Tenth Circuit: Class action doesn’t require remand under CAFA’s ‘local controversy’ exception

By Jessica Karmasek | Mar 25, 2016

Judge Jerome Holmes for the U.S. Court of Appeals for the Tenth Circuit.  

DENVER (Legal Newsline) - A federal appeals court recently ruled that plaintiffs must be held to their burden of proving that greater than two-thirds of class members are actually citizens of the forum state.

The U.S. Court of Appeals for the Tenth Circuit, in its Feb. 9 order, affirmed the judgment of an Oklahoma district court in a class action challenging the manner in which fracking waste was disposed.

The district court, Circuit Judge Jerome Holmes wrote, “properly denied” both motions to remand and dismissed the amended complaint against the defendants -- among them, AES Corporation, GCI Mining, and Highland Oil and Gas.

“It cannot be disputed that Plaintiffs here bear the burden of establishing the applicability of the local-controversy exception,” Holmes wrote in the 50-page order. He was joined by judges Scott Matheson Jr. and Carolyn McHugh.

Plaintiffs William and Diane Reece, Herman Tolbert, Bennett Tanksley, Susan Holmes and Charles Tackett filed a petition in the LeFlore County District Court, Oklahoma, asserting a putative class action. They alleged that several companies, including AES, GCI and Highland, were responsible for environmental pollution stemming from the generation and disposal of coal-combustion waste, or CCW, and fluid waste from oil and gas drilling -- produced fluid waste, or PFW.

The defendants removed the case to the U.S. District Court for the Eastern District of Oklahoma under the Class Action Fairness Act, or CAFA.

The plaintiffs filed two motions to remand, and the district court denied them both.

Also, after affording the plaintiffs two opportunities to cure “factual deficiencies” in their complaint, the district court dismissed it for failure to state plausible claims for strict liability, negligence per se and negligence.

On appeal, the plaintiffs challenged the district court’s denial of their two motions for remand and its dismissal of their amended complaint.

Under CAFA, a federal district court has subject matter jurisdiction “over class actions involving at least 100 members and over $5 million in controversy when minimal diversity is met (between at least one defendant and one plaintiff-class member).”

However, CAFA contains certain mandatory jurisdictional exceptions; where the requirements of those exceptions are met, the district court must eschew jurisdiction and remand the case.

The plaintiffs in Reece v. AES Corp. argue that one such exception applies here -- the local-controversy exception.

Such an exception requires plaintiffs seeking remand to show that “greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed” -- in this case, Oklahoma.

The plaintiffs argued the putative class consisted primarily of Oklahoma landowners.

However, the Tenth Circuit, in its order, noted that not all landowners are necessarily citizens.

“Plaintiffs’ class here was not restricted to citizens; instead, it included ‘citizens and/or residents and/or property owners,’” Holmes explained. “This definition encompasses groups who may not necessarily be Oklahoma citizens.”

The judge said the plaintiffs were “obliged to do more” in establishing the Oklahoma citizenship of the class members.

“In sum, the district court here did not err in insisting that Plaintiffs demonstrate, through more than their broad pleading averments, that over two-thirds of the proposed class were Oklahoma citizens,” he wrote. “And Plaintiffs did not rise to meet the court’s demand.”

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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