Coffey v. Freeport McMoran Copper & Gold, 581 F.3d 1240 (10th Cir. 2009)
In this matter, the federal appellate court sides with the plaintiffs and sends the case back to state court with a message to clean it up.
In 2008, the plaintiffs filed a class action in a state court in Oklahoma on behalf of themselves and all other similarly situated persons asserting state law claims based on the defendants’ alleged contamination of their property through operation of the Blackwell Zinc Smelter in Blackwell, Oklahoma.
The defendants removed the case to federal court, asserting federal jurisdiction based on CAFA and the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”). The plaintiffs filed a motion to remand, arguing that there was no basis for federal jurisdiction. The district court granted the motion, and the defendants appealed from that decision. (Editors’ Note: See the CAFA Law Blog analysis of the district court’s decision in Coffey posted on July 29, 2009).
The plaintiffs included in their punitive class definition all Oklahoma citizens currently domiciled in the state of Oklahoma who own private real property in Blackwell, or within a 5 mile radius of the smelter site, and all Oklahoma citizens who reside or at any time resided on real property located in Blackwell or within a 5 mile radius of the smelter site.
As CAFA wonks know, Congress created an exception thereto for those cases consisting of primarily local intrastate matters creating a “local controversy exception.” The court noted that this provision was intended to respond to concerns that class actions with a truly local focus should not be moved to federal court under CAFA legislation because state courts have a strong interest in adjudicating such disputes.
The court further recognized that this case presented a class example that Congress intended to cover when it created its exception as it is a truly local controversy – a controversy that uniquely affects a particular locality to the exclusion of all others.
There are 3 main requirements for the plaintiffs to meet in order to satisfy the local controversy exception. The defendants did not contest that the plaintiffs had already met 2 of the 3 requirements – all of the members of the plaintiff class are Oklahoma citizens, and the principal injuries occurred in Oklahoma. The provision in dispute relates to the requirement that there be at least “one real local defendant.” In order to satisfy this “local defendant” requirement, the plaintiffs must show that at least 1 defendant is a defendant (1) from which significant relief is sought by members of the punitive class; (2) whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class; and (3) who is a citizen of the state in which the action was originally filed. The first and third requirements were contested by the defendants.
The alleged “local defendant” was Blackwell Zinc Company, Inc. (“BZC”) who owned and operated the smelter in Blackwell, Oklahoma from 1922 until 1974. As such, the plaintiffs argued that BZC was a defendant from whom significant relief was sought by members of the plaintiff class because all class members had claims against BZC – as opposed to a mere subset of class members. Further, all class members were seeking to hold BZC jointly and severally liable for all the plaintiffs’ damages, and, given the fact that BZC was the operator of the smelter from 1922 to 1974, it was reasonably likely that BZC would be held at least equally responsible for the plaintiffs’ damages, if not more so.
In defense, the defendants argued that the significant relief requirement requires consideration of a defendant’s ability to pay a judgment. The defendants asserted that BZC has no assets to satisfy any potential judgment and that, therefore, BZC could not be considered a defendant from whom significant relief is sought.
The court looked to the statutory language of the “local defendant” provision and that it simply requires that the defendant be one “from whom significant relief is sought by members of the plaintiff class. . .” Agreeing with the district court, the appellate court held that the statutory language was unambiguous, and that a “defendant from whom significant relief is sought” does not mean a “defendant from whom significant relief may be obtained.”
Regarding the citizenship of BZC, the plaintiffs asserted that BZC was an active corporation with its principal place of business in Oklahoma because it owns real property in Oklahoma and pays taxes on that property. Further, BZC filed an application for a permit to operate a ground water treatment plant in Oklahoma and has been conducting voluntary environmental remediation for many years in Oklahoma and has initiated a community outreach program to educate the citizens of Blackwell about BZC’s environmental remediation efforts. BZC has been licensed to do business in Oklahoma since 1922, that license was still active, and BZC conducted business only in Oklahoma.
The defendants argued that BZC was not a citizen of Oklahoma because it had not conducted significant business there since it was acquired by another corporation in 1999.
The court recognized that the district court’s determination about a corporation’s principal place of business is the question of fact that it reviews for clear error. The court recognized that when determining a corporation’s principal place of business, a court should look to the total activity of the company or the totality of the circumstances. The court found that the district court’s analysis was consistent with that precedent and that the defendants have failed to show to the district court’s decision was clearly erroneous.
As the old woodsy owl states “give a hoot – don’t pollute!” Oh, and get on back to state court.