In Cheapside Minerals, Ltd. v. Devon Energy Prod Co., L.P., the Fifth Circuit concluded that CAFA’s “local controversy” exception did not apply, and thus reversed a remand to state court in an oil-and-gas royalties dispute:

[T]he “principal injury” each Plaintiff sustained is obvious because there was only one type of injury: a financial harm resulting from Devon’s alleged underpayment of their royalties. While most Plaintiffs sustained that injury in Texas, others did not. Therefore, the principal injuries prong is not satisfied in this case, and Plaintiffs have failed to demonstrate that the local controversy exception applies.

No. 24-40026 (March 1, 2024).

CAFA allows remand of a case, otherwise removable under that statute, if the plaintiffs establish that the “local controversy” exception applies. Am element of that exception is that the plaintiffs seek “significant relief” from an in-state defendant.

A recurring problem in remedies law is whether “irreparable injury” is shown (and injunctive relief thus justified) when a defendant is insolvent. State of Louisiana v. i3 Verticals, Inc. presents a simlar problem because the in-state party was “a defunct shell with no assets, facilities, business, or employees ….”

The majority held: “The interpretation of the ‘significant relief’ prong is an issue of first impression in our circuit. We begin where we always do—with the text. And all the text requires is that ‘significant relief is sought’ from an in-state defendant. It says nothing about the in-state defendant’s ability to pay.” (citation omitted). The dissent saw that holding as inconsistent with CAFA’s discouragement of artful pleading. No. 22-30553 (Sept. 1, 2023).

At issue in Stewart v. Entergy Corp. was whether BP v. Mayor of Baltimore, 141 S. Ct. 1532 (2021), allowed the review of non-CAFA grounds for removal, in the context of an appeal of a remand order taken pursuant to CAFA. The Fifth Circuit, acknowledging contrary authority from other Circuits, held that it did not, noting that unlike the statute at issue in BP, CAFA requires expedited appeals and thus establishes a unique, CAFA-specific system for review of rulings related to it. No. 22-30177 (May 27, 2022).

The plaintiff’s pleading at the time of removal in Turner v. GoAuto Ins. Co. described a putative class made up of only “citizens of Louisiana.” The defendant argued “that the Louisiana law contravened Louisiana law in several ways by allowing [Plaintiff] to amend his complaint to redefine the class.” But that argument ran afoul of the “basic precept of our federal system … that federal courts do not exercise authority over the proceedings of a sovereign state’s judiciary as it relates to that state’s laws,” which meant that the amended pleading controlled, and that the defendant could not establish the necessary diversity of citizenship. No. 22-30103 (May 2, 2022).

A Louisiana-based defendant removed a class action brought by an individual citizen of Louisiana, contending that a co-defendant’s “non-diverse Louisiana citizenship could be disregarded because the [statutory] claims against [the co-defendant] were ‘improperly and egregiously misjoined’ with the assignment-based bad faith claim against the removing defendant.”

This concept — called “fraudulent misjoinder” and reliant upon state-law procedural rules — is distinct from the traditional concept of “improper joinder” (a/k/a “fraudulent joinder”), which focuses on the viability of the claim against the nondiverse defendant.

The panel majority in Williams v. Homeland Ins. Co., written by Judge Haynes and joined by Judge Ho, soundly rejected removal based on fraudulent misjoinder, emphasizing the doctrine’s practical consequences: “Adopting the fraudulent misjoinder doctrine will dramatically expand federal jurisdiction, putting the federal district courts in this circuit in the position of resolving procedural matters that are more appropriately resolved in state court—all without a clear statutory hook.” No. 20-30196 (Nov. 30, 2021).

A concurrence by Judge Ho emphasized the importance of the statutory text in rejecting the doctrine; a dissent by Judge Jones focused on “the unusual circumstances here, which bespeak obvious joinder machinations undertaken to avoid federal court.” (both opinions are in the above link). The trio of opinions suggests that this case may receive serious consideration for en banc review.

CAFA creates an exception to federal class-action jurisdiction if, among other requirements, “the primary defendants[] are citizens of the State in which the action was originally filed.” Recognizing a lack of clear authority about the meaning of “primary defendant,” the Fifth Circuit reasoned that “there is much to commend the [Third Circuit’s] emphasis on the ‘real target’ of the litigation and [this Court’s] description of the controversy’s ‘primary thrust.'” Madison v. ADT, LLC, No. 21-90028 (Aug. 24, 2021).

Plaintiffs, represented by the same counsel, sought to consolidate two actions in state court; the defendant removed under CAFA’s “mass action” provision. A Fifth Circuit panel majority affirmed the denial of Plaintiff’s motion to remand, rejecting arguments about timeliness, retroactivity, and CAFA’s text. The majority reasoned that “it is the mass action, not claims against particular defendants, that is removable,” and that the plaintiff’s motion satisfied the CAFA requirement of “100 or more persons . . . proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact.” A dissent would remand based on CAFA’s “not-retroactivity” language, as one of the state cases was filed before CAFA took effect. Lester v. Exxon Mobil Corp., No. 14-31383 (Jan. 9, 2018).

Johnson v. Real Estate Mortgage Network, Inc. reminds of a technical but important point about the review of remand orders under CAFA in the Fifth Circuit: “Facing our CAFA deadline, we continue to apply [prior preceden’s] suggestion that our jurisdiction to review a CAFA remand order stops at the edge of the CAFA portion of the order,” and does not extend to “every issue decided in the remand order, including federal question jurisdiction.” No. 17-30768 (Nov. 30, 2017).

The plaintiff in Watson v. City of Allen sued, in Texas state court, several Texas cities about the operation of their “red light camera” programs.No. 15-10732 (May 5, 2016). The cities removed based on his RICO claim and CAFA. Plaintiff then dropped the RICO claim and sought remand based on CAFA’s “local controversy” and “home state” exceptions. The district court kept the case, finding it untimely as to CAFA, finding supplemental jurisdiction over the remaining state-law claims, and dismissing many claims for lack of standing. The Fifth Circuit reversed, concluding:

1. The 30-day deadline in 28 U.S.C. § 1447(c) does not apply to CAFA mandatory abstention provisions, since it “does not deprive federal courts of subject matter jurisdiction, but rather, acts as a limitation upon the exercise of jurisdiction granted by CAFA.”
2. The CAFA motion was filed within a reasonable time of removal, when “[a]ll indications are that [Plaintiff] acted diligently to gather evidence,” and because “fifty-two days is simply not a very long time.”
3. The “home state” exception applied because “[t]his suit’s primary thrust is an attempt to declare unconstitutional red light camera scheme,” meaning that the State of Texas and its municipalities were the “primary defendants,” and not the companies hired to carry out the program.
4. The district court should have declined to exercise supplemental jurisdiction, since “Texas courts have a strong interest” in the remaining issues and the plaintiff’s “motion to amend . . . to delete the federal claims is not a particularly egregious form of forum manipulation, if it is manipulation at all.”

A plaintiff class alleged that Chesapeake’s oil and gas production in the Fort Worth area trespassed on their property interests.  The defendants removed under CAFA, the district court remanded under that statute’s “local controversy exception,” and the Fifth Circuit reversed.  The key appellate issue was whether the plaintiff class was “narrow” — only current owners of mineral interests — or “broad” — current and former interests since a series of foreclosures began in 2004.  The plaintiffs could prove the requisite citizenship to establish the exception for the narrow class, but not the broad.  The panel majority found the plaintiffs’ pleading was ambiguous on this point, and based on that conclusion, remanded for a failure to prove that element of the exception.  A dissent took issue with the construction of the pleading and what it called “a new rule” of a “presumption in favor of federal jurisdiction.” Arbuckle Mountain Ranch of Texas v. Chesapeake Energy Corp., No. 15-10955 (Jan. 7, 2016).

In yet another opinion showing that the seemingly simple language of CAFA is anything but, in Robertson v. Exxon Mobil the Fifth Circuit reversed the remand of a mass action, concluding that the district court erred in finding that no plaintiff satisfied the $75,000 amount-in-controversy requirement.  No. 15-30920 (Dec. 31, 2015).  In a footnote, the Court declined to engage the broader issue of whether at least 100 plaintiffs had to satisfy that requirement, and the Court declined to rule on potentially applicable exceptions to jurisdiction (such as “local controversy”) until the district court addressed them on remand.  On the proof point, the Court noted: “(1) [Plaintiff] Eddie Ashley claims that she has suffered, among other harms, emphysema and the wrongful death of her husband from lung cancer; and (2) [Plaintiff] Tommie Jones avers that he developed prostate cancer and a host of other ailments. We hold that it is more likely than not that these plaintiffs seek to recover more than $75,000. Indeed, Plaintiffs’ counsel acknowledged at oral argument that for the plaintiffs who contracted cancer, he would be ‘asking [the] jury, come trial, for a whole lot more than $75,000.'”

Defendants sought to remove several cases under the “mass action” provisions of CAFA, arguing: “the fact that plaintiffs’ counsel broke up their client base into multiple suits making identical allegations is not a tactic that prevents the assertion of jurisdiction under CAFA.”  The Fifth Circuit disagreed, declining to “pierce the pleadings across multiple state court actions,” noting that there had been no effort to consolidate the cases below, and observing: “Every other court of appeals confronted with this question has come to the same conclusion: that plaintiffs have the ability to avoid [CAFA ‘mass action’] jurisdiction by filing separate complaints naming less than 100 plaintiffs by not moving for or otherwise proposing joint trial in the state court.”  Eagle US 2, LLC v. Abraham et al. (Dec. 11, 2015, unpublished) (on petition for rehearing en banc of denial of petition for review).

In declining to hear Crutchfield v. Sewerage & Water Board, the Fifth Circuit offered some rare guidance about what guides its discretion in accepting a petition to appeal under CAFA: “[N]o CAFA-related issues are raised in the petition for permission to appeal. See Alvarez v. [Midland Credit], 585 F.3d [890,] 894 [5th Cir. 2009] (vacating initial grant of permission to appeal under Section 1453(c), as the appeal no longer involved “unique issues under CAFA”); id. (“[Section 1453(c)] was intended to facilitate the development of a body of appellate law interpreting [CAFA] without unduly delaying the litigation of class actions.” (internal quotation marks omitted)); see also Perritt v. Westlake Vinyls Co., L.P.., 562 F. App’x 228, 230 (5th Cir.2014) (unpublished) (per curiam) (““[Section] 1453(c) tethers our discretionary review to CAFA determinations.”).”  No. 15-90014 (May 19, 2015, unpublished).

Plaintiff brought a class action in Louisiana state court on behalf of apartment owners and managers.  Defendant removed under CAFA.  Plaintiff then sought to add a local defendant and invoke the “local controversy” exception to CAFA jurisdiction. Cedar Lodge Plantation, LLC v. CSHV Fairway View I, LLC, No. 14-30735 (Sept. 29, 2014). Citing State of Louisiana v. American National Property & Casualty Co., 746 F.3d 633 (5th Cir. 2014), the Fifth Circuit rejected this argument, noting that CAFA defines a class action as the “civil action filed”   28 U.S.C. § 1332(d)(1)(B) (emphasis added).

The defendants in Rainbow Gun Club, Inc. v. Denbury Onshore, LLC removed to federal court under CAFA, arguing that the 167 plaintiffs’ claims based on mineral leases were a “mass action.”   No. 14-30514 (July 23, 2014).  The dispute centered on whether those claims, which alleged negligent operation of the relevant well, arose from “an event or occurrence in the State” within the meaning of that statute.  The Fifth Circuit concluded that the ordinary meaning of those terms, CAFA’s legislative history, and case law from other circuits supported the plaintiffs’ position that “the exclusion applies to a single event or occurrence, but the event or occurrence need not be constrained to a discrete moment in time.”  Drawing an analogy to the Deepwater Horizon accident, the Court also rejected an argument based on allegations of multiple acts of negligence, as such an incident “was the event that resulted from a number of individual negligent acts related to each other . . . .”  Accordingly, the Court affirmed the remand of the case to Louisiana state court.

Class actions were filed about the effects of an explosion at a chemical plant.  The Fifth Circuit agreed that CAFA jurisdiction had not been established.  Citing Berniard v. Dow Chem. Co., 481 F. App’x 859 (5th Cir. 2010), the Court held: “[D]efendants ‘overstate the reach of the plaintiffs’ petitions by improperly equating the geographic areas in which potential plaintiffs might reside with the population of the plaintiff class itself.  Further, the comparisons that the Defendants-Appellants make to damage recovery in similar cases is too attenuated to satisfy their burden.'”  Perritt v. Westlake Vinyls Company, L.P., No. 14-30145 (April 14, 2014, unpublished).  The Court also noted: “Bald exposure extrapolations are insufficient to establish the likely number of persons affected by the release or, for those affected, the severity of their harm.”

The State of Louisiana sued several insurers, alleging it was the beneficiary of assignments made by the insured in return for help rebuilding after Hurricane Katrina.  The insurers removed to federal court under CAFA.  After extensive proceedings, the district courts ultimately severed the actions by individual policy and ordered remand to state court.  State of Louisiana v. American National Property & Casualty Co., No. 14-30071 (March 26, 2014).  The Fifth Circuit reversed because “at the time of removal, these claims clearly possessed original federal jurisdiction as an integrated part of the CAFA class action.”  Noting language in Honeywell International v. Phillips Petroleum that “a severed action must have an independent jurisdictional basis,” 415 F.3d 429, 431 (5th Cir. 2005), the Court limited that language as “appl[ying] only to severed claims that are based on supplemental jurisdiction.”

9-0, the Supreme Court reversed the Fifth Circuit’s panel opinion in Mississipi ex rel. Hood v. AU Optronics Corp., 571 U.S. ___ (Jan. 14, 2014).  After review of CAFA’s language and structure, that Court concluded that an action brought on behalf of consumers by a state was not a “mass action” that could allow removal, since it has only one plaintiff, and the claims of the relevant consumers cannot be counted without “unwieldy inquiries.”  The Supreme Court characterized the “mass action” provision of CAFA as a “backstop” to prevent the repackaging of a class action.

Mississippi brought six parens patriae actions alleging inappropriate charges for credit card “ancillary services” in violation of state law.  Defendants removed under CAFA and on the ground of complete preemption, and the district court denied remand. Hood v. JP Morgan Chase & Co. (Dec. 2, 2013).  The Fifth Circuit reversed.  As to CAFA, it found that defendants (who have the burden) did not establish that any plaintiff had a claim of $75,000 – especially when Mississippi offered evidence that the average yearly charge at issue was around $100.  The Court also observed that the defendants likely had similar information in their records.  The Court acknowledged that federal usury laws have the effect of complete preemption, but found that the charges at issue in these cases could not be characterized as “interest” within the meaning of those laws.

The Fifth Circuit took the atypical step of writing a short opinion about why it granted a petition for review of a remand order under CAFA in Opelousas General Trust Authority v. Multiplan, Inc., No. 13-90027 (June 28, 2013).  CAFA jurisdiction has a “local controversy” exception, an element of which is that the putative class seeks “significant relief” from an in-state defendant.  In that context, the Court said: “We have yet to fully explore the meaning of ‘significant relief” in this context. Defendants argue that we should grant them leave to appeal so that we may determine ‘whether a defendant which is not a going concern and which will not satisfy any judgment against it can be a defendant from whom “significant relief is sought” . . . .’ We GRANT their petition so that we may consider the question.”

In State of Mississippi v. AU Optronics Corp., the Fifth Circuit reversed a remand order, finding that a suit brought to protect consumers by the Mississippi Attorney General was a “mass action” under CAFA. 701 F.3d 696 (2012).  Based on the analytical framework of Louisiana ex rel Caldwell v. Allstate Insurance, 536 F.3d 418 (5th Cir. 2008), the Court concluded that the numerical requirements of CAFA for a mass action were satisfied, and the “general public policy” exception in the statute was not.  A concurrence endorsed the outcome but suggested that the “claim-by-claim” framework of Caldwell effectively mooted the public policy exception.  The Supreme Court has now granted certiorari in this case to resolve a circuit split about how CAFA should treat “parens patriae” actions.

The parties’ agreement said: “State Farm agrees not to remove any Hurricane Ike cases filed by your firm to Federal Court.”  Horn v. State Farm Lloyds, No. 12-40410 (Dec. 21, 2012).  Roughly a year later, the firm filed a 100,000-member class action against State Farm, who removed the case.  State Farm argued that the agreement was intended to resolve large numbers of individual claims and extending it to a class action was not consistent with the specific consideration given.  The Fifth Circuit affirmed the remand order, finding that the terms “any” and “cases” were not ambiguous.  The Court’s emphasis on contract wording, especially in the insurance context, is consistent with other recent cases, see, e.g., Ballard v. Devon Energy, 678 F.3d 360 (5th Cir. 2012).

In State of Mississippi v. AU Optronics Corp., the Fifth Circuit reversed a remand order, finding that a suit brought to protect consumers by the Mississippi Attorney General was a “mass action” under CAFA. 701 F.3d 796 (2012).  The Court reviewed the pleading, the relevant Mississippi statutes, the general contours of parens patriae law, and its prior case of Louisiana ex rel Caldwell v. Allstate Insurance, 536 F.3d 418 (5th Cir. 2008), which found that policyholders rather than the Louisiana AG were the real parties in interest in an analogous suit.  Based on this analysis, the Court concluded that the numerical requirements of CAFA for a mass action were satisfied, and the “general public policy” exception in the statute was not.  A concurrence endorsed the outcome but questioned the framework used to analyze the statutory exception.

In Williams v. Homeland Insurance, a discretionary appeal accepted under the Class Action Fairness Act, the Court affirmed the denial of a motion to remand, concluding that the “local controversy” exception to CAFA jurisdiction had been satisfied.  The opinion reminds that “[t]he parties moving for remand bear the burden of proof that they fall within an exception to CAFA jurisdiction.”  Op. at 3.  In this challenge to discounts made by a PPO program, the Court concluded that adding a claims administrator as a new party did not change the fact that “significant relief” was still sought from the in-state entity that operated the PPO network, thus satisfying that element of the local controversy exception.  Op. at 6.   The Court went on to state that “a class arbitration is not a class action,” and that as a result, a prior arbitration did not implicate the requirement of the exception that no other class action have been filed against a defendant in the previous three years.  Op. at 7.