Frazier v. Pioneer Americas, LLC, 2006 WL 1843629, No. 06-30434 (5th Cir. July 6, 2006).

Defendants scored some traction in remand battles from the U.S. Fifth Circuit Court of Appeals, which declared that plaintiffs bear the burden of proving an exception to prima facie CAFA jurisdiction exists.  On July 6, 2006, Fifth Circuit Judge Patrick E. Higginbotham, handed down an opinion from the Fifth Circuit side stepping the burden of proof issue as to jurisdiction, but examining burden of proof as to CAFA’s exceptions and discussing the primary defendant exception and the local controversy exception.

In this case, the plaintiffs sued Pioneer Americas who operated hydrogen processing equipment in its St. Gabriel, Louisiana facility when mercury seeped from the equipment into the atmosphere. Some of the citizens living near the facility argued the seeping mercury threatened their health. Pioneer reported the seeping mercury to the Louisiana Department of Environmental Quality (DEQ). The DEQ investigated and determined that the increased levels of mercury were only slightly problematic and fined Pioneer about $400,000. The plaintiffs alleged the DEQ neglected its statutory duties to monitor, inspect, report emissions, and warn citizens of dangerous emissions. 

The plaintiffs sued Pioneer Americas and DEQ in state court alleging negligence and seeking damages for personal injury. Without the consent of DEQ, Pioneer Americas removed to the federal district court for the Middle District of Louisiana asserting diversity jurisdiction under 1332(a), due to the improper joinder of DEQ, and CAFA. The plaintiffs moved to remand the case to state court arguing that the defendants could not prove improper joinder, the amount in controversy ($75,000 for 1332(a)) was not met, and also that the case was within the two exceptions in CAFA. The plaintiffs did not challenge the defendants allegations of CAFA’s minimal diversity or that the $5 million amount in controversy was satisfied.

The United States Magistrate Judge placed the burden to show the absence of CAFA jurisdiction on the plaintiffs. The Magistrate Judge held that the plaintiffs did not contest prima facie jurisdiction under CAFA, and that neither exception applied. He did not address the 1332(a) diversity jurisdiction, and the District Court Judge agreed with the holding. [

(Editors’ Note:  For a full discussion of the clear mandates of section 2 of CAFA and the burden of proof, see the law review article scheduled for publication in the Spring 2006 edition of the Mississippi College Law Review entitled “CAFA’s New ‘Minimal Diversity’ Standard For Interstate Class Actions Creates A Presumption That Jurisdiction Exists, With The Burden Of Proof Assigned To The Party Opposing Jurisdiction” by Anthony Rollo, Hunter Twiford, and John Rouse.  As an added bonus for you, our brilliant readers, the entire article and the CAFA Law Blog discussion posted on May 5, 2005 is now available to our loyal CAFA Law Blog readers, pre-publication, here.)

The Fifth Circuit granted leave to appeal under section 1453 and handed down an opinion granting federal court jurisdiction under CAFA. First, Judge Higginbotham addressed the general burden of proof arguments. The plaintiffs cited the Seventh Circuit’s opinion in Brill and the Ninth Circuit’s opinion in Abrego arguing the language of CAFA is plain and silent as to who bears the burden of proof.  (Editors’ Note:  See the CAFA Law Blog’s analysis of Brill posted on November 2, 2005 and the CAFA Law Blog analysis of Abrego posted on May 25, 2006).  The plaintiffs argued that the burden must be on the defendant, and to do otherwise would be inconsistent with the longstanding section 1441(a) removal doctrine which overrides any legislative history of a purpose to place the burden on the plaintiffs. 

The defendants argued the clear legislative history controls in the face of statutory silence, silence not broken by the doctrine developed under the different and older removal provision of 1332(a).  The Fifth Circuit sidestepped the issue stating that “we need not answer which party has the burden to prove prima facie jurisdiction because that is not at issue here.” After Pioneer America raised CAFA jurisdiction, the plaintiffs never contested that the general requirements for CAFA jurisdiction were met. 

The opinion then turned to address two exceptions under CAFA. The court placed the burden of proof to prove the applicability of CAFA’s exceptions on the plaintiffs, noting that the “longstanding § 1441(a) doctrine placing the burden on plaintiffs to show exceptions to jurisdiction buttresses the clear congressional intent to do the same with CAFA.” Neither the Seventh Circuit nor the Ninth Circuit addressed the issue. 

Then, the Fifth Circuit addressed the application of 1332(d)(5)(A), the state exception to the case. The plaintiffs argued that the exception applied because DEQ, a primary defendant, is a state entity.  Pioneer Americas responded by pointing out the exception requires ALL primary defendants be states. Judge Higginbotham agreed with Pioneer Americas that the exception requires all defendants to be states. The Judge also pointed out that “the legislative history, which explains that the exception is not meant to create a loophole, whereby plaintiffs can avoid CAFA jurisdiction by naming a state as a primary defendant in an action largely targeting non-states.”

The Court also quickly addressed the local controversy exception under section 1332(d)(4) that excludes cases where at least one defendant is a citizen of the state where the action was originally filed. The plaintiffs argued that DEQ was a citizen of Louisiana, but the court disagreed by pointing out that “it is long-settled that a state has no citizenship for § 1332(a) diversity purposes.” The court found no reason to depart from this rule as it follows directly with CAFA’s legislative history.