those involved -- including court personnel, the several liaison counsel, and other counsel -- has the management effort thus far been a success.
D. Administrative Developments, Constitutional Challenges, and Amended Pleadings
DEP sought to force potentially responsible parties to clean up the landfill both through this lawsuit and through a series of administrative directives issued pursuant to the Spill Act. These directives ordered potentially responsible parties to complete specified cleanup work. The recipients of the first two Spill Act directives raised constitutional challenges to them, but the court never had an opportunity to address those challenges. The challenges became moot because some of the potentially responsible parties satisfied the directives and because DEP agreed to file an amended complaint joining in this litigation all recipients of the Spill Act directives. In October 1986 DEP filed its fourth amended complaint, which named as defendants more than fifty additional alleged generators and transporters of the hazardous wastes dumped at the GEMS site.
In May 1987 DEP issued a third Spill Act directive naming more than ninety allegedly responsible parties and ordering them to pay close to $ 1.6 million for the design of the remedy DEP and EPA selected for the landfill. That directive named parties not included in the previous directives or in DEP's fourth amended complaint. The New Holland defendants were among the potentially responsible parties named in this new directive. Many of the parties named in the new directive challenged that administrative order on the ground that it violated their federal constitutional rights to due process and equal protection. The generator defendants raised these challenges as part of this lawsuit, and they sought a temporary restraining order. In addition, the operators and another group each filed new lawsuits raising similar constitutional challenges, Amadei Sand & Gravel, Inc. v. New Jersey Dep't of Envtl. Protection, Civil Action No. 87-3086, and ICI Americas Inc. v. New Jersey Dep't of Envtl. Protection, Civil Action No. 87-3110. The court also received a letter from the Ford New Holland defendants stating that, although they were not then defendants in this lawsuit, they would like any relief granted to the defendant generators also to be granted to parties like themselves who were named as respondents to the third Spill Act directive but who were not named as defendants in this case. The court adjourned without date the parties' applications for a temporary restraining order. The court consolidated the new filings with this action and set a briefing schedule for the parties' challenges. The court heard oral argument in December 1987. However, for several reasons, including progress of settlement talks and the pendency of the instant motion, the court has yet to rule on these applications.
In August 1988 DEP issued its fourth Spill Act directive ordering the respondents to begin to perform the first phase of remedial action at the GEMS landfill site in the immediate future. At the same time, serious settlement negotiations were ongoing before Judge Simandle in an attempt to raise the funds necessary for the defendants to hire a private contractor to complete the selected remedy. Such a contractor agreed to undertake phase one of the remedy (essentially involving capping the landfill and building a gas collection system) for $ 32.5 million plus cost overruns. Under the terms of the fourth directive and the Spill Act, if the parties failed to meet that directive's deadline for beginning work DEP could engage its own contractor through public bidding and seek treble costs from the respondents. In cooperation with the defendants, DEP postponed the compliance deadline month after month until it announced that November 30, 1988, was the final deadline.
Just prior to November 30th several defendants met with Judge Simandle and DEP and attempted to negotiate an extension of the deadline while they raised approximately ten million dollars more to reach their $ 32.5 million goal. DEP refused and instead told the parties that it intended to seek bids for the cleanup job. On November 30th several defendants came before the court seeking a temporary restraining order raising essentially the same challenges they raised to the third directive. They also sought relief against EPA, which had issued administrative orders pursuant to section 106 of CERCLA paralleling the DEP directives. The court heard oral argument on the application for injunctive relief. In the course of oral argument a group of defendants asked to speak with the court in chambers, and the court agreed to do so. Based on representations made by the defendants in chambers and based on the court's promise to assist in settlement discussions, DEP reluctantly agreed not to seek bids for at least another week, and EPA indicated that it was not likely to seek penalties for noncompliance. The court therefore continued the motion for a temporary restraining order.
E. Phase One Settlement
After November 30th the court took an active role in settlement negotiations. Liaison counsel, through a participation system worked out among the parties, had developed a scheme for grouping settling parties within each group of defendants in tiers according to their perceived level of responsibility. As a result, counsel had a method of allocating the cost of the private remedy among the settling parties. Throughout December and much of January, the court directed those defendants not previously participating in settlement discussions to appear before it to explain their position to the court and to liaison counsel. On several days there were more than one hundred parties, their counsel, and representatives of their insurance carriers in the courthouse. The result of the court's enormous effort to reach out to many of the recalcitrant parties was a success. By the end of January the settling parties met their $ 32.5 million goal. After further negotiation with DEP over the wording of an administrative consent order, the parties to the settlement all signed the order and placed the money raised into a trust fund. In addition, the court signed an order making the administrative consent order an order of this court. Work has now begun on the phase one remedy, and the parties are now beginning to strive toward an accord for completion of the phase two remedy.
F. The New Holland Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction
In April 1988 the New Holland defendants filed a motion to dismiss DEP's claims against them for lack of subject matter jurisdiction. They claimed that DEP named them as defendants for the first time in this action in its fifth amended complaint, filed in December 1987. They argue that that complaint states no basis for this court's subject matter jurisdiction and that it does not allege any federal cause of action. Moreover, they note that there is no basis for the court to exercise jurisdiction based on diversity of citizenship. Finally, they argue that the court lacks pendent party jurisdiction over the state law claim against them, especially because they were added as pendent parties after the original basis for the court's jurisdiction over this case -- the presence of EPA -- ceased to exist. DEP has responded to the motion by asserting that pendent party jurisdiction is appropriate under the unique circumstances of this case. In addition, several liaison counsel representing the defendants other than the New Holland group filed briefs urging that the court can and should maintain jurisdiction over newly added parties. The court held oral argument on June 17, 1989. The New Holland defendants cited in their reply brief for the first time Lovell Mfg. v. Export-Import Bank of the U.S., 843 F.2d 725 (3d Cir. 1988). Because that case called into doubt whether this court ever had jurisdiction over this litigation, the court directed the parties to submit supplemental briefs addressing the case.
The New Holland defendants' motion was fully briefed in November 1988. However, as the court prepared to address the motion, settlement discussions became increasingly productive and the possibility of settlement became a very real one. The settlement process taxed heavily the court's resources. Although there was only very limited hope that a settlement could be of such a nature as to obviate the court's need to pass on this motion, that possibility kept the court from reaching it. Now that the court has signed an order incorporating the phase one settlement into an order of this court, it feels compelled to address the New Holland defendants' arguments and to accept their invitation to revisit its earlier holdings that EPA properly removed the case to this court and that the court can retain jurisdiction.
The New Holland defendants' motion focuses on whether the court has subject matter jurisdiction over the claims against them. Nonetheless, their reply brief calls into question whether the court ever had subject matter jurisdiction over this case. Consequently, the court will first address whether it has subject matter jurisdiction over any part of this lawsuit by determining whether it properly retained jurisdiction after dismissing EPA as a third-party defendant. The court will then address whether it has subject matter jurisdiction over parties like the New Holland defendants whom DEP brought into this lawsuit after the court dismissed EPA.
A. The Court Had Subject Matter Jurisdiction Over This Action After it Dismissed EPA
1. Removal Was Proper
In 1984 this court found that EPA properly removed this action pursuant to 28 U.S.C. § 1442(a)(1). Last year in Lovell Mfg. v. Export-Import Bank of the U.S., 843 F.2d 725 (3d Cir. 1988), the Third Circuit ruled that section 1442(a)(1) allows removal of an action against either an officer of the United States or an officer of a federal agency, but that it does not allow removal of an action against the United States or a federal agency. Id. at 733. The appeals court explained, "it is clear to us that a fair reading of the statute only allows officers, and not agencies, to remove cases to federal court." Id. It continued, "we cannot read a statute to say what it does not say, and we think it plain from the punctuation of the sentence and the use and placement of the word 'him' that this statute merely allows removal by 'any officer . . . or person acting under him.'" Id. (quoting 28 U.S.C. § 1442(a)(1)).
There is no question that the Lovell decision conflicts with this court's earlier interpretation of section 1442(a)(1). Although there was support for the reading this court gave that section, see 14A C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3727, at 457 (2d ed. 1985) [hereinafter C. Wright], that interpretation was based more on policy and congressional purpose than on plain language. The unfortunate result of the Third Circuit's reading of section 1442(a)(1) is that it prevents in most instances the United States and its agencies from removing an action against them to federal court when they are named as a third-party defendant. As in this case, a claim asserted against a federal agency often arises under federal law. If an agency is a direct defendant and the claim arises under federal law, that agency can remove pursuant to the general removal statute, 28 U.S.C. § 1441(a), because a district court would have had original jurisdiction over the claim pursuant to 28 U.S.C. § 1331. However, only a direct defendant (and not a third-party defendant or an involuntary plaintiff) can remove under section 1441(a). See 14A C. Wright, supra, § 3731. In a case such as this, therefore, a federal agency defendant must either find another applicable removal provision or must defend against a federal claim in state court.
The court finds that the Third Circuit's reading of section 1442(a)(1) cannot have retrospective application to this lawsuit. As a general rule, a controversy must be decided "on the law as exists at the time the appellate court considers the case, although that law may differ from the one in force at the time the trial court decided the matter or at the time the events sparking the litigation occurred." Hill v. Equitable Trust Co., 851 F.2d 691, 695 (3d Cir. 1988), cert. denied, 488 U.S. 1008, 109 S. Ct. 791, 102 L. Ed. 2d 782 (1989). That general rule stems from the view that the role of courts is to interpret the law rather than make it, that is, to tell the world what the law is rather than what it will be. There are, however, exceptions to the general rule based on the notion that judges indeed make law and that in some cases retrospective application of a new rule has unjust consequences. See id. The Supreme Court has established three requisites for applying a decision only prospectively:
(1) The holding must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied, or by deciding an issue of first impression whose resolution was not clearly foreshadowed;
(2) The merits and demerits in each case must be weighed by looking to the history of the rule, its purpose and effect, and whether retrospective operation will further or retard the rule's operation; [and]
(3) Retrospective application must create the risk of producing substantially inequitable results.
Id. at 696 (citing Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07, 30 L. Ed. 2d 296, 92 S. Ct. 349 (1971)).
Applying the Hudson factors to the present case, it becomes clear that the Lovell court's reading of section 1442(a)(1) should not apply retrospectively to unwork this court's June 1985 holding that EPA properly removed this case. First, the Lovell court ruled on an issue of first impression in this circuit, the resolution of which was far from clearly foreshadowed. As that court stated, courts have split on the appropriate reading to give to section 1442(a)(1). See 843 F.2d at 733 n.11. Although the panel explained that the weight of authority supported its narrow reading of the statute, see id., that choice was not clear from prior precedent. In fact, the parties in this case did more than rely on their fair reading of the law; they relied on this court's decision broadly interpreting section 1442(a)(1). Second, the purpose of the rule that the Lovell court announced is to restrict the federal-officer removal statute to what that court found to be Congress's intent. Retrospective application would not further the purpose of the rule. The only thing to be gained by declaring that this lawsuit was not properly removed would be vindication of Congressional intent; it would in no way promote future adherence to that intent. Finally, retrospective application would produce substantially inequitable results in some instances, and this case is a paradigm of such an instance. Literally hundreds of parties have relied on this court's reading of the law and have invested hundreds of thousands of dollars in litigating this case in federal court. Retrospective application would return this litigation to another court and would render futile much of the effort expended by the parties in this court. The Third Circuit's Lovell decision therefore does not bind the court in this case.
It is of no concern to this court that the Lovell court did not address the question of retrospective application of its reading of section 1442(a)(1). That reading was only dicta, or, at most, an alternative holding. After the appeals court concluded that section 1442(a)(1) must be read to prevent agencies from invoking it, it went into a lengthy analysis of why it lacked jurisdiction under that section even if Eximbank properly removed the case under section 1442(a)(1) as a federal agency. See id. at 733-35.
2. The Court Properly Maintained Jurisdiction After it Dismissed EPA
When an action is properly removed pursuant to section 1442(a)(1), a federal court can exercise ancillary jurisdiction over the entire controversy. 14A C. Wright, supra, § 3727, at 462. If a court dismisses the federal defendant from such a case, it must use its discretion to decide whether to remand the remaining ancillary claims to state court or to maintain jurisdiction over those claims. Id.; see, e.g., District of Columbia v. Merit Sys. Protection Bd., 246 U.S. App. D.C. 35, 762 F.2d 129, 133 (D.C. Cir. 1985); Spencer v. New Orleans Levee Bd., 737 F.2d 435, 438 (5th Cir. 1984); IMPC Professional Servs., Inc. v. Latin Am. Home Health, Inc., 676 F.2d 152, 160 (5th Cir. 1982); Watkins v. Grover, 508 F.2d 920, 921 (9th Cir. 1975). There is, however, an exception to this rule: "if the principal claim is dismissed because there was never jurisdiction over it, then the ancillary claim must likewise be dismissed as never having been within the court's jurisdiction." IMPC Professional Servs., 676 F.2d at 159 n.12; accord National Research Bureau, Inc. v. Bartholomew, 482 F.2d 386, 388 (3d Cir. 1983).
This case does not fall into the subject-matter-jurisdiction-dismissal exception to the ancillary jurisdiction rule. The court dismissed EPA from this action because sovereign immunity barred the claim against it. A sovereign immunity defense is something more than a claim of no subject matter jurisdiction. When a court passes on a defense of sovereign immunity, it determines whether the government is subject to suit in any court, not just federal court. "Sovereign immunity is not a jurisdictional defense." 1A J. Moore & B. Ringle, Moore's Federal Practice para. 0.169, at 681 n.16 (2d ed. 1986) [hereinafter J. Moore] (emphasis in original); accord KCPO Employees Credit Union v. Mitchell, 421 F. Supp. 1327, 1328 (W.D. Mo. 1976). Consequently, EPA filed its motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) (failure to state a claim upon which relief can be granted) rather than Fed. R. Civ. P. 12(b)(1) (lack of subject matter jurisdiction). This court's decision dismissing the Township of Gloucester's claim against EPA went beyond the threshold federal jurisdiction issue and therefore the court properly maintained ancillary jurisdiction over the remaining state law claims.
The New Holland defendants argue in part that this court abused its discretion by retaining jurisdiction in 1985. In support, they invoke Lovell Mfg. v. Export-Import Bank of the U.S., 843 F.2d 725 (3d Cir. 1988), for the proposition that "once all federal claims have been dropped from a case, the case simply does not belong in federal court." Id. at 734. The Lovell court explained, "Absent 'extraordinary circumstances,' a district court in this circuit is powerless to hear claims lacking an independent jurisdictional basis, and 'time already invested in litigating the state cause of action is an insufficient reason to sustain the exercise of pendent jurisdiction.'" Id. at 735 (quoting Weaver v. Marine Bank, 683 F.2d 744, 746 (3d Cir. 1982)). The court must reject this argument because there are extraordinary circumstances in this case. The court will examine these circumstances as it reaches the question of whether it can exercise pendent party jurisdiction over the New Holland defendants. See infra section II.B.1.
B. The Court Has Subject Matter Jurisdiction Over Claims Against Parties Added to this Lawsuit Subsequent to EPA's Dismissal
The New Holland defendants argue that by hearing DEP's claims against them the court is improperly exercising pendent party jurisdiction. See Aldinger v. Howard, 427 U.S. 1, 15, 49 L. Ed. 2d 276, 96 S. Ct. 2413 (1976) (In some instances "the addition of a completely new party would run counter to the well-established principle that federal courts, as opposed to state trial courts of general jurisdiction, are courts of limited jurisdiction marked out by Congress."), overruled on other grounds, Monell v. New York City Dep't of Social Servs., 436 U.S. 658, 56 L. Ed. 2d 611, 98 S. Ct. 2018 (1978). Their position essentially amounts to little more than this: A federal court, having dismissed the federal defendant from an action removed to it from state court in its entirety pursuant to 28 U.S.C. § 1442(a)(1), can continue to adjudicate the dispute but cannot permit the plaintiff to add any additional parties. The argument, then, poses the question of whether the court can add a pendent party when the only basis for federal jurisdiction over the case is a lingering ancillary claim.
Pendent party jurisdiction over the New Holland defendants is appropriate in this case. Such jurisdiction involves "the addition of a party which is implicated in the litigation only with respect to the pendent state law claim and not also with respect to any claim as to which there is an independent basis of federal jurisdiction. " Moor v. County of Alameda, 411 U.S. 693, 713, 36 L. Ed. 2d 596, 93 S. Ct. 1785 (1973). See generally 13 B C. Wright, supra, § 3567.2. The courts of appeals are divided on the availability of pendent party jurisdiction, and the Third Circuit has not yet decided the question. See Lovell Mfg. v. Export-Import Bank of the U.S., 843 F.2d 725, 732 (3d Cir. 1988); see also Liberty Mutual Ins. v. Insurance Corp. of Ireland, Ltd., 693 F. Supp. 340, 345-49 (W.D. Pa. 1988) (discussing availability of pendent party jurisdiction in the Third Circuit). In this case the situation varies from the usual application of pendent jurisdiction because the plaintiff has not asserted federal claims against any party. The case is in this court because a one-time federal defendant removed. The distinction makes the jurisdiction over additional defendants ancillary rather than pendent, but it is of little significance because both jurisdictional doctrines require essentially the same analysis. See Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 372-73, 57 L. Ed. 2d 274, 98 S. Ct. 2396 (1978).
Two requirements for the exercise of pendent jurisdiction have been clear since the Supreme Court decided United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966): First, the court must determine whether it has constitutional power to exercise jurisdiction; second, it must determine whether it should, in its discretion, exercise jurisdiction. Id. at 726. See generally 13 B C. Wright, supra, § 3567.1. The Aldinger Court added a third step to the two-step pendent claim inquiry: Now a court deciding whether to exercise pendent party jurisdiction must also determine whether the statute conferring jurisdiction either expressly or implicitly negates jurisdiction over a pendent party. 427 U.S. at 17-18. The court will now turn to the Gibbs/Aldinger analysis by first addressing the questions of power and discretion and then examining the jurisdictional statute at issue in this case.
1. Constitutional Power
For a federal court to have the power under U.S. Const. art. III to hear a state law claim pendent to a federal claim,
The state and federal claims must derive from a common nucleus of operative fact. But if, considered without regard to their federal style or character, a plaintiff's claims are such that he would ordinarily be expected to try them all in one judicial proceeding, then, . . . there is power in federal courts to hear the whole.