Great Lakes Gas Transmission Ltd. Partnership v. Essar Steel Minnesota LLC, 2016 U.S. App. LEXIS 21608

Background

Great Lakes (pipeline operator) and Minnesota Steel Industries (later Essar Steel Minnesota, ESML) contracted in 2006 (TSA) for gas transportation; TSA incorporated Great Lakes’s FERC-filed tariff and was governed by Michigan law.
ESML delayed/failed payments beginning Aug 2009 after its plant financing stalled; Great Lakes sued in federal court (anticipatory repudiation / breach of contract) seeking the remaining payment stream under the TSA.
The FAC pleaded only a state-law breach of contract claim and asserted diversity jurisdiction; diversity later collapsed when ESML discovered a limited partner with public unitholders.
The district court denied ESML’s motion to dismiss for lack of subject matter jurisdiction, finding federal-question jurisdiction based on disputed federal issues and NGA exclusivity, and proceeded to trial, entering judgment for Great Lakes.
On appeal the Eighth Circuit considered whether federal law (the Natural Gas Act / FERC-filed tariff) created an express or implied federal cause of action or otherwise supported federal-question jurisdiction under Grable; the court held it lacked subject matter jurisdiction and vacated the judgment.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether federal law creates an express federal cause of action to collect unpaid tariff payments	Great Lakes: NGA/tariff enforcement supports federal jurisdiction and federal forum	ESML: NGA contains no express private cause of action for contract recovery	Held: No express federal cause of action under the NGA
Whether the NGA implies a private cause of action for breach to avoid undue preference (15 U.S.C. §717c)	Great Lakes: §717c’s prohibition on undue preference implies right to sue to collect from all shippers	ESML: No indication Congress intended to create private federal remedy displacing state contract law	Held: No implied federal cause of action under NGA
Whether the state-law breach claim “necessarily raises” a substantial federal question (Grable) because the TSA incorporated a FERC tariff	Great Lakes: Tariff is federal law; interpreting tariff provisions (force majeure, liability cap) necessarily raises federal issues	ESML: FAC is ordinary breach claim; federal issues are not essential to the right to relief	Held: Federal issues were not sufficiently substantial to the federal system to meet Grable
Whether exercising federal jurisdiction would disturb federal-state balance given NGA’s exclusive-jurisdiction clause	Great Lakes: NGA exclusivity shows Congress intended a federal forum for such disputes	ESML: Exclusive-jurisdiction clause does not demonstrate intent to create federal cause of action and broad federal jurisdiction would displace state contract adjudication	Held: Granting federal jurisdiction would disrupt the congressionally approved balance; exclusive clause cuts against broad federal forum here

Key Cases Cited

Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804 (establishing the well-pleaded complaint rule for federal-question jurisdiction)
Transamerica Mortg. Advisors, Inc. v. Lewis, 444 U.S. 11 (federal causes of action may be express or implied)
Cort v. Ash, 422 U.S. 66 (test for implying private remedy in a federal statute)
Grable & Sons Metal Prods. v. Darue Eng’g & Mfg., 545 U.S. 308 (state claim may raise federal-question jurisdiction when it necessarily raises a substantial federal issue)
Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677 (limits on Grable; fact-bound disputes do not qualify)
Louisville & N. R. Co. v. Rice, 247 U.S. 201 (tariff-enforcement cases under Interstate Commerce Act can present federal-question jurisdiction)
Thurston Motor Lines, Inc. v. Jordan K. Rand, Ltd., 460 U.S. 533 (federal jurisdiction where complaint alleges action arises under a federal tariff statute)
City of Osceola v. Entergy Arkansas, Inc., 791 F.3d 904 (8th Cir.) (suit to enforce a FERC-approved tariff can present federal law issues)