Evans v. Walter Industries, Inc., 449 F.3d 1159, 2006 WL 1374688, No. 06-11974 (11th Cir. May 22, 2006).
On April 8, 2005, the plaintiffs filed a class action in the Circuit Court of Calhoun County, Alabama, alleging personal injuries and damage to their
Anniston, Alabama , property caused by waste produced over a period of 85 years by the defendants’ manufacturing facilities. Walter Industries removed the litigation to federal court under the “minimal diversity” jurisdictional provisions of the Class Action Fairness Act. The plaintiffs did not dispute that minimal diversity existed at the threshold under 28 U.S.C. §1332(d)(2), but instead, sought remand under CAFA’s “local controversy” exception. The plaintiffs, citing §1332(d)(4)(A), argued that the court must decline to exercise its undisputed minimal diversity jurisdiction under the exception since more than two-thirds of the class were Alabama citizens, and U.S. Pipe was a “significant” defendant under CAFA. The district court agreed, applying the local controversy exception, and remanded the case to the
Alabama state court. Subsequently, Walter Industries perfected its appeal to the Eleventh Circuit Court of Appeals.
Judge R. Lanier Anderson, writing for the three judge panel of the Eleventh Circuit, began his opinion by examining the expedited appeal process provided by 28 U.S.C. § 1453 as amended by CAFA. This provision provides for a sixty day period of review of remand decisions under CAFA. Noting that § 1453(c)(1) contains the word “may,” the Circuit Judge held that review by the court of appeals of remand decisions under CAFA is “clearly discretionary.” Following the reasoning of Patterson v. Dean Morris, LLP, 444 F.3d 365 (5th Cir. 2006), Amalgamated Transit Union v. Laidlaw Transit Services, Inc., 435 F.3d 1140, 1145 (9th Cir. 2006) (see the CAFA Law Blog summary posted on February 1, 2006) and Pritchett v. Office Depot, Inc., 420 F.3d 1090, 1093 (10th Cir. 2005)(see the CAFA Law Blog summary posted on October 23, 2005), the Eleventh Circuit held the sixty day period begins to run from the date the court of appeals grants the application to appeal and allows the appeal to be filed, as opposed to when the appellant applies for the appeal.
Judge Anderson next examined the language of the local controversy exception, codified at § 1332(d)(4)(A), recognizing CAFA’s language favors federal jurisdiction for class actions, and CAFA’s legislative history suggests Congress intended the local controversy exception to be a narrow one. Referencing the statute’s legislative history, the court quoted from CAFA’s Senate Report for the tenant that all doubts be resolved “in favor of exercising jurisdiction over the case.” (Editors’ Note: It is important to note that Judge Anderson also quoted Section 2 of CAFA for the proposition that Congress expanded federal court jurisdiction “providing for Federal court consideration of interstate cases of national importance under diversity jurisdiction” with only narrow exceptions, and stated specifically, “these notions are fully confirmed in the legislative history.” Interestingly, the Evans court is the first court at any level to reference Section 2 of CAFA in connection with a burden of proof analysis.
Judge Anderson then cited Brill v. Countrywide Home Loans, Inc. (see the CAFA Law Blog summary posted on November 2, 2005) for the proposition that CAFA does not alter the traditional rule that a party seeking to remove a case to federal court bears the burden of establishing federal jurisdiction without mentioning CAFA’s legislative history and the changes discussed therein. The court also cited Abrego v. Dow Chemical Co., which followed Brill, for the same proposition, and without further analysis, relied on those rulings in concluding CAFA does not change the well-established rule that the removing party bears the burden of proof. Judge Anderson did, however, hold that the plaintiffs bore the burden of proving the local controversy exception by pointing to two non-CAFA cases, Castleberry v. Goldome Credit Corp., 408 F.3d 773 (11th Cir. 2005) and Lazuka v. Federal Deposit Insurance Corp., 931 F.2d 1530 (11th Cir. 1991), both of which discuss the removal of actions involving the FDIC, eschewing any mention of the portion of CAFA’s legislative history mentioned earlier in the opinion.
Judge Anderson then proceeded to apply the local controversy exception to the facts of the case. First, on the issue of whether more than two-thirds of the class members were Alabama citizens, the court held the evidence brought forward by the plaintiffs (an affidavit by the plaintiffs’ attorney outlining their determination of percentages of Alabama citizens), failed to present a credible estimate of the percentage of class members who were citizens of Alabama. Second, the court addressed whether U.S. Pipe was a defendant from whom “significant relief” was sought, and whose conduct formed a “significant basis” for the claims asserted by the plaintiffs. Judge Anderson cited Robinson v. Cheetah Transportation, 2006 WL 468820 (W.D. La. Feb. 27, 2006) (see the CAFA Law Blog summary posted on March 28, 2006) and Kearns v. Ford Motor Company, 2005 WL 3967998 (C.D. Cal. Nov. 21, 2005) which held that a class seeks “significant relief” against a defendant when the relief sought against that defendant is a significant portion of the entire relief sought by the class. After applying this test, the Eleventh Circuit disagreed with the district court that U.S. Pipe was a “significant defendant.” Following Robinson, Judge Anderson stated, “whether a putative class seeks significant relief from an in-state defendant includes not only an assessment of how many members of the class were harmed by the defendant’s actions, but also a comparison of the relief sought between all defendants and each defendant’s ability to pay a potential judgment.” He continued, pointing out that neither the plaintiffs’ complaint nor their affidavit addressed the relief sought from U.S. Pipe or any of the other 17 named defendants as to liability. Moreover, the plaintiffs failed to prove the conduct of U.S. Pipe formed a significant basis for their claims. The court accordingly held that the plaintiffs failed to meet their burden of proof as to the local controversy exception.
Editor’s Note: Evans is an important decision in several respects. Significantly, the ruling shows that the circuit court viewed CAFA’s jurisdictional provisions as implicating a two-level test: first, whether minimal diversity jurisdiction exists at the threshold, and if so, second, whether to abstain from exercising such jurisdiction on a discretionary or a mandatory basis. The proper characterization of this second level test can have significant ramifications. See, for example, the article coauthored by three of the editors of the CAFA Law Blog, Anthony Rollo, Hunter Twiford, and Gabe Crowson, characterizing Sections 1332(d)(3) and (4) of CAFA as abstention provisions, rather than jurisdictional exceptions. The article, entitled “Practitioners review ‘abstention’ procedure under Sections 1332(d)(3) and (4),” was published in the Consumer Financial Services Law Report, Vol. 9, Issue 2 (June 15, 2005), and is available on the CAFA Law Blog. See the summary posted on October 22, 2005.
The ruling is also important with respect to which party bears the threshold jurisdictional burden of proof. The Editors will comment tomorrow on the CAFA Law Blog as to why the Evans court was incorrect in following Brill and Abrego, and why its logic as to the second level analysis supports the conclusion that Brill and Abrego are wrongly decided in this respect.