Provincial Gov't of Marinduque v. Placer Dome, Inc.

Citations: 582 F.3d 1083; 39 Envtl. L. Rep. (Envtl. Law Inst.) 20225; 2009 U.S. App. LEXIS 21323; 2009 WL 3086009Docket: 07-16306

Court: Court of Appeals for the Ninth Circuit; September 29, 2009; Federal Appellate Court

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Under the act of state doctrine, actions taken by foreign sovereigns within their jurisdiction are deemed valid, impacting federal-question jurisdiction when a plaintiff's complaint challenges a foreign state’s conduct. The Ninth Circuit addressed whether the district court had subject-matter jurisdiction to hear a case brought by the Provincial Government of Marinduque against Placer Dome, Inc. for damages related to alleged environmental harm caused by the company's mining activities in the Philippines. The Province claimed Placer Dome's operations led to severe pollution and health risks while benefiting from assistance from the Philippine government, including actions taken by former President Ferdinand Marcos.

After the Province filed the suit in Nevada state court, Placer Dome removed the case to federal court, arguing it involved international law issues. The district court denied the Province's motion to remand, asserting jurisdiction under the act of state doctrine. However, the Ninth Circuit determined that the foreign sovereign's conduct was not essential to the Province's claims, leading to a reversal of the district court’s jurisdiction ruling. The case's dismissal on forum non conveniens grounds in favor of a Canadian forum was also influenced by the Supreme Court's guidance in Sinochem International Co. v. Malaysia International Shipping Corp., which allowed for addressing forum non conveniens before establishing jurisdictional issues. The district court maintained its stance on the existence of subject matter jurisdiction based on the act of state doctrine during reconsideration.

Removal from state to federal court was initiated under 28 U.S.C. § 1441(a) based on Placer Dome's claim that the Province's allegations involved federal common law relating to foreign relations. For removal to be valid, the federal district court must have had original jurisdiction under 28 U.S.C. § 1331, which grants jurisdiction over cases involving federal constitutional, statutory, or common law questions. Federal-question jurisdiction arises in two scenarios: first, when a federal right or immunity is a crucial element of the plaintiff's cause of action, as established in Franchise Tax Board v. Construction Laborers Vacation Trust for Southern California; second, when a state-law claim inherently raises a significant federal issue that a federal court can adjudicate without disrupting the federal-state judicial balance, as noted in Grable & Sons Metal Products Inc. v. Darue Engineering & Manufacturing.

The removal statute is interpreted strictly against jurisdiction for removal, with the burden on the defendant to demonstrate the propriety of removal. The court conducts a de novo review of a district court's determination of subject-matter jurisdiction after removal, referencing Schnabel v. Lui. Placer Dome contended that the district court dismissed the case based on forum non conveniens without addressing subject-matter jurisdiction. The court's decision, based on Sinochem, suggests that it may not need to resolve jurisdictional questions if a foreign tribunal is deemed more appropriate for the case. However, the reviewing court emphasizes its obligation to verify jurisdiction independently, regardless of the district court's conclusions regarding subject-matter jurisdiction or forum non conveniens.

Placer Dome misinterprets the earlier proceedings, where the Province contested the district court's subject-matter jurisdiction following the lawsuit's removal. The district court initially sided with Placer Dome, affirming that the Province's claims fell under the act of state doctrine, thereby establishing federal-question jurisdiction. Despite casting doubt on this conclusion when dismissing the case on forum non conveniens grounds, the district court later clarified its position, reaffirming its jurisdictional determination in response to the Province's motion for reconsideration. 

The Supreme Court's ruling in Sinochem is relevant, indicating that a district court is not required to definitively establish jurisdiction before dismissing a case on forum non conveniens grounds. The Court emphasized that jurisdiction matters only if a court intends to rule on the case's merits, allowing federal courts flexibility in prioritizing dismissal grounds. A forum non conveniens dismissal does not decide the merits, enabling courts to bypass jurisdictional questions in favor of considerations of convenience and fairness.

Sinochem also clarifies the implications of dismissal sequencing, particularly in removal scenarios, where a dismissal on forum non conveniens grounds differs significantly from a remand due to improper removal. The district court's assessment of federal-question jurisdiction under the act of state doctrine remains pivotal. While the Province's complaint is detailed, the jurisdictional analysis is straightforward, as the act of state doctrine is a well-established principle that prohibits courts from assessing the legitimacy of actions taken by foreign governments within their territories.

The act of state doctrine is rooted in the concern that judicial examination of foreign sovereign acts could disrupt U.S. foreign policy, necessitating that such acts within a sovereign's territory serve as a decisive rule for U.S. courts. The Supreme Court has emphasized that this doctrine applies only when a court's decision hinges on the validity of a foreign sovereign's official action. In W.S. Kirkpatrick, the Court clarified that act of state issues arise solely when the case outcome depends on such actions. 

In Patrickson v. Dole Food Co., the Ninth Circuit declined to apply the doctrine, determining that the case brought by Latin American banana workers did not involve act of state issues, despite the defendants' arguments regarding implications for foreign relations. The court noted that the act of state doctrine does not create federal-question jurisdiction where the complaint does not directly challenge a foreign state's actions. 

Congress has not expanded federal-question jurisdiction to cover all cases involving foreign relations unless explicitly stated. The Ninth Circuit thus adhered to the well-pleaded complaint rule, rejecting broader interpretations of the act of state doctrine. Regarding the Province's complaint, it details allegations of toxic dumping and governmental corruption but does not engage the act of state doctrine, as it does not rely on the validity of a foreign sovereign's actions.

The Province claims that Placer Dome caused significant harm to Marinduque, alleging environmental degradation that resulted in various health issues among residents, including blood diseases, skin disorders, and stomach ailments. The Province accuses Placer Dome of failing to address these problems since its departure in 1997 and of avoiding responsibility. The legal action is based on thirteen causes under Philippine law, including violations of public trust, reckless and simple imprudence, water and fisheries laws, pollution control, mining law, quasi-delict claims, breaches of contract, and promissory estoppel. The Province seeks damages related to environmental, economic, and health impacts, as well as injunctive relief.

Placer Dome removed the case to federal court, arguing that it raised questions of international law and foreign relations, thus providing federal-question jurisdiction. The district court agreed, noting that the complaint included allegations involving the Philippine government's actions that contributed to the environmental harm. Specific allegations cited included governmental permits for mining and the actions of various presidents regarding environmental controls.

However, the district court found that the act of state doctrine, which Placer Dome claimed barred the suit, only applies defensively and does not establish federal-question jurisdiction. For federal jurisdiction to exist, a federal issue must be a necessary element of the plaintiff's claims, according to the well-pleaded complaint rule. The court concluded that the alleged acts of state were not essential to the Province's claims and did not raise a substantial federal issue, thereby negating the basis for removal to federal court.

The complaint includes references to the Philippine government and its laws, asserting that these elements contribute to the damages claimed by the Marinduquenos. However, for federal-question removal jurisdiction to apply, there must be a clear assertion of a federal question or a substantial federal issue that does not disrupt the balance between state and federal judicial responsibilities. Merely referencing political issues, international law, or foreign relations does not mean that an act of state is a necessary component of a claim. The act of state doctrine does not exempt cases that could embarrass foreign governments from federal court jurisdiction. 

The Province's claims against Placer Dome, including allegations of reckless behavior regarding the construction of the Maguila-Guila dam, do not necessitate proving the validity of any governmental actions. Any potential involvement of the Philippine government in Placer Dome's operations would be relevant only as a defense, not as a basis for removal jurisdiction. The Province has not manipulated its claims to avoid federal questions. 

The court distinguishes between claims that relate to governmental actions and those that require those actions to be central to the claims at issue. Allegations concerning former President Marcos's actions, such as enabling mining or easing pollution restrictions, are not essential to the Province's claims regarding environmental violations or contract breaches. The court concludes that the act of state doctrine does not apply here, particularly as the implications for foreign relations are minimal and criticisms of past regimes are less risky than those aimed at current governments. The political implications of actions by now-defunct regimes carry reduced weight in this context.

The Philippine government has publicly condemned the actions of its former president, Marcos, which diminishes the relevance of the 'act of state' doctrine in this case. The dispute outlined in the complaint does not necessitate an evaluation of the Philippines' governmental actions, leading to the conclusion that Placer Dome's reliance on the act of state doctrine is unfounded. Consequently, the district court lacked subject-matter jurisdiction, and the removal from state court was deemed improper. The court reverses the dismissal based on forum non conveniens and remands the case with instructions to return it to state court. The analysis of removal appropriateness is based solely on the pleadings at the time of removal, without considering later amendments. The Province initiated the lawsuit in Nevada, asserting that Placer Dome conducts significant business there, and Barrick Gold Corporation was later added as a defendant due to its majority ownership of Placer Dome. The removal statute allows for actions with original federal jurisdiction to be moved to federal court. The district court's findings bypassed the issue of personal jurisdiction and halted related discovery, as informed by the Sinochem case. The Supreme Court has noted that the act of state doctrine has evolved and serves as a binding principle for both federal and state courts, potentially functioning as a defense or a basis for a claim.

Federal jurisdiction is established in this case due to the necessity of addressing a foreign government's request to enforce directives for freezing property in the U.S. This situation involves the Supreme Court's ruling in Rivet v. Regions Bank of Louisiana, which articulates that a plaintiff cannot circumvent removal to federal court by failing to include necessary federal questions in their pleadings. The artful pleading doctrine allows courts to overlook the absence of a federal question on the complaint's face if it is determined that the plaintiff has strategically framed their claims to avoid federal jurisdiction. If a state law claim is completely preempted by federal law, any related claims are deemed federal in nature from the outset, thus qualifying them as arising under federal law.