Froud v. Anadarko E&P Co. Ltd. Partnership, 2010 WL 961456, *2+ (E.D.Ark. Mar 16, 2010) (NO. 4:09CV00936-WRW).
In this ‘quiet title case’, the Arkansas District Court declined to remand the action to state court under CAFA’s ‘local controversy’ exception, 28 U.S.C. § 1332(d)(4), holding that the plaintiffs sought ‘significant relief’ against defendant Anadarko — a non-citizen.
The plaintiffs, land owners, on their behalf and on behalf of all the land owners, brought a class action in state court against Anadarko E&P Company Limited Partnership, Anadarko Land Corporation (“Anadarko”), SEECO and similar situated companies (the “producer defendants”), and others.
The plaintiffs asserted that when Missouri Pacific Railroad conveyed land in the 1930’s with a ‘reservation of minerals,’ the reservation did not have the effect of reserving to Missouri Pacific the oil and gas rights in the disputed land; thus, they, as landowners, own the oil and gas under their properties.
Anadarko asserted that it properly obtained the oil and gas rights when Missouri Pacific deeded those rights to Anadarko in 1995 — because Missouri Pacific owned the oil and gas rights through the ‘reservation of minerals’ from the 1930’s deeds.
The plaintiffs sought declaration that Missouri Pacific’s reservation of rights did not include oil and gas, and that the plaintiffs were the owners of the mineral rights, and asked the producer defendants to pay the plaintiffs for the oil and gas that had been extracted. Additionally, the plaintiffs requested that the Court impose a constructive trust with respect to all money and other things of value paid by the producer defendants to Anadarko for the production of oil and gas extracted from the disputed land.
After the defendants removed the action to federal court, the plaintiffs sought to remand the action to state court under CAFA’s ‘local-controversy’ exception, which the District Court denied. The Court held that Anadarko’s conduct formed a significant basis for the plaintiffs’ claims. The defendants disputed only two of the ‘local-controversy’ exception elements–more than two-thirds of the proposed class were not citizens of Arkansas and SEECO, the only non-diverse defendant, was not a ‘significant’ defendant.
First, the District Court observed that the plaintiffs’ expert’s analysis that of 478 land owners including those persons who own the minerals, 361 (75.52%) were Arkansas citizens, was correct.
The District Court, however, found that the producer defendant, SEECO, the only Arkansas citizen, was not a significant defendant. The Court stated that the plaintiffs overlooked the significance of Anadarko, and opined that the case rested entirely on Anadarko’s conduct because Anadarko claimed that it owned the mineral rights in the disputed lands.
The Court explained that if it was to determine that Missouri Pacific’s reservation of mineral rights was valid and properly conveyed to Anadarko, then the plaintiffs’ claims against the producer defendants would be dismissed. If the Court was to determine that the plaintiffs owned the mineral rights in the land, the plaintiffs’ significant relief would be from Anadarko because the plaintiffs sought a constructive trust including all money and other things of value paid by the producer defendants to Anadarko for the production of oil and gas extracted from the disputed land.
The Court observed that the legal issue (quiet title) and requested relief (that Anadarko hand over the money it had received so far) were against Anadarko; thus the fact that SEECO had produced oil and gas from the disputed land, and was paying proceeds to Anadarko did not amount to a ‘significant basis’ for the claims asserted by the class.
Finally, the Court remarked that the plaintiffs’ relief that producer defendants pay them for the oil and gas that had been extracted was not a ‘significant relief’ from SEECO, rather, it was simply a redistribution of oil and gas proceeds based on the quiet title determination.