ARCO Environmental Remediation, LLC (ARCO) appealed the district court's denial of it motion to remand its claim to state court, arguing the case was improperly removed. Reversing the district court, the Ninth Circuit held the district court lacked jurisdiction because ARCO's claims did not arise under any federal law and the district court could not exercise supplemental jurisdiction to enforce an order issued in a previous case between the two parties. The Ninth Circuit remanded the case with instructions to vacate an order joining the Environmental Protection Agency (EPA) as a defendant and to remand the case to Montana state court.

EPA identified ARCO as a potentially responsible party (PRP) under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)[1] for contamination at the Clark Fork River Operable Unit (CFROU), a Superfund site located in Montana's Upper Clark Fork River Basin. EPA and Montana's Department of Health and Environmental Sciences (DHES) signed a memorandum of agreement (MOA) under which the two agencies agreed to exchange information and documents relating to Superfund sites around the state. Beginning in 1989, ARCO has failed on several attempts to gain access to documents relating to the CFROU site. In 1989, ARCO sued DHES in Montana state court to gain access to the requested documents. The parties ultimately reached a settlement in which ARCO agreed to seek the documents through discovery in the CERCLA action then pending in federal district court.

In addition, ARCO was a party to an administrative proceeding, which was determining water quality standards for the Clark Fork River. ARCO failed in its attempts to gain access to meetings between EPA and the Montana Department of Environmental Quality (DEQ) relating to the water quality standards, and failed to obtain an ecological risk assessment for the CFROU. ARCO filed suit in Montana state court in June 1999, seeking a preliminary and permanent injunction ordering DEQ to turn over documents relating to the ecological risk assessment and an order prohibiting closed-door consultation between EPA and DEQ. ARCO based its claim on Montana statutes and the Montana Constitution.[2] DEQ removed the case to federal district court by arguing that ARCO's claims actually arose under CERCLA and that ARCO used "artful pleading" to plead a federal claim as a state claim. ARCO filed a motion to remand, which the district court denied on the grounds that CERCLA preempted ARCO's state law claims. In addition, DEQ filed a Rule 19[3] motion to join EPA as a defendant, which the district court granted.

The Ninth Circuit first addressed whether federal question jurisdiction existed for ARCO's claims. Under the "well-pleaded complaint rule,"[4] the court held that ARCO's complaint did not on its face state a claim arising under federal law. Montana statutes regarding access to public records and open meetings created the causes of action under which ARCO sought relief. The court stated that mere references to CERCLA in the complaint do not mean that CERCLA created the cause of action.

The Ninth Circuit then considered whether the "artful pleading rule" applied to ARCO's complaint. Under the "artful pleading rule" a plaintiff cannot avoid removal simply by failing to plead federal claims that are necessary to the action.[5] The Supreme Court has determined that a state law-created cause of action can be "deemed to arise under federal law" if: 1) "federal law completely preempts state law"; 2) the "claim is necessarily federal in character"; or 3) the "right to relief depends on resolution of a substantial, disputed federal question."[6]

The court first held that Congress did not intend to completely occupy the field of environmental regulation by enacting CERCLA. Language in the federal statute showed that Congress did not mean for CERCLA to preempt state law any time the statute was at issue. Furthermore, EPA's regulations clearly allow state law to provide a right to access CERCLA records. As a result, the Ninth Circuit held that the case could not be removed to federal court on the basis of complete preemption.

The court next addressed whether the jurisdictional provisions of CERCLA make ARCO's claims "necessarily federal in character" by depriving the Montana state court jurisdiction over the case. Section 113(b) grants federal district courts exclusive original jurisdiction over claims arising under CERCLA,[7] and section 113(h) delays federal jurisdiction over "challenges to [CERCLA] removal or remedial action."[8] Previous Ninth Circuit decisions have determined that when these sections are read together, they expand the federal coverage of CERCLA, and claims that challenge a CERCLA cleanup are "necessarily federal claims."[9] An action is a challenge to a CERCLA cleanup when it is related to the goals of the cleanup. ARCO's claim only involved the right of access to information about the cleanup, which does not implicate the cleanup requirements or environmental standards, nor does it terminate or delay the cleanup. As a result, the court determined the claim was not related to the goals of the CFROU cleanup and the suit was not necessarily federal in character.

DEQ asserted that the plaintiff's claim was a challenge to a CERCLA cleanup because ARCO could take the information it gained from the administrative proceeding and attempt to use it to reduce water quality standards in the Clark Fork River. Because CERCLA applies to state water quality standards, the result will be a reduction in the amount of cleanup required under CERCLA. In addition, the defendants contended that enjoining closed-door meetings between EPA and DEQ would interfere with the cleanup process. In rejecting the defendant's argument, the Ninth Circuit held that simply because an action has an incidental effect on a cleanup, it is not necessarily a challenge to a CERCLA cleanup action.

Finally, the court rejected defendant's claims that federal jurisdiction existed because a "substantial, disputed question of federal law is a necessary element of one of the well-pleaded state claims."[10] The defendants relied on a previous Ninth Circuit case that held removal was proper when the relief sought was partially based on an issue committed exclusively to federal jurisdiction.[11] The court concluded, however, that ARCO's right to relief was to be determined solely by Montana law and was not grounded in federal law. Therefore, ARCO's right to relief did not turn on the determination of any federal law question.

DEQ also argued that an order in a 1993 case between the same parties gave the district court discretion to exercise supplemental jurisdiction.[12] The order had dismissed a similar suit by ARCO without prejudice, but premised the dismissal on ARCO's agreement to seek the desired documents through discovery in litigation in the district court. Federal law requires that a defendant seeking to remove a case to federal court do so within thirty days of being served with the complaint.[13] After the thirty-day period has passed, a defendant may not amend its notice of removal to add a separate basis for jurisdiction.[14] The Ninth Circuit concluded that because DEQ failed to state in its notice of removal that removal jurisdiction exists under the supplemental jurisdiction statute, and more than thirty days had passed since the action was filed, DEQ could not amend its notice of removal. Therefore, supplemental jurisdiction could not stand as a basis for federal jurisdiction.