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State v. Talen Montana, LLC

United States District Court, D. Montana, Helena Division

October 10, 2017

STATE OF MONTANA, Plaintiff,
v.
TALEN MONTANA, LLC, f/k/a PPL Montana, LLC, and NORTHWESTERN CORPORATION, d/b/a Northwestern Energy, a Delaware Corporation, Defendants.

          ORDER

          Dana L. Christensen, Chief District Judge.

         United States Magistrate Judge Jeremiah C. Lynch entered Findings and Recommendations in this case on January 23, 2017, recommending denial of Plaintiff the State of Montana's ("the State") Objection and Motion to Dismiss Defendant Talen Montana, LLC's ("Talen") Consent to Removal (Doc. 14). Judge Lynch further recommended granting the State's Motion to Remand (Doc. 12). Both Talen and Defendant Northwestern Corporation ("Northwestern") timely filed objections and are therefore entitled to de novo review of the specified findings and recommendations to which they object. 28 U.S.C. § 636(b)(1). The portions of the findings and recommendations not specifically objected to will be reviewed for clear error. 28 U.S.C. § 636(b)(1)(A); McDonnell Douglas Corp. v. Commodore Bus. Mack, Inc., 656 F.2d 1309, 1313 (9th Cir. 1981). Clear error exists if the Court is left with a "definite and firm conviction that a mistake has been committed." United States v. Syrax, 235 F.3d 422, 427 (9th Cir. 2000) (citations omitted).

         For the reasons stated below, Judge Lynch's Findings and Recommendations are adopted as to the State's Motion to Dismiss Talen's Consent to Removal. However, the Court rejects the Findings and Recommendations regarding the State's Motion to Remand.

         BACKGROUND

         In 2003, PPL Montana, LLC ("PPL"), was sued by parents of Montana schoolchildren in the Missoula division of this Court based upon diversity jurisdiction. The plaintiffs alleged that PPL was operating hydroelectric facilities on state-owned riverbeds and argued that the riverbeds were part of Montana's school trust lands which entitled plaintiffs to compensation for PPL's use of the property. The parents were dismissed for lack of standing after the State intervened as a party plaintiff. PPL then moved to dismiss the case for lack of subject matter jurisdiction asserting that the State is not a citizen for purposes of diversity jurisdiction. The Court granted PPL's motion and dismissed the case.

         In 2004, PPL filed suit in state court seeking a declaration that the State was not entitled to compensation for PPL's use of the riverbeds. The State counterclaimed seeking a declaration that it did own the riverbeds and was entitled to collect rent from PPL for their use. The state court granted summary judgment to the State. The state court found the riverbeds of the Clark Fork, Missouri, and Madison rivers were navigable and accordingly held that the State owned the riverbeds through navigability for title under the Equal Footing Doctrine. The Montana Supreme Court affirmed the state district court in PPL Montana, LLC v. State of Montana, 229 P.3d 421, 443 (Mont. 2010), concluding the rivers were navigable as a matter of law at the time of statehood in 1889, meaning the State acquired title to the riverbeds at that time under the Equal Footing Doctrine.

         PPL petitioned the United States Supreme Court for a writ of certiorari, which was granted on the sole issue of whether the Montana Supreme Court erred in its application of the navigability for title doctrine. PPL Montana, LLC v. Montana, 132 S.Ct. 1215 (2012). The Supreme Court reversed and remanded, holding that the Montana Supreme Court erred in disregarding the segment-by-segment approach to navigability for title, and by relying on evidence of present-day recreational use to assess navigability at the time of statehood. Id. at 1229, 1233-34.

         In September 2013, Northwestern entered into a purchase and sale agreement for the acquisition of PPL's hydroelectric facilities in Montana, including the facilities at issue here. (Doc. 1-1 at 4.) The acquisition was approved by the Montana Public Service Commission in September 2014. Id. In June 2015, PPL Montana, LLC changed its legal name to Talen Montana, LLC. (Docs. 1-1 at 4; 13-3 at 2-3.)

         Before further pursuing litigation, the State and Talen stipulated in late March 2016 that the State would be realigned as the Plaintiff and Talen would be realigned as the Defendant. (Doc. 13-3 at 3.) The parties also stipulated to bifurcate issues of liability and damages, with all claims or defenses relating to navigability at the time of statehood to be adjudicated first. Id. Six days later, on March 31, 2016, the State filed its complaint on remand naming both Talen and Northwestern as Defendants. (Doc. 13-4.) The State asks for a declaration that it owns the land occupied by Defendants' hydroelectric facilities and seeks to recover rental payments.

         On April 20, 2016, Northwestern filed a notice of removal invoking this Court's federal question jurisdiction. (Doc. 1.) Talen consented in writing to the removal. (Doc. 1-3.) The State has since filed two motions challenging the propriety of North Western's removal and the subject matter jurisdiction of this Court. First, the State filed a Motion to Remand (Doc. 12) arguing that Northwestern has not met its burden of establishing federal question subject matter jurisdiction (Doc. 13). Second, the State filed an Objection and Motion to Dismiss Talen's Consent to Northwestern's Notice of Removal (Doc. 14) asserting that Talen should be judicially estopped from consenting to removal based on federal question jurisdiction, meaning that Northwestern cannot satisfy the requirement that all defendants consent to removal (Doc. 15).

         DISCUSSION

         I. Motion to Dismiss Talen's Consent to Removal

         The Court agrees with Judge Lynch that the State's Objection and Motion to Dismiss Talen's Consent to Northwestern's Notice of Removal (Doc. 14) should be denied. No party objects to this finding and recommendation. Thus, reviewing for clear error, the Court finds none and this motion will be denied. Judge Lynch correctly concluded: 1) that the later-served defendant rule should apply to Northwestern; 2) applying the waiver doctrine to an earlier-served defendant would prevent all defendants from consenting to removal which would deprive the later-served defendant of its right to remove and defeat the purpose of the later-served defendant rule; and 3) the litigation conduct of Talen, as the earlier-served defendant, has no effect on Northwestern's right of removal under the later-served defendant rule. (Doc. 144 at 9-13.)

         II. ...


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