Sherman v. Mantle Oil & Gas, LLC, No. CIV.A. 10-2774, 2011 WL 130240 (E.D. La. Jan. 14, 2011).
In this case, a District Court in Louisiana found that even if two similar class actions are pending before a federal court, the statutory language of CAFA compels remanding an action to state court if it was filed first and involved a local controversy.
The plaintiffs filed two actions after an oil and gas well owned by the Mantle Oil & Gas, LLC and operated by Cajun Well Service, Inc. in Assumption Parish, Louisiana blew out on August 11, 2010, releasing gas and oil into the air and surrounding environment.
Two days later (before the oil that was released was dry) on August 13, 2010, a class action was filed in the state court against Mantle and Cajun (“the Hendrix Action”) seeking to represent the residents of the neighboring communities, the motoring public, and/or persons who own or occupy land in and around the area of the Mantle well who sustained damages to their property as a result of the defendants’ negligence.
On August 18, 2010, a second class action was filed in the Eastern District of Louisiana against Mantle for damages arising out of the same well blowout (“the Sherman Action”).
Mantle and Cajun then removed the Hendrix Action to the Eastern District of Louisiana under CAFA. Then, the District Court consolidated the Hendrix Action and the Sherman Action. The Hendrix plaintiffs moved to remand their case to the state court, which the District Court granted.
Primarily, the Court observed that the parties did not dispute the presence of minimal diversity of citizenship and that the class consisted of 585 individuals. Although the parties disputed whether the amount in controversy was met, the Court declined to determine this issue because the plaintiffs had proved that the local controversy exception to CAFA jurisdiction applied in this case.
Keeping in mind the language of CAFA, which favors federal jurisdiction over class actions and CAFA’s legislative history that suggests that Congress intended the local controversy exception to be a narrow one, with all doubts resolved in favor of exercising jurisdiction over the case, the Court addressed the parties’ arguments.
First, the Court found that the plaintiffs established that “two-thirds of proposed class members [were] citizens” of Louisiana, where the suit was filed, 28 U.S.C. §1332(d)(4)(A)(i)(I). Moreover, under “common sense” approach, the Court stated that a well blowout in Assumption Parish, Louisiana, likely affected a class consisting of greater than two-thirds Louisiana citizens.
Second, the Court stated that the plaintiffs adequately established that the “class sought significant relief” from the defendant Cajun–a Louisiana citizen whose conduct formed a significant basis for the claims asserted, §1332(d)(4)(A)(i)(II).
Third, neither party contested the requirement that the “principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed,” §1332(d)(4)(A)(i)(III).
Fourth, the parties disputed only the fourth requirement, that “during the 3-year period preceding the filing of that class action, no other class action has been filed asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons,” §1332(d)(4)(A)(ii).
The Court observed that the Sherman Action undoubtedly asserted similar factual allegations, but it was filed five days after the Hendrix Action and not in the 3-year period preceding it. The Hendrix Action was a local controversy at the time it was filed, and under the plain language of the exception the subsequently-filed Sherman Action did not matter. Thus, at the time the Hendrix action was filed, no other class action had been filed asserting similar factual allegations against any of the defendants. Accordingly, the Court concluded that the fourth element of the “local controversy” exception to CAFA jurisdiction was met.
Finally, the Court remarked that remanding the Hendrix Action to proceed in state court while the Sherman Action proceeded in the District Court was inefficient. But it was not entirely unprecedented that a court may have jurisdiction over some, but not all, of a group of similar potential class actions that might otherwise benefit from consolidation.
The Court stated that although the two class actions arose out of exactly the same factual predicate, shared a common defendant, and possessed overlapping proposed class definitions, the Court was constrained to remand one class action, but exercise jurisdiction over another solely because one group of attorneys beat another to the courthouse by five days. In absence of any precedents addressing a situation quite like this, the Court found that the statute requires that the Court decline to exercise jurisdiction over the Hendrix Action. Although the Court reached the outcome required by the statute, it hoped that the appellate courts would resolve this anomaly so that federal and state coordination can be achieved in order to maximize efficiency and minimize duplicative cost.
Accordingly, the Court remanded the Hendrix Action to the state court.