U.S. Fifth Circuit Denies Remand under Local Controversy Exception where Class Definition Does Not Clearly Limit Membership

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Plaintiff Arbuckle Mountain Ranch sued for a putative class of post-foreclosure owners of disputed oil and gas interests. The putative class allegedly includes “between three thousand and five thousand” members “spread out across the United States.” Arbuckle claims the defendants’ oil and gas leases automatically terminated upon foreclosure, and the defendants’ continued operation of these wellheads therefore constitutes trespass and conversion. The suit was originally filed in Texas State Court, but removed under the Class Action Fairness Act (CAFA). Arbuckle sought remand under the Act’s local controversy exception, which was granted by the District Court. But the U.S. Fifth Circuit reversed:

“The class definition issue is critical to determine whether the local controversy exception applies. Arbuckle has presented sufficient evidence to show that, under the narrow definition, the proposed class consists of over two-thirds Texas citizens. Arbuckle has failed, though, to present any evidence about those owners who purchased mineral interests post-foreclosure but have since sold or otherwise relinquished their interests.

“Paragraph 14 [of the Complaint] states ‘all class members are currently mineral interest owners.’ In conflict with that, paragraph 23 sets out that the Class and Class Members include ‘[a]ll non-excluded persons or entities … who are, or were, since 2004, purchasers of property … or owners who took title by, through or under such a purchaser.’ Paragraph 23, reasonably read, includes all non-excluded purchasers since 2004: the initial purchasers at foreclosure who no longer are owners; purchasers from the original or later purchasers who no longer are owners; and the current owners no matter when they acquired their interests on tracts that passed through foreclosures….”

The party seeking removal must establish federal jurisdiction. However: “When CAFA’s basic requirements are satisfied, as they are in this case, and where a party seeks remand under an exception to federal jurisdiction, that party ‘must prove that the CAFA exceptions to federal jurisdiction divest the district court of subject matter jurisdiction.’ Underlying our analysis is our need to resolve lingering doubts in favor of exercising federal jurisdiction when an exception to jurisdiction is asserted.”

Arbuckle Mountain Ranch of Texas, Inc. v. Chesapeake Energy Corp., No. 15-10955, 2016 WL 98128 (5th Cir. Jan. 7, 2016).

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