, and attorney’s fees.



      1   15 U.S.C. §§ 717 et seq.
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      Nadel moved to dismiss for lack of subject matter jurisdiction and failure
to state a claim under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6),
respectively. After concluding that Enable was in essence asserting a state law
conversion claim, the district court granted Nadel’s motion to dismiss for lack
of subject matter jurisdiction. See Fed. R. Civ. P. 12(b)(1). In so doing, the
district court relied on a decision by the Ninth Circuit that presented similar
facts. See Williston Basin Interstate Pipeline Co. v. An Exclusive Gas Storage
Leasehold & Easement in the Cloverly Subterranean Geological Formation, 524
F.3d 1090 (9th Cir. 2008). The district court found that Nadel was not subject
to regulation by the NGA and that federal jurisdiction would interfere with the
federal-state regulatory balance that Congress established between the
transportation and sale of natural gas and the production of natural gas.
Enable appealed.
      While this case was pending on appeal, Enable filed a motion to
disqualify Nadel’s counsel on grounds that Enable, under its previous name,
was represented when forming West Unionville in 1968 by current and former
members of the same law firm that now represents Nadel.
                                II. ANALYSIS
   1. Subject Matter Jurisdiction
      This court “review[s] de novo a district court’s ruling on a motion to
dismiss for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1).”
In re Eckstein Marine Serv., LLC, 672 F.3d 310, 314 (5th Cir. 2012). “The party
asserting jurisdiction carries the burden of proof.” Id. “A court can find that
subject matter jurisdiction is lacking based on ‘(1) the complaint alone; (2) the
complaint supplemented by undisputed facts evidenced in the record; or (3) the
complaint supplemented by undisputed facts plus the court’s resolution of
disputed facts.’” Ballew v. Continental Airlines, Inc., 668 F.3d 777, 781 (5th


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Cir. 2012) (quoting Ramming v. United States, 281 F.3d 158, 161 (5th Cir.
2001)).
       Enable claims that this court has original jurisdiction to hear this case
under 28 U.S.C. § 1331 as well as under 15 U.S.C § 717u. 2 Federal courts have
jurisdiction in “all civil actions arising under the Constitution, laws, or treaties
of the United States.” 28 U.S.C. § 1331. Additionally, the NGA provides that
federal courts “shall have exclusive jurisdiction of violations of this chapter or
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.” 15
U.S.C. § 717u. Although section 717u is not expressly limited to cases arising
under the NGA, this limitation is implied.                Pan Am. Petroleum Corp. v.
Superior Court of Del., 366 U.S. 656, 665 n.2 (1961).
       There are two types of cases that fit this “arising under” standard:
“cause[s] of action created by federal law” and state law claims that “turn on
substantial questions of federal law.” Grable & Sons Metal Prods., Inc. v.
Darue Eng’g & Mfg., 545 U.S. 308, 312 (2005). For a state law claim to support
federal subject matter jurisdiction, a federal issue must be “(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).
           a. Federal Question Jurisdiction
       Enable admits that there is no federal cause of action but avers that
there are substantial questions of federal law implicated by its state law claim.



       2 Enable filed for a declaratory judgment. See 28 U.S.C. § 2201(a). Although the
Declaratory Judgment Act “enlarged the range of remedies available in the federal courts,”
it “did not extend their jurisdiction.” Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667,
671 (1950).
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Specifically, Enable asserts that the court must decide (1) the nature and
ownership of any gas leaving West Unionville; (2) whether the production
exception applies to Nadel when it withdraws gas from West Unionville; and
(3) whether Nadel has violated the NGA by withdrawing, transporting, and
selling storage gas in interstate commerce.
       Although Enable pled no specific state law claim, the district court
determined that Enable was essentially pursuing a conversion claim against
Nadel for producing gas owned by Enable. The Louisiana Civil Code does not
provide for a common law conversion action, “[h]owever, causes of action for
conversion have been inferred from the Codal articles providing that the right
of ownership, possession, and enjoyment of movables are protected by actions
for the recovery of the movables themselves, actions for restitution of their
value, and actions for damages.” 3 Dual Drilling Co. v. Mills Equip. Invs., Inc.,
721 So. 2d 853, 856 (La. 1998). We agree with the district court that this is a
proper characterization of Enable’s claim.
       To establish a civilian conversion claim under Louisiana law, Enable
must demonstrate an act of dominion or control that is wrongfully asserted
over its moveable property. See id. at 857; 12 William E. Crawford, Louisiana
Civil Law Treatise § 12:13 (2d ed. 2016).                Therefore, we must determine
whether the right of ownership, possession, and enjoyment of the storage gas
implicates a federal question that is necessary, substantial, and disputed. See
Gunn, 133 S.Ct. at 1065. Enable argues that this determination of ownership
cannot be made without interpretation of the NGA. We disagree.




       3 There are three possible actions under Louisiana civil law: a “revendicatory action
for the recovery of a moveable transferred” if the defendant is still in possession; an unjust
enrichment action; and a delictual action, which is the closest to common law conversion, but
it requires fault rather than imposing strict liability. Dual Drilling Co. v. Mills Equip. Invs.,
Inc., 721 So. 2d 853, 856–57 (La. 1998).
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      The NGA and its associated regulations govern the operation of Enable’s
storage facility and the possessory interest in the gas as between Enable and
its customers.     Enable acquired a certificate of public convenience and
necessity to operate West Unionville. See 15 U.S.C. § 717f(c) (providing that a
natural gas company needs a certificate of convenience and necessity to operate
facilities). This certificate does not address Enable’s property rights in the
storage gas; it merely authorizes the operation of West Unionville. See id.
Enable also filed a tariff with FERC that details “all rates and charges for any
[interstate] transportation or sale . . . and the classifications, practices, and
regulations affecting such rates and charges.” Id. § 717c(c). Enable’s tariff
states that it controls and possesses the gas at all times “while [the gas] is in
[Enable’s] facilities between the receipt point(s) and delivery point(s).”
However, these rules of possession apply only “[a]s between Customer and
[Enable].” On their face, the tariff’s rules of possessory interest do not extend
beyond the customers to others who may interfere with the storage gas.
      Enable’s storage facility is also subject to state regulation. States are
empowered “to regulate the physical production and gathering of natural gas
in the interests of conservation or of any other consideration of legitimate local
concern.” Interstate Nat. Gas Co. v. Fed. Power Comm’n, 331 U.S. 682, 690
(1947); see also Fed. Power Comm’n v. Panhandle E. Pipe Line Co., 337 U.S.
498, 509–13 (1949) (stating that the federal power granted under the NGA
“was to complement that of the state regulatory bodies”); 15 U.S.C. § 717(b).
Louisiana has its own permitting requirements for underground storage
facilities that must be met before the facility can be used. La. Rev. Stat.
§ 30:22(B)(1–3).     In authorizing West Unionville, the commissioner is
empowered to deem all natural gas in the facility that “has previously been
reduced to possession and which is subsequently injected into [the]
underground storage reservoir” to be “deemed the property of the injector.” Id.

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§ 30:22(E). The statute further states “in no event shall such gas . . . be subject
to the right of the owner of the surface of the lands.” Id. Enable has an order
to that effect from the commissioner for West Unionville. As it is clear that
Louisiana law defines the property interest in the storage gas as between
Enable and Nadel, issues of federal law are not necessary to the resolution of
this case.
       The Ninth Circuit reached the same conclusion in a nearly identical suit.
See Williston, 524 F.3d at 1092–94, 1102. The plaintiff in Williston operated
an underground natural gas storage reservoir that it claimed was losing
natural gas to a nearby production well. Id. at 1093. The plaintiff brought
state law claims for conversion and negligence against the owner of the well. 4
Id. The court held that “no provision of the NGA constitutes an essential
element of [the conversion and negligence] claims,” and thus there was no
federal jurisdiction. Id. at 1102. We agree with the reasoning of the Ninth
Circuit. Because no element of a Louisiana civilian conversion claim requires
the resolution of a federal law issue, there is no federal question jurisdiction
over this suit.
       It is of no moment that Enable accuses Nadel of producing gas traveling
in interstate commerce, which Enable contends places Nadel outside of the
NGA’s production exception. The NGA excludes from federal regulation “the
production or gathering of natural gas.” 15 U.S.C. § 717(b). An error by Nadel
in its production activities does not automatically place it outside of this
production exception. “[P]roducers are subject to the jurisdiction of the FERC
when they engage in activities that can be classified as sales or transportation
rather than as production or gathering.”                Shell Oil Co. v. Fed. Energy



       4The plaintiffs also brought a condemnation action to take over the well as permitted
by the NGA, but that claim is not relevant to this case. Williston, 524 F.3d at 1093; 15 U.S.C.
§ 717f(h).
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Regulatory Comm’n, 566 F.2d 536, 539 (5th Cir. 1978). “‘Production’ of gas
(means) the act of bringing gas from the earth, and ‘gathering’ (means) the act
of collecting gas after it has been brought forth.” Id. (quoting Panhandle E.
Pipe Line Co., 337 U.S. at 518 (Black, J., dissenting)) (alterations in original).
Erroneously drawing storage gas from the ground is still a part of physical
production, and we decline to reclassify it as the interstate sale or
transportation of natural gas.
      We also conclude that the federal issues Enable’s tort claim raises are
not substantial. The NGA applies to the transportation or sale of natural gas
in interstate or foreign commerce, but not to retail sales or “the production or
gathering of natural gas.” 15 U.S.C. §717(b); see also Oneok, Inc. v. Learjet,
Inc., 135 S. Ct. 1591, 1595–96 (2015).       Regulation of the production and
gathering of natural gas is left to the states. Oneok, 135 S. Ct. at 1596. The
core subject of this suit is state-regulated production by Nadel, so “there is no
‘serious federal interest in claiming the advantages thought to be inherent in
a federal forum.’” Gunn, 133 S. Ct. at 1068 (quoting Grable, 545 U.S. at 313).
      Finally, finding federal jurisdiction in this case would disrupt the
balance between state and federal regulation of the natural gas markets
established by the NGA. See Gunn, 133 S. Ct. at 1065. “[T]he Natural Gas Act
‘was drawn with meticulous regard for the continued exercise of state power,
not to handicap or dilute it in any way.’” Oneok, 135 S. Ct. at 1599 (quoting
Panhandle E. Pipe Line Co. v. Pub. Serv. Comm’n, 332 U.S. 507, 517–18
(1947)). Finding federal jurisdiction in this state law action against a producer
would interfere with the congressionally approved right of Louisiana to
regulate production according to its own laws and in its own courts.
         b. Exclusive Federal Jurisdiction
      Enable also argues that the NGA’s grant of exclusive federal jurisdiction
over “actions at law brought to enforce any liability or duty created by, or to

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enjoin any violation of, this chapter or any rule, regulation, or order
thereunder” requires that its claims be brought in federal court. See 15 U.S.C.
§ 717u. Enable alleges that by withdrawing and possessing the storage gas,
Nadel is interfering with Enable’s own rights and obligations under the NGA.
Enable admits that the NGA does not provide it with a private cause of action,
but it insists that Nadel’s withdrawal and resale of gas from West Unionville
is exclusively a matter of federal law.
       We do not agree. The NGA’s federal exclusivity clause does not create
federal jurisdiction in this case because Nadel’s conduct is not a violation of the
NGA even if it interferes with Enable’s rights and obligations under the NGA.
It is an issue of first impression for this court whether the NGA’s exclusive
jurisdiction provision extends to actions involving third party interference, but
other circuits that have addressed the issue have held that it does not. For
instance in Williston, the Ninth Circuit held that because the well operator
was not subject to any duties under the NGA it could not violate the NGA and
be subject to the exclusive jurisdiction clause. 524 F.3d at 1102. The Sixth
Circuit, in resolving a dispute between a regulated gas company and the non-
regulated owners of land across which the gas company held an easement,
similarly concluded that “[i]f the [defendants] do not have a statutory duty,
then they cannot have violated the Natural Gas Act.”                        Columbia Gas
Transmission, LLC v. Singh, 707 F.3d 583, 588 (6th Cir. 2013). Since Nadel
does not have any duties under the NGA or its related regulations, resolution
of Enable’s state law claims will not require us “to determine whether the
defendants [have] complied with rules that [have] the effect and force of federal
law.” Williston, 524 F.3d at 1102. 5



       5 Enable points to a district court case out of Oregon to support its claim of exclusive
federal jurisdiction. Pacificorp v. Nw. Pipeline GP, No. CV. 10–99–PK, 2010 WL 3199950 (D.
Or. June 23, 2010). However, Pacificorp is inapplicable because in that case the plaintiff’s
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       We therefore join our sister circuits and decline to extend the federal
exclusivity provision of the NGA to cover claims of interference with duties
under the NGA against defendants who have no statutory duties of their own
under the Act.
   2. Motion to Disqualify
       Having concluded that this court lacks subject matter jurisdiction to hear
the underlying suit, we deny as moot Enable’s motion to disqualify Nadel’s
counsel.
                                      III. CONCLUSION
       We AFFIRM the district court’s dismissal of Enable’s claims for lack of
subject matter jurisdiction. We DENY as moot Enable’s motion to disqualify
Nadel’s counsel.




state law claims were based on the defendant’s violation of its own federal tariff, not solely
on the plaintiff’s tariff. Id. at *4. In contrast, Nadel is not subject to a tariff or other
regulation under the NGA.

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