Jeffry Vodenichar v. Halcon Energy Properties Inc , 733 F.3d 497 ( 2013 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
No. 13-2812
______________
JEFFRY S. VODENICHAR; DAVID M. KING, JR. and
LEIGH V. KING, husband and wife; JOSEPH B. DAVIS and
LAUREN E. DAVIS, husband and wife; GROVE CITY
COUNTRY CLUB; and RICHARD BROADHEAD,
individually and on behalf of those similarly situated,
v.
HALCÓN ENERGY PROPERTIES, INC.; MORASCYZK &
POLOCHAK; and CO-EXPRISE, DBA CX-ENERGY
Halcόn Energy Properties, Inc.,
Appellant
______________
On Appeal from the United State District Court
for the Western District of Pennsylvania
(D.C. Civ. Action No. 2-13-CV-00360)
District Judge: Honorable Arthur J. Schwab
______________
Submitted Under Third Circuit L.A.R. 34.1(a)
July 16, 2013
______________
Before: RENDELL, SMITH, and SHWARTZ, Circuit
Judges.
(Filed: August 16, 2013)
Kevin L. Colosimo, Esq.
Burleson LLP
501 Corporate Drive, Suite 105
1
Canonsburg, PA 15317
Counsel for Appellant
David A. Borkovic, Esq.
Jones, Gregg, Creehan & Gerace, LLP
411 Seventh Avenue, Suite 1200
Pittsburgh, PA 15219
Counsel for Appellees
Richard A. Finberg, Esq.
300 Mt. Lebanon Boulevard, Suite 206-B
Pittsburgh, PA 15234
Counsel for Appellees
______________
OPINION OF THE COURT
______________
SHWARTZ, Circuit Judge.
Defendant Halcόn Energy Properties, Inc. (“Halcόn”)
appeals the District Court’s Order remanding this case to state
court based on the “home state” exception to subject matter
jurisdiction under the Class Action Fairness Act (“CAFA”).
For the reasons stated below, we will affirm the District
Court’s remand order, but do so instead based on CAFA’s
“local controversy” exception.
I. FACTS & PROCEDURAL HISTORY
Plaintiffs Jeffry S. Vodenichar, David M. King, Jr.,
Leigh V. King, Joseph B. Davis, Lauren E. Davis, Grove City
Country Club, and Richard Broadhead filed suit on behalf of
themselves and other similarly situated landowners who
sought to lease the oil and gas rights in their land in Mercer
County, Pennsylvania. Defendants Morascyzk & Polochak
(“M&P”) and Co-eXprise, d/b/a “CX-Energy,” (“CX-
Energy”) agreed to act as Plaintiffs’ agents to negotiate leases
of their oil and gas interests to energy companies under the
terms of Landowner MarketPlace Agreements (“LMAs”). In
exchange for their successful marketing efforts, M&P and
CX-Energy were to be paid a “transaction fee.”
2
M&P and CX-Energy entered into a Letter of Intent
with Halcόn (“Halcόn Agreement”), an oil and gas company,
pursuant to which Halcόn would lease up to 60,000 acres of
oil and gas rights from landowners who entered into LMAs
and who had submitted lease documents to Halcόn. Under
the Halcόn Agreement, each landowner who executed an
LMA was guaranteed a $3,850 per acre payment plus an
18.5% royalty on the net amount Halcόn realized from the oil
and gas recovered from the property.
According to Plaintiffs, Halcόn agreed to accept the
leases absent a title defect, an adverse environmental claim,
or restrictions on the ability to explore, drill for, or produce
oil, gas, or hydrocarbons. Plaintiffs assert that Halcόn
rejected many of the leases for reasons other than those
permitted under the Halcόn Agreement. Halcόn counters that
the word “geology” was fraudulently omitted from the list of
grounds upon which it could decline to lease the property, and
that Halcόn was within its bargained-for rights to reject the
leases. Plaintiffs claim that this explanation was pretextual,
as Halcόn sought to extricate itself from the lease
arrangement because it lost a bid to secure oil and gas rights
in other nearby properties, which made the leases of
Plaintiffs’ land less attractive. Plaintiffs further claim that
they did not know that any words were omitted from the
agreements and if a change had been made, it was the fault of
M&P and CX-Energy.
As a result of these events, Plaintiffs filed a putative
class action against Halcόn based upon diversity jurisdiction,
28 U.S.C. § 1332(a), in the United States District Court for
the Western District of Pennsylvania (“first filed action”). In
their complaint, Plaintiffs alleged that Halcόn breached their
agreement and the duty of fair dealing. Halcόn filed an
answer and the District Court convened a case management
conference. During the conference, Halcόn informed the
District Court that it anticipated joining M&P and CX-
Energy, claiming that they were “necessary parties.” Case
Mgmt. Conf. Tr. 13-14, No. 12-1624 (W.D. Pa. Jan. 16,
2013), ECF No. 31.
Plaintiffs decided to file direct claims against M&P
and CX-Energy. Knowing that adding these parties to the
3
complaint would destroy diversity jurisdiction, Plaintiffs filed
a motion to dismiss the first filed action without prejudice and
with the intent of pursuing their claims against all defendants
in state court. In response to the motion, Halcόn stated that it
did not oppose joining M&P and CX-Energy, agreed that the
claims against all three defendants would benefit from being
heard in a single proceeding, but asserted that the case should
proceed in the District Court under CAFA, particularly given
the discovery already produced and the ongoing alternative
dispute resolution (“ADR”) activities.
The District Court granted the motion to voluntarily
dismiss the first filed action without prejudice, reasoning that
the parties agreed that the claims should proceed in one
forum, federal diversity would be destroyed by the addition of
M&P and CX-Energy, and CAFA had not been pled as a
basis for jurisdiction. The District Court also ordered the
parties to complete the ADR process and directed the parties
to retain the discovery produced to both facilitate the ADR
process and assist in the state court case.
On the day Plaintiffs filed their motion to dismiss the
first filed action, they, through their same counsel, filed a
state court class action complaint in the Court of Common
Pleas of Mercer County, Pennsylvania, alleging that Halcόn,
M&P, and CX-Energy breached their agreements with, and
duties to, the putative class (“second filed action”). The
second filed complaint is identical to the first filed complaint,
except with respect to the addition of two named plaintiffs,
two defendants, the causes of action against the additional
defendants, seven paragraphs setting forth the facts
supporting those additional claims, and several exhibits
relating thereto.
Halcόn then removed the second filed action to the
District Court, which was assigned to the same District Judge
as the first filed action. On the cover sheet that accompanied
the removal petition, Halcόn indicated that the second filed
action was related to the first filed action. In a text-entry
order filed in the second filed action shortly after removal, the
District Court made specific reference to the first filed action,
including a directive that the parties inform the District Court
4
of the status of the ADR process that the Court had ordered in
the first filed action.
Plaintiffs filed a motion to remand the second filed
action based upon CAFA’s local controversy exception to
federal subject matter jurisdiction. The District Court found
that the local controversy exception did not apply, but held
that CAFA’s home state exception required remanding the
case to the Court of Common Pleas. Halcόn petitioned for
review of the remand order pursuant to 28 U.S.C. §
1453(c)(1), which we granted.
II. JURISDICTION & STANDARD OF REVIEW
We have jurisdiction over this appeal pursuant to 28
U.S.C. § 1453(c) and review issues of subject matter
jurisdiction and statutory interpretation de novo. Kaufman v.
Allstate New Jersey Insurance Co., 561 F.3d 144, 151 (3d
Cir. 2009).
III. DISCUSSION
CAFA provides federal courts with jurisdiction over
civil class actions if the “matter in controversy exceeds the
sum or value of $5,000,000,” the aggregate number of
proposed class members is 100 or more, and any class
member is a citizen of a state different from any defendant.
28 U.S.C. § 1332(d)(2), (d)(2)(A), (d)(5)(B). Thus, the
statute authorizes federal jurisdiction over class actions even
in the absence of complete diversity between the parties,
except where the “controversy is uniquely” connected to the
state in which the action was originally filed. Kaufman, 561
F.3d at 149 & n.4. To this end, the statute includes two
mandatory exceptions to federal subject matter jurisdiction,
known as the “local controversy” and “home state”
exceptions. 28 U.S.C. § 1332(d)(4)(A)-(B). The party
seeking to invoke an exception bears the burden of proving
by a preponderance of the evidence that the exception
applies.1 Kaufman, 561 F.3d at 153-54.
1
Because these exceptions are examined to determine
whether a federal court has subject matter jurisdiction, “our
inquiry is limited to examining the case ‘as of the time it was
5
Upon determining that the local controversy exception
was inapplicable, the District Court concluded that the home
state exception applied to this case. For the reasons explained
herein, we part company with the District Court and conclude
that CAFA’s home state exception is inapplicable to this case,
but that remand is warranted under the local controversy
exception.
A. Home State Exception
The home state exception requires a federal court to
decline to exercise subject matter jurisdiction in CAFA class
actions where “two-thirds or more of the members of all
filed in state court[.]’” Std. Fire Ins. Co. v. Knowles, 133 S.
Ct. 1345, 1349 (2013) (quoting Wisc. Dep’t of Corrs. v.
Schacht, 524 U.S. 381, 390 (1998)) (concluding that,
although District Court appropriately considered stipulation
in the complaint by the class action plaintiff to an amount in
controversy below CAFA’s jurisdictional threshold, the
District Court wrongly concluded that the precertification
stipulation was binding on the absent class members). As we
noted in Erie Ins. Exch. v. Erie Indem. Co., No. 13-1415, __
F.3d __, 2013 WL 3481493, at *3 (3d Cir. June 28, 2013), in
evaluating whether removal was proper, “we generally focus
on the allegations in the Complaint and the notice of
removal.” Id. (emphasis added). Courts may consider
pleadings as well as evidence that the parties submit to
determine whether subject matter jurisdiction exists or an
exception thereto applies. See Coleman v. Estes Express
Lines, Inc., 631 F.3d 1010, 1015-17 (9th Cir. 2011) (relying
solely on the pleadings to evaluate the “significant relief” and
“significant basis of the claims” factors under the local
controversy exception, but considering external evidence to
determine the “citizenship” factor); Coffey v. Freeport
McMoran Copper & Gold, 581 F.3d 1240, 1246 (10th Cir.
2009) (looking to the total activity of a company to determine
the “citizenship” factor ); Moua v. Jani-King of Minn., Inc.,
613 F. Supp. 2d 1103, 1108-09 (D. Minn. 2009) (considering
the allegations and plaintiff’s arguments in other
submissions); Anthony v. Small Tube Mfg. Corp., 535 F.
Supp. 2d 506, 517 (E.D. Pa. 2007) (considering defendant’s
answer and averments).
6
proposed plaintiff classes in the aggregate, and the primary
defendants, are citizens of the State in which the action was
originally filed.” 28 U.S.C. § 1332(d)(4)(B). A party seeking
to invoke this exception must therefore: (1) establish that the
citizenship of the members of two-thirds or more of the
putative class is the state in which the action was originally
filed; (2) establish the citizenship of the defendants; (3)
identify the primary defendants; and (4) demonstrate that
two-thirds or more of the members of the putative class are
citizens of the same state as the primary defendants. See
Anthony, 535 F. Supp. 2d at 514-15.
There is no dispute that the named plaintiffs, more
than two-thirds of the class members,2 CX-Energy, and M&P
are all citizens of Pennsylvania, the state where the action was
originally filed.3 Halcόn is a Delaware Corporation with its
principal place of business and headquarters in Texas, and
thus it is not a citizen of Pennsylvania.
Having established the citizenships of the parties and
two-thirds or more of the putative class, the Court must next
identify the “primary defendants” under Section
2
Members of the putative class who are natural
persons are deemed citizens of the state in which they are
domiciled, which is typically the state where the person lives.
See Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826,
828 (1989); District of Columbia v. Murphy, 314 U.S. 441,
455 (1941). Under CAFA, suits brought “by unincorporated
associations [are] treated like suits by corporations in that the
citizenship of the association for diversity purposes is
determined by the entities’ principal place of business and not
by the citizenship of its members.” Erie Ins., 2013 WL
3481493, at *6 n.7; 28 U.S.C. § 1332(d)(10).
3
CX-Energy is deemed a citizen of Pennsylvania,
which is both its state of incorporation, 28 U.S.C. §
1332(c)(1), and the place “where the corporation’s high level
officers direct, control, and coordinate the corporation’s
activities.” Hertz Corp. v. Friend, 559 U.S. 77, 80 (2010).
As an unincorporated association, CAFA deems M&P “to be
a citizen of the State where it has its principal place of
business and the State under whose laws it is organized,” 28
U.S.C. § 1332(d)(10), which in this case is Pennsylvania.
7
1332(d)(4)(B). Here, the District Court concluded that the
home state exception applied based upon its determination
that M&P and CX-Energy were the only primary defendants
and both were citizens of Pennsylvania, where the second
filed action was originally filed. Because Halcόn had denied
liability in its answer, the District Court reasoned that Halcόn
was not a primary defendant. We conclude, however, that
Halcόn—which is not a citizen of Pennsylvania—is a primary
defendant, thereby rendering CAFA’s home state exception
inapplicable to this case.
CAFA itself does not define the phrase “primary
defendants.” The word “primary” has several meanings,
including: “first in order of time or development,”
“primitive,” “of first rank, importance, or value,” “principal,”
“basic,” “fundamental,” “direct,” “firsthand,” and “belonging
to the first group or order in successive divisions,
combinations or ramifications.” Merriam-Webster’s
Collegiate Dictionary 923 (10th ed. 2002). Looking at the
surrounding statutory language, we can rule out certain of
these definitions (such as those that focus on sequence), and
construe the word primary to mean “principal,”
“fundamental,” or “direct.”
Some courts have embraced the definition of primary
to mean direct and construed the words “primary defendants”
to capture those defendants who are directly liable to the
proposed class, as opposed to being vicariously or secondarily
liable based upon theories of contribution or indemnification.
See, e.g., Copper Sands Homeowners Ass’n, Inc. v. Copper
Sands Realty, LLC, No. 2:10-cv-00510, 2011 WL 941079, at
*6 (D. Nev. Mar. 16, 2011); Anthony, 535 F. Supp. 2d at 517;
Kitson v. Bank of Edwardsville, No. 06-528, 2006 WL
3392752, at *13-17 (S.D. Ill. Nov. 22, 2006). This
construction finds support in the statements of CAFA’s
Sponsors, which describe the primary defendants as those
who are the “real targets” of the lawsuit. 151 Cong. Rec.
H723-01, 2005 WL 387992 (daily ed. Feb. 17, 2005)
(statement of Rep. Goodlatte); see also H.R. Rep. No. 108-
144, 2003 WL 21321526, at 38 (2003) (stating that “[t]he
sponsors intend that primary defendants be intended to reach
those defendants who are the real targets of the lawsuit, i.e.,
the defendants who would be expected to incur most of the
8
loss if liability is found.”) This language shows that the
Sponsors were focused on the defendants who plaintiffs
alleged are the real wrongdoers as opposed to those
defendants who may have to pay because of the actions of
others.4 Therefore, the direct versus secondary liability
distinction some courts use is consistent with the legislative
intent.
Courts also look at the allegations to identify the
defendants expected to sustain the greatest loss if liability
were found, Bennett v. Bd. of Comm’rs for East Jefferson
Levee Dist., Nos. 07-3130, 07-3131, 2007 WL 2571942, at *6
(E.D. La. Aug. 31, 2007) (comparing the maximum exposure
of liability for each defendant to determine primacy), and
whether such defendants have “substantial exposure to
significant portions of the proposed class.”5 Robinson v.
Cheetah Transp., No. 06-0005, 2006 WL 468820, at *2 n.7
(W.D. La. Nov. 14, 2006).6 These considerations, therefore,
4
For this reason, courts examining whether a
defendant is a “primary defendant” should not consider
whether the defendant may be able to recover from others or
whether it is able to satisfy the judgment.
5
This is also consistent with the legislative history.
The Sponsors explicitly stated that “[t]he term “primary
defendant” should include any person who has substantial
exposure to significant portions of the proposed class in the
action, particularly any defendant that is allegedly liable to
the vast majority of the members of the proposed classes, as
opposed to simply a few individual class members.” 151
Cong. Rec. H723-01, 2005 WL 387992 (daily ed. Feb. 17,
2005) (statement of Rep. Goodlatte); see also H.R. Rep. No.
108-144, 2003 WL 21321526, at 38 (2003). Thus, the
Sponsors intended the identity of the “primary defendants” to
be determined based upon the allegations concerning the
defendants expected to be liable to the greatest number of
class members and to suffer the greatest loss if liability is
found.
6
See also Hollinger v. Home State Mut. Ins. Co., 654
F.3d 564, 572 (5th Cir. 2011) (finding that defendants were
primary defendants after considering the fact that all punitive
class members had claims against them and that they had
issued the insurance policies at the center of the dispute).
9
focus on the number of class members purportedly impacted
by the defendant’s alleged actions and the amount the
defendant may lose if found liable. To determine the number
of class members to whom a defendant may be liable and to
identify the defendants who would sustain the greatest loss if
found liable, courts must assume liability will be established.7
As a result, courts should not consider whether a defendant
has denied liability, and the District Court’s reliance on
Halcόn’s denial of liability was misplaced.
In short, courts tasked with determining whether a
defendant is a “primary defendant” under CAFA should
assume liability will be found and determine whether the
defendant is the “real target” of the plaintiffs’ accusations. In
doing so, they should also determine if the plaintiffs seek to
hold the defendant responsible for its own actions, as opposed
to seeking to have it pay for the actions of others. Also,
courts should ask whether, given the claims asserted against
the defendant, it has potential exposure to a significant
portion of the class and would sustain a substantial loss as
compared to other defendants if found liable.
Applying these principles, we conclude that Plaintiffs
allege that each defendant is directly liable, appear to
apportion liability equally among the defendants, and seek
similar relief from all defendants. While more claims are
asserted against M&P and CX-Energy than against Halcόn,
the claims against Halcόn are as, if not more, significant in
that Plaintiffs allege Halcόn breached its lease agreement
with more than 1,000 landowners and owes damages
exceeding $50,000 to each class member. Thus, Halcόn is a
“primary defendant.”
Finally, by using the word “the” before the words
“primary defendants” rather than the word “a,” the statute
requires remand under the home state exception only if all
primary defendants are citizens of Pennsylvania. Anthony,
535 F. Supp. 2d at 515. Because Halcόn is a primary
defendant and is not from the same state as the Pennsylvania
7
This is in keeping with the contingent nature of the
Sponsors’ language (i.e., “if liability is found”). H.R. Rep.
No. 108-144, 2003 WL 21321526, at 38 (2003).
10
class members, remand based upon this exception is not
warranted.
For these reasons, we conclude that the home state
exception does not apply and remand should not have been
ordered on this basis.
B. Local Controversy Exception
Finding the District Court’s rationale for remand
lacking, we turn to the other exception to CAFA’s subject
matter jurisdiction: the local controversy exception. The
District Court ruled that the local controversy exception did
not apply to this case because another class action had been
filed arising from the same facts and asserting similar claims.
For the reasons set forth herein, we conclude that “no other
class action” had been filed as contemplated under CAFA,
and therefore remand of this case pursuant to the local
controversy exception is appropriate.
Under the local controversy exception:
A district court shall decline to exercise
jurisdiction under paragraph (2)—
(A)(i) over a class action in which—
(I) greater than two-thirds of the members of
all proposed plaintiff classes in the
aggregate are citizens of the State in which
the action was originally filed;
(II) at least 1 defendant is a defendant—
(aa) from whom significant relief is
sought by members of the plaintiff class;
(bb) whose alleged conduct forms a
significant basis for the claims asserted
by the proposed plaintiff class; and
(cc) who is a citizen of the State in which
the action was originally filed; and
11
(III) 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; and
(ii) 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[.]
28 U.S.C. § 1332(d)(4)(A). A party seeking to invoke this
exception must therefore show that: (1) greater than two-
thirds of the putative class are citizens of the state in which
the action was originally filed; (2) at least one defendant is a
citizen of the state in which the action was originally filed
(the “local defendant”); (3) the local defendant’s conduct
forms a significant basis for the claims asserted; (4) plaintiffs
are seeking significant relief from the local defendant; (5) the
principal injuries occurred in the state in which the action was
originally filed; and (6) no other class action asserting the
same or similar allegations against any of the defendants had
been filed in the preceding three years. These elements
ensure that the exception is invoked when the class is
primarily local, the lawsuit is against “at least one real in-state
defendant whose alleged conduct is central to the class claims
and from whom the class seeks significant relief,” the injuries
the defendant allegedly caused occurred within the forum,
and no other similar class actions have been filed against any
of the defendants. 151 Cong. Rec. S999-02, 2005 WL
283380 (daily ed. Feb. 7, 2005) (statement of Sen. Specter).
Each element of the local controversy exception is met
and remand pursuant to this exception is warranted.
First, as stated previously, there is no dispute that more
than two-thirds of the class members are citizens of
Pennsylvania.
Second, there is no dispute that at least one defendant
named in the case is local—that is, from the state in which the
case was originally filed. As discussed above, both M&P and
CX-Energy are citizens of Pennsylvania, the state in which
12
the case was originally filed, and hence are local defendants
under CAFA.
Third, each local defendant’s “alleged conduct forms a
significant basis for the claims asserted by the proposed
plaintiff class.” 28 U.S.C. § 1332(d)(4)(A)(i)(II)(bb).8 As
agents for the putative class members, the local defendants
entered an agreement with Halcόn pursuant to which Halcόn
would lease up to 60,000 acres of Plaintiffs’ oil and gas
rights. Plaintiffs allege that the local defendants breached
their contractual and fiduciary obligations to the class by
failing to ensure that the lease agreements conformed to
Halcόn’s requirements and made negligent misrepresentations
to the class concerning the basis upon which Halcόn could
refuse to enter the leases.9 Put differently, Plaintiffs
essentially assert that M&P and CX-Energy made
misrepresentations to induce them to relinquish their oil and
gas rights and caused Halcόn to decline to enter the lease
agreement by changing the terms of the agreement and that
these actions damaged Plaintiffs. Because Plaintiffs’ claims
are based upon Halcόn’s rejection of the leases and because
Halcόn allegedly rejected the leases based on language that
the local defendants purportedly omitted, the local
defendants’ conduct forms a “significant basis” of Plaintiffs’
claims.
Fourth, Plaintiffs are seeking “significant relief” from
both local defendants. Plaintiffs seek from the local
defendants damages totaling more than $50,000 for each of
8
This factor does not require that each class member
assert a claim against that local defendant nor must the local
defendant’s alleged conduct form the basis of every claim
asserted. Kaufman, 561 F.3d at 155. The focus is on the
conduct in which the local defendant allegedly engaged and
the alleged number of people impacted by it.
9
Halcόn’s cross-claim also alleges that the local
defendants agreed to include language in certain lease
documents that did not appear in the documents that plaintiffs
signed. Halcόn claims that the local defendants made
statements concerning the basis upon which Halcόn could
reject the lease, which Halcόn alleges contradicts the written
agreement.
13
the 1,362 class members and a declaration that the local
defendants were not entitled to receive fees from Plaintiffs for
the lease transactions. While monetary and declaratory relief
is also sought from Halcόn, this does not change the fact that
significant relief is being sought from the local defendants.
Fifth, there is no dispute that the “principal injuries”
resulting from the alleged conduct or related conduct of each
defendant were “incurred in the state in which the case was
originally filed.” 28 U.S.C. § 1332(d)(4)(A)(i)(III).10 Here,
most class members who sought to lease their oil and gas
rights allegedly reside in, and all of the land is located in,
Mercer County, Pennsylvania. Thus, Pennsylvania citizens
own the land that is at the heart of this dispute, and they were
allegedly financially injured by the defendants’ alleged
breach of the agreements to lease the oil and gas rights to
their Pennsylvania property.
Finally, contrary to the District Court, we determine
that no other class action, as contemplated by CAFA,
asserting the same or similar allegations against any of the
defendants had been filed in the preceding three years. While
we recognize that Plaintiffs filed two separate putative class
action complaints against Halcόn, the act of filing a
subsequent complaint does not necessarily mean that the
earlier filed action bars invocation of the exception. Indeed,
close scrutiny of the two cases shows that the first filed action
does not constitute an “other class action” as contemplated by
CAFA.
CAFA does not define what constitutes an “other class
action” other than to limit it to filed cases asserting similar
factual allegations against a defendant. The goals of the
statute, however, provide guidance. In enacting CAFA,
Congress recognized the benefits of having one federal forum
10
This provision is written in the disjunctive and
hence, the provision is “satisfied either 1) when principal
injuries resulting from the alleged conduct of each defendant
were incurred in the state in which the action was originally
filed ‘or’ 2) when principal injuries resulting from any related
conduct of each defendant were incurred in the state.”
Kaufman, 561 F.3d at 158.
14
to adjudicate multiple cases filed in various courts against a
defendant. See Class Action Fairness Act of 2005, Pub. L.
No. 109-2, § 2(a)(1), 119 Stat. 4. To this end, the statute
seeks to control the impact of multiple class actions filed by
different members of the same class against a defendant by
providing a single forum to resolve similar claims. See S.
Rep. No. 109-14, at 4-5 (2005), reprinted in 2005
U.S.C.C.A.N. 3, 5-6; DeHart v. BP America, Inc., No. 09-
626, 2010 WL 231744, at *12 (W.D. La. Jan. 14, 2010).
Moreover, Congress sought to have all but truly local
controversies11 proceed in federal court and found that when a
“controversy results in the filing of multiple class actions, it is
a strong signal that those cases may not be of the variety that
[the local controversy] exception is intended to address.” S.
Rep. No. 109-14, at 40-41, 2005 U.S.C.C.A.N. at 39; see also
Class Action Fairness Act of 2005, Pub. L. No. 109-2, §
2(b)(2), 119 Stat. 4.
In short, Congress wanted to ensure that defendants
did not face copycat, or near copycat, suits in multiple forums
and hence excluded from the local controversy exception
cases where a defendant was named in multiple similar cases.
It follows that the “no other class action” factor must not be
read too narrowly. The “inquiry is whether similar factual
allegations have been made against the defendant in multiple
class actions”—and hence they are facing separate, distinct
lawsuits—without regard to the procedural posture of the
earlier filed cases or whether the putative classes in the cases
overlap, their claims arise from an identical event, or involve
the same causes of action or legal theories.12 S. Rep. No.
11
The local controversy exception seeks to “identify a
truly local controversy—a controversy that uniquely affects a
particular locality to the exclusion of all others” 151 Cong.
Rec. H723-01, 2005 WL 387992 (daily ed. Feb. 17, 2005)
(statement of Rep. Sensenbrenner), and “enables State courts
to adjudicate truly local disputes involving principal injuries
concentrated within the forum State.” 151 Cong. Rec. S999-
02, 2005 WL 283380 (daily ed. Feb. 7, 2005) (statement of
Sen. Specter).
12
Also, if two class actions arise out of the same facts,
but are factually and analytically different, such that the proof
necessary for one class to prevail differs from the proof
15
109-14, at 41, 2005 U.S.C.C.A.N. at 39; see also Giannini v.
Nw. Mut. Life Ins. Co., No. 12-77, 2012 WL 1535196, at *5
(N.D. Cal. Apr. 30, 2012); Rasberry, 609 F. Supp. 2d at 605.
The question here is whether the first and second filed
actions are the same case or if the first filed action is an
“other class action,” as contemplated under the local
controversy exception. The same representative plaintiffs
filed two complaints on behalf of an identically-defined
putative class arising from the same factual allegations.
While the first filed action was pending in federal court, the
parties proceeded with discovery and Halcόn disclosed its
intention to join the local defendants based on their role in the
transaction that gave rise to the dispute. Plaintiffs then
expressed a desire to add them as direct defendants. Instead
of amending the first filed complaint in a way that would
destroy complete diversity, Plaintiffs sought to voluntarily
dismiss the first filed action so that Plaintiffs and Halcόn
could assert claims against the local defendants in a single
forum in which subject matter jurisdiction undisputedly
existed. Apparently recognizing the possibility that, absent a
settlement, the dispute between the sides would continue, the
District Court granted the motion to dismiss the first filed
action without prejudice but ordered the parties to participate
in ADR and to retain the discovery that they had exchanged
for use in both the ADR and the case that joined the two local
defendants. Thus, the District Court’s actions showed that it
considered the second filed action a continuation of the first
filed action and took practical steps to ensure that the act of
filing the second complaint did not delay the parties’ ability
to proceed. Treating the second filed action in this way is
consistent with the goal of the local controversy exception of
ensuring that the defendants are not subject to similar claims
in different forums and allowing all claims against them to
proceed in a coordinated fashion.
Furthermore, this is not a copycat situation where the
defendants face similar class claims brought by different
another class would need to present, the first filed class action
would not constitute an “other” class action as defined in
CAFA. Rasberry v. Capitol Cnty. Mut. Fire Ins. Co., 609 F.
Supp. 2d 594, 605 (E.D. Tex. 2009).
16
named plaintiffs and different counsel in different forums.
Rather, the named Plaintiffs and their counsel brought class
claims in November 2012 and, based on Halcόn’s disclosure,
Plaintiffs decided to enlarge the case to add the two local
defendants together with claims unique to those parties that
arose from the same transactions. In practical terms,
Plaintiffs’ actions were no different from a situation where a
party amends a pleading to join parties to an existing case,
which is indeed what Halcόn itself stated it intended to do
during the original district court proceeding. Indeed, there is
nothing in the record that would suggest otherwise.
In short, Halcόn is defending the same case that it had
been defending since November 2012 with the exception of
the addition of the other parties Halcόn intended to join. The
first filed action therefore is not an “other class action” as
contemplated under CAFA, but rather is the same case, albeit
enlarged, and thus, the “no other class action” prong of the
local controversy exception is satisfied.
For these reasons, the local controversy exception to
CAFA jurisdiction mandates remand of this truly local case
involving Pennsylvania landowners and their land.
IV. CONCLUSION
For the foregoing reasons, we will affirm the order of
the District Court granting the motion to remand.
17