FRANKFORT, Ky. - In response to Marathon Oil's diversity jurisdiction argument, Kentucky's Greg Stumbo recently offered a history lesson from other attorneys general.

Stumbo is suing Marathon for allegedly violating the state's anti-price gouging statute in the wake of hurricanes Katrina and Rita, a case Marathon had removed to federal court. In a motion filed Tuesday, Stumbo goes through examples from West Virginia's Darrell McGraw and Mississippi's Jim Hood in his effort to remand it to state court.

"In this case, the Plaintiff is the Commonwealth of Kentucky, represented by the Attorney General as relator (seeking civil penalties to be paid into the state treasury) and chief law enforcement officer of the state," Stumbo wrote, later citing Hood's case against Microsoft. "The fact that the consumer protection laws provide for a remedy of restitution to affected consumers as well as penalties and injunctive relief does not deprive the case of its character as an enforcement action on behalf of the state, affecting the state's treasury and vindicating the state's interest in the 'economic well-being of its citizens.'"

Marathon is claiming that the diversity of the parties and the amount in controversy (a total of $89 million) puts the case in federal court.

"The Attorney General's argument in his Motion to Remand then is simple," Marathon wrote. "As Attorney General, he claims that for purposes of this case, he is nothing but an arm of the Commonwealth of Kentucky. And were this true, the principle that a state is not a citizen for purposes of diversity jurisdiction would likely make his remand motion successful.

"However, the Attorney General ignores that in this case he is not simply litigating on behalf of a sovereign entity, but rather is utilizing his role as a representative for a discrete set of citizens within the Commonwealth. In such cases, the principle that states are not citizens for purposes of diversity is meaningless, as the actual litigants in the case are the citizens of the Commonwealth. As such, their citizenship, rather than that of the state, becomes the deciding factor in determining diversity for federal jurisdiction."

Stumbo's suit is the first filed by a state against a major oil refinery over price-gouging allegations. Marathon is Kentucky's largest wholesaler of gasoline, and Speedway SuperAmerica is also named as a defendant.

Marathon is also challenging the constitutionality of the anti-price gouging statute, while claiming the heart of Stumbo's argument comes on behalf of affected individuals, not the state.

This was the exact scenario presented in the Levi Strauss case. There, the State of Connecticut brought a series of claims against Levi Strauss for alleged overcharges incurred by its citizens when the corporation's products were purchased," Marathon claims. "The court recognized that at its core, the Attorney General was not suing to enforce a punishment or to validate any fundamental interest of the sovereign, but rather was seeking to recoup losses suffered by a circumscribed group of its citizens.

"Thus, the real party in interest was not the sovereign itself, but the citizens of Connecticut who had purchased Levi Strauss products at prices that were alleged to be too high. The court held, 'a state's role in suing on behalf of particular citizens sufficiently dispenses with its sovereign capacity not only to bar access to the Supreme Court's original jurisdiction but also to gain access to the district courts' diversity jurisdiction.'"

Stumbo, in his motion, reminded the defendants that the Levi Strauss case was remanded to state court anyway. He says Marathon could not uncover one instance where a similar case stayed in federal court, including McGraw's case against Minnesota Mining and Manufacturing Co., and called the company's attempts to do so "tortured."

"Marathon's attempt to transform its legal defenses into federal subject matter jurisdiction must fail," Stumbo wrote.