Speed v. JMA Energy Co., 2017 WL 2547240 (E.D. Ok. June 13, 2017).

Once the court had determined that a sufficient number of the plaintiffs and the primary defendants were citizens all citizens of the state in which the suit had been brought, it weighed the remaining six factors under 28 U.S.C. § 1132(d)(3)(A)–(F) and decided in favor of remand because the claims related only to state law, the outcome of the litigation did not involve a “national interest,” and the class action had not been pleaded in a way that seeks to avoid federal jurisdiction.

The plaintiff brought a class action against JMA Energy Company, LLC in the state court of Hughes County, Oklahoma, based on JMA’s alleged willful and ongoing violations of Oklahoma law related to payment of oil and gas production proceeds to well owners. JMA removed the action to the federal court based on CAFA. Plaintiff moved to remand.

The parties only disputed the application of the “discretionary exception” that allows a federal court to decline to exercise jurisdiction over a class action that is otherwise covered by CAFA based on six enumerated factors of 28 U.S.C. § 1332(d)(3). See Dutcher v. Matheson, 840 F.3d 1183, 1194 (10th Cir. 2016). (Editor’s Note: See the CAFA Law Blog discussion of Dutcher here)

The first factor is whether the matter of national interest. The District Court noted that in a similar case—where the defendants were citizens of Oklahoma and had their principal place of business in Oklahoma, the acts giving rise to the plaintiffs’ claims occurred in Oklahoma, and the subject oil and gas wells were all located in Oklahoma— the court had found that the first factor weighed in favor of remand. Here, all of the subject oil and gas wells were located in Oklahoma, all class members owned interests in the subject Oklahoma wells, and the lead plaintiff was an Oklahoma citizen. Moreover JMA was an Oklahoma citizen with its principal place of business in Oklahoma, the business activities that gave rise to this case occurred in Oklahoma, and the claims were based upon Oklahoma law.

JMA argued that the first factor’s focus was not necessarily application of law, but rather the national interest in the sense of the interests of the national and domestic oil and gas industry, as well as to royalty owners throughout the United States. JMA also argued that other jurisdictions considered the rulings of Oklahoma courts in determining their own oil and gas rules and laws. But the Court here state that one court might always “consider” the ruling of another court, but this alone does not create a national interest. Using an example out of the Fifth Circuit upholding a remand regarding a class action arising out of Hurricane Katrina, the District Court notes that just because the nation took interest in the storm did not mean that the legal claims at issue in the class action lawsuit qualified as national or interstate interest. See Preston v. Tenet Healthsystem Memorial Medical Center, Inc., 485 F.3d 804, 822 (5th Cir. 2007). The District Court therefore held that this factor weighed in the plaintiff’s favor.

As to the second factor, whether the claims asserted were governed by the state in which the action was brought, the plaintiff asserted that he only brought claims under Oklahoma law, the state where the action was originally filed. JMA contended that the claims were likely to be governed by the laws of multiple states or federal law, not the laws of Oklahoma only. But the District Court was not persuaded. It noted that in Weber v. Mobil Oil Co., 243 P.3d 1 (Okla. 2010), the Oklahoma Supreme Court had concluded that Oklahoma law would govern class members’ fraud claims even though some members were citizens of other states. The District Court further noted that ate least one treatise states that, generally, the second factor can weigh in favor of remand even if other claims are involved in the suit. Accordingly, the second factor also slightly weighed in favor of the plaintiff.

The third factor concerns whether the class action had been pleaded in a manner that sought to avoid federal jurisdiction. JMA asserted that it had because plaintiff excluded publicly traded companies and their affiliated entities that produce, gather, process, or market gas. Instead, plaintiff sued only Oklahoma citizens as defendants, despite the possibility of including other, diverse defendants. But the District Court found that because the plaintiff proposed a natural class—i.e. a class that encompassed all of the people and claims that one would expect to include in a class action, and appeared to follow a natural pattern—then this factor weighed in favor of remand.

Next, the District Court addressed the fourth factor, the forum’s nexus to class members, alleged harm, and defendants. JMA argued that the forum referred to in the statute was not the state, but the specific county in which the action was filed. But the District Court was not persuaded. It held that the CAFA analysis involved federalism, the relationship between federal courts and state courts—as indicated by the 28 U.S.C. § 1332(d)(3) reference “other States”—so any county court in Oklahoma was viewed as an “Oklahoma state court” for purposes of the forum analysis. That is, so long as the as venue was appropriate in in the original county for the state court petition—which was a question of state law—the specific county was irrelevant for this analysis. Accordingly, this factor also weighed in favor of remand.

Next, the District Court considered the fifth factor, how the number of Oklahoma citizens in the proposed class compared to other states, as well as dispersal of class members. It noted that the Oklahoma citizens made up 48.46% of the proposed class and that the number of Oklahoma citizens was larger than the number of citizens from any other state by a factor of nearly 2.5 times. JMA argued that less than half of the proposed class members were Oklahoma citizens that in excess of five percent resided in two other states and more than four percent resided in another. But the District Court found that the purpose of this factor was to further ensure that the forum state’s connection was substantially greater than that of any other state’s connection. Because Oklahoma’s connection to this litigation was substantially greater than was that of any other state, the plaintiff had satisfied this factor.

Finally, the District Court found that there was no dispute as to the final factor—that during the three-year period preceding the filing of this class action there had not been filed a class action asserting the same or similar claims on behalf of the same or other people—so this did not affect the analysis.

Even though the court had federal jurisdiction under 28 U.S.C. § 1332(d)(2), because overall the factors weighed in favor of remand, the District Court granted the plaintiff’s motion.

–Barry A. McCain