Rainbow Gun Club, Inc. v. Denbury Onshore, L.L.C.

Case: 14-30514 Document: 00512709492 Page: 1 Date Filed: 07/23/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
July 23, 2014
No. 14-30514
Lyle W. Cayce
Clerk
RAINBOW GUN CLUB, INCORPORATED; LAKESIDE DEVELOPMENT
COMPANY, INCORPORATED; DELLA MILLER BROUSSARD; REED
JOSEPH MILLER; URSIN MILLER; ET AL,
Plaintiffs – Appellees
v.
DENBURY ONSHORE, L.L.C.; SPECTER EXPLORATION,
INCORPORATED; SKH ENERGY PARTNERS, L.P.,
Defendants – Appellants
Appeals from the United States District Court
for the Western District of Louisiana
Before JOLLY, SMITH, and CLEMENT, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
A group of 167 individuals, trusts, and associations (collectively, “the
Plaintiffs”) entered into oil, gas, and mineral leases with Denbury Onshore,
Specter Exploration, and SKH Energy (collectively, “Denbury”). The Plaintiffs
later became unhappy with the outcome of their arrangement causing them to
bring this suit in Louisiana state court, which alleged that Denbury breached
its duty to act as a reasonable and prudent operator of the well that was drilled
under these leases. Denbury removed the case to federal court asserting
federal jurisdiction as a mass action under the Class Action Fairness Act
(“CAFA”). CAFA, however, excludes federal jurisdiction over a state case that
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is primarily local and arises from “an event or occurrence.” Holding that this
was such a case, the district court remanded the case upon motion of the
Plaintiffs. Denbury petitioned this court for permission to appeal that
determination, which we granted. The sole issue presented is whether the
Plaintiffs’ claims arise from a single event or occurrence. We hold that they
do, and we AFFIRM.
I.
In the early 2000s, the Plaintiffs entered into leases with Denbury
allowing Denbury to explore for oil, gas, and hydrocarbons. In February 2003,
Denbury began drilling Rainbow Gun Club Well No. 1 (“the Well”). The Well
began producing hydrocarbons in July 2004 and was plugged and abandoned
in July 2008.
In February 2013, the Plaintiffs brought this suit in Louisiana state
court alleging that Denbury had breached its duty as a lessee under Louisiana
law to act as a reasonable and prudent operator of the Well. Specifically, the
Plaintiffs allege that Denbury acted imprudently in allowing extraneous water
to enter the gas reservoir, greatly reducing the productivity of the Well. The
Plaintiffs allege that this occurred because Denbury was negligent in several
respects: (1) failing to heed methods of operation intended to avoid getting the
drill pipe stuck; (2) failing to isolate the reservoir by properly cementing the
well; (3) failing to properly cement the casing in a sidetrack well; (4) failing to
heed increased differential pressures in the drilling of the original well; and (5)
failing to correct the defective cement job.
Denbury filed a notice of removal, asserting that the case was a “mass
action” under CAFA, see 28 U.S.C. § 1332(d)(11)(A)–(B), and that the district
court thus had jurisdiction. The Plaintiffs filed a motion to remand, arguing
that two exclusions to the definition of “mass action” applied to this case: (1)
the local single event exclusion, and (2) the $75,000 jurisdictional amount
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exclusion. See id. § 1332(d)(11)(B)(i),(ii)(I). Based on these exclusions, the
Plaintiffs argued that the case should either be remanded completely, or that
at least those claims that do not satisfy the $75,000 amount-in-controversy
requirement should be remanded.
The case was assigned to a magistrate judge, who held that the claims
arose from a single event or occurrence, and therefore the Plaintiffs’ motion to
remand must be granted. See 28 U.S.C. § 636(b)(1)(A) (allowing district courts
to “designate a magistrate judge to hear and determine” certain pretrial
motions). Specifically, the magistrate judge found it instructive that the
Plaintiffs’ claims for recovery arose from a single statute that imposed a duty
on Denbury to act as a reasonably prudent operator of the well. The magistrate
judge concluded: “If this is so, then it suggests that the underlying matter is
but one event or occurrence—the manner in which defendants drilled the well.”
The magistrate judge also emphasized that the exploration of the property
“persisted uninterrupted over a defined period of time, and the allegations of
negligence reflect a logical series of happenings.”
Denbury challenged the magistrate judge’s order before the district
court. See id. (allowing the district court to reconsider the magistrate judge’s
decision “where it has been shown that the magistrate judge’s order is clearly
erroneous or contrary to law”). The district court held that the magistrate’s
decision was not clearly erroneous or contrary to law. Although recognizing
that there must be a limit to what constitutes a single event or occurrence, the
district court judge reasoned that “that limit may as often as not be supplied
by the liberal application of common sense” because the ordinary meaning of
the words of the statute do not require that the single event or occurrence occur
at a single moment in time. The district court thus denied Denbury’s appeal
of the magistrate judge’s order and remanded the case to the state court.
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Denbury then filed a motion before this court for permission to appeal
the remand order under 28 U.S.C. § 1453(c), which we granted.
II.
The sole issue raised on appeal is whether the district court erred in
remanding the case on the basis that the local single event exclusion applies
to the facts and circumstances of this particular case. 1 We review a district
court’s remand order de novo. Louisiana v. Am. Nat’l Prop. & Cas. Co., 746
F.3d 633, 637 (5th Cir. 2014).
CAFA provides for federal jurisdiction over “mass actions.” 28 U.S.C.
§ 1332(d)(11)(A). “[T]he term ‘mass action’ means any civil action . . . in which
monetary relief claims of 100 or more persons are proposed to be tried jointly
on the ground that the plaintiffs’ claims involve common questions of law or
fact . . . .” Id. at § 1332(d)(11)(B)(i). The parties agree that this provision is
satisfied. Relevant to this case, however, the statute proceeds to circumscribe
this definition. “[T]he term ‘mass action’ shall not include any civil action in
which . . . all of the claims in the action arise from an event or occurrence in
the State in which the action was filed, and that allegedly resulted in injuries
in that State or in States contiguous to that State.” Id. at
§ 1332(d)(11)(B)(ii),(ii)(I). We refer to this provision as the “local single event
exclusion.” The dispute is whether the claims in this case “arise from an event
or occurrence” for the purposes of the exclusion. 2 We begin our analysis of the
1 As discussed, the Plaintiffs also argued to the district court that at least some of the
claims must be remanded to state court because they do not satisfy the $75,000 amount in
controversy requirement. See 28 U.S.C. § 1332(d)(11)(B)(i). The parties have not, however,
presented any briefing on this issue, and because we hold that the local single event exclusion
applies, requiring remand of the entire case, neither we nor the district court has any need
to consider this alternative argument.
2 Denbury has presented no argument referencing the second portion of the
exclusion—i.e. that the event or occurrence “allegedly resulted in injuries in [Louisiana] or
in States contiguous to [Louisiana].” 28 U.S.C. § 1332(d)(11)(B)(ii)(I). Accordingly, Denbury
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exclusion by looking to its text, its legislative history, and prior judicial
decisions interpreting it. We then move to applying this analysis to the facts
of this case. 3
A.
In understanding the meaning of the exclusion, we begin with its text.
Sebelius v. Cloer, 133 S. Ct. 1886, 1893 (2013). Because the statute does not
define “an event or occurrence,” we look to the ordinary meaning of those
words. Id. (“As in any statutory construction case, we start, of course, with the
statutory text, and proceed from the understanding that unless otherwise
defined, statutory terms are generally interpreted in accordance with their
ordinary meaning.” (internal quotation marks and alterations omitted)).
At the starting point, both parties agree that the exclusion contemplates
a single event or occurrence. This agreement is based upon substantial judicial
authority. See Abraham v. St. Croix Renaissance Grp., L.L.L.P., 719 F.3d 270,
276–77 (3d Cir. 2013); see also Adams v. Macon Cnty. Greyhound Park, Inc.,
829 F. Supp. 2d 1127, 1136 (M.D. Ala. 2011) (“[T]he court cannot ignore the
singular usage of ‘event’ and the singular usage of ‘occurrence.’”). These
authorities also recognize, however, that the meaning of “event” or
“occurrence” is not necessarily constrained “to a specific incident with a fixed
duration of time.” Abraham, 719 F.3d at 277.
has waived this issue. Askanase v. Fatjo, 130 F.3d 657, 668 (5th Cir. 1997) (“All issues not
briefed are waived.”).
3 The parties briefly dispute who has the burden of demonstrating the applicability or
inapplicability of the exclusion. Generally, the party seeking removal has the burden of
proving that the provisions of CAFA are satisfied. See Hood ex rel. Miss. v. JP Morgan Chase
& Co., 737 F.3d 78, 84–85 (5th Cir. 2013). The party seeking remand, however, has the
burden of proving the applicability of any exceptions to CAFA jurisdiction. See Opelousas
Gen. Hosp. Auth. v. FairPay Solutions, Inc., 655 F.3d 358, 360 (5th Cir. 2011). Because it
does not affect the outcome, and because the parties have presented no argument on this
issue other than summary assertions, we decline to address this dispute.
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This reasoning is supported by the dictionary definitions—both popular
and legal—of the terms. An “occurrence” is “[s]omething that happens, or
takes place; specif., an accident, event, or continuing condition that results in
personal injury or property damage.” Black’s Law Dictionary 1248 (10th ed.
2014). And the words “event” and “occurrence” can be understood as
synonymous. See American Heritage Dictionary of the English Language 615
(5th ed. 2011) (defining “event” as “something that takes place, especially a
significant occurrence”); id. at 1219 (defining “occurrence” as “the action, fact,
or instance of occurring . . . something that takes place; an event or incident”);
see also Abraham, 719 F.3d at 277 n.6. From these definitions, it is apparent
that a singular event or occurrence, as contemplated by the local single event
exclusion, need not be precisely confined to a moment in time. Nothing in
either definition imposes a simultaneous time limitation, and Black’s Law
Dictionary explicitly defines “occurrence” as including a “continuing condition.”
Thus, the plain text of the exclusion supports the Plaintiffs’ view that
the terms “event” and “occurrence” are not generally understood to apply only
to incidents that occur at a discrete moment in time.
B.
This understanding is supported by the legislative history of CAFA. We
are permitted to look to this legislative history only when the text of the statute
is ambiguous. See In re Hammers, 988 F.2d 32, 34 (5th Cir. 1993) (“We may
not look beyond [the words of the statute] when, taken as a whole, they are
rational and unambiguous.”). Here, at least some ambiguity exists in the scope
of the terms “event” and “occurrence,” as evidenced by the district court
decisions cited by the parties. Accordingly, we consider the relevant legislative
history to shed light on the intent of Congress in passing the local single event
exclusion. Id. (“The sole purpose of statutory construction including, when
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appropriate, a review of all available legislative history, is to ascertain the
intent of the legislative authority.”).
In one of its prior proposed forms, the local single event exclusion would
have applied only to cases in which the plaintiffs’ claims arose from a “single
sudden accident.” The version of CAFA that was enacted “expand[ed] the
‘single sudden accident’ exception so that federal jurisdiction shall not exist
over mass actions in which all claims arise from any ‘event or occurrence.’” 151
Cong. Rec. S1076-01 (statement of Senator Dodd summarizing compromise).
This legislative history demonstrates that Congress considered explicitly
adopting a view similar to what Denbury suggests here, constraining the
exception to events that occur at a discrete moment in time. This proposal was
rejected, however, and the exclusion expanded in the operative version of
CAFA. This history thus supports the ordinary meaning of the terms in the
exclusion and indicates 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.
Denbury points to another piece of legislative history to supports its
narrower reading of the exclusion. Specifically, Denbury cites the Senate
Report discussing CAFA. 4 In discussing the local single event exclusion, the
Senate Report states:
4 The Plaintiffs argue that the Senate Report should not be considered as legislative
history because it was released after CAFA was enacted—a position that has been accepted
by some courts. See Abraham, 719 F.3d at 279 n.8 (doubting that the legislative history
would aid in the interpretation of CAFA because it “was issued after CAFA was enacted”).
Some courts, however, have held that the Senate Report may be considered because it was
still before the Senate at the same time that CAFA was being considered. See Lowery v. Ala.
Power Co., 483 F.3d 1184, 1206 & n.50 (11th Cir. 2007) (looking to the legislative history of
CAFA for aid in interpreting the statute after noting “[w]hile the report was issued ten days
following CAFA’s enactment, it was submitted to the Senate” while the Senate was
considering the bill). We have previously looked to the Senate Report for insight into CAFA’s
meaning. Louisiana v. Am. Nat’l Prop. & Cas. Co., 746 F.3d 633, 639 (5th Cir. 2014). In
short, we consider the Senate Report here, but remain cognizant of its shortcomings.
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The [local single event] exception would apply only to a truly
local single event with no substantial interstate effects. The
purpose of this exception was to allow cases involving
environmental torts such as a chemical spill to remain in state
court if both the event and the injuries were truly local, even
though there are some out-of-state defendants. By contrast,
this exception would not apply to a product liability or
insurance case. The sale of a product to different people does
not qualify as an event. And the alleged injuries in such a case
would be spread out over more than one state (or contiguous
states)—even if all the plaintiffs in the particular case come
from one state.
S. Rep. 109-14, 47, reprinted in 2005 U.S.C.C.A.N. 3, 44–45. Denbury points
to the report’s discussion of environmental torts as evidence that the exclusion
was not intended to apply to the claims here, which arise out of the contracts
between the Plaintiffs and Denbury.
We are not convinced that the Senate Report provides relevant insight
into the reach of the exclusion as applied to this case. First, even accepting
that the purpose of the exclusion was specifically to keep local environmental
torts out of federal court, there is no reason that the exclusion cannot also apply
to other cases if those cases fit within its language. Importantly, the text of
the exclusion speaks to “any civil action” involving claims arising from an event
or occurrence. 28 U.S.C. § 1332 (d)(11)(B)(ii)(I). In the light of this text, we
cannot read the exclusion to apply only to a specific genre of claims. Second,
even looking at the examples that the Senate Report cites, the Plaintiffs’ claims
are more akin to an environmental tort than a product liability or insurance
action. Like an environmental tort, these claims arise from Denbury’s
allegedly negligent operation of the Well. The only distinction between this
case and an environmental tort is the source of the damages—the Plaintiffs’
claims of financial harm due to lost productivity from the Well as opposed to a
claim for property damage from an explosion or spill from the Well. Thus, to
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the extent that we consider the Senate Report, it does not support Denbury’s
interpretation of the statute.
C.
Lastly, we discuss two cases from other circuits that have addressed the
scope of the local single event exclusion and have been cited to us by the
respective parties. First, the Third Circuit has adopted an interpretation of
“arise from an event or occurrence” that supports the Plaintiffs’ argument. In
Abraham, the plaintiffs brought a suit against the operator of a refinery,
alleging that the refinery had been continuously releasing hazardous
substances for about a decade. Abraham, 719 F.3d at 273. Despite the long
time frame, the court held that the claims did “arise from an event or
occurrence” because “the words ‘event’ and ‘occurrence’ do not commonly or
necessarily refer in every instance to what transpired at an isolated moment
in time, [so] there is no reason for us to conclude that Congress intended to
limit the phrase ‘event or occurrence’ . . . in this fashion.” Id. at 277. In its
clearest explication of a rule, the court held:
[W]here the record demonstrates circumstances that share
some commonality and persist over a period of time, these can
constitute ‘an event or occurrence’ for purposes of the exclusion
in § 1332(d)(11)(B)(ii)(I). In short, treating a continuing set of
circumstances collectively as an “event or occurrence” for
purposes of the [local single event] exclusion is consistent with
the ordinary usage of these words, which do not necessarily
have a temporal limitation. Giving the words “event” or
“occurrence” their ordinary meaning is not at odds with the
purpose of the statutory scheme of CAFA. Congress clearly
contemplated that some mass actions are better suited to
adjudication by the state courts in which they originated.
Id.
Against this broader interpretation, the Ninth Circuit has arguably
adopted a position closer to Denbury’s advocacy. In Nevada v. Bank of Am.
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Corp., the Ninth Circuit rejected an argument that the local single event
exclusion applied to a parens patriae action against Bank of America for
misleading consumers in various ways. 672 F.3d 661, 665 (9th Cir. 2012). The
court held that the exclusion only applies “where all claims arise from a single
event or occurrence.” Id. at 668 (emphasis in original). The court went on to
state that “[c]ourts have consistently construed the ‘event or occurrence’
language to apply only in cases involving a single event or occurrence, such as
an environmental accident, that gives rise to the claims of all plaintiffs.” Id.
(internal quotation marks omitted). Applying the language in this way, the
court held that the exclusion could not apply to a case involving “widespread
fraud in thousands of borrower interactions.” Id.
Abraham provides obvious support for the Plaintiffs’ position that the
local single event exclusion can apply in situations beyond events or
occurrences that happen at a discrete moment in time. The Ninth Circuit’s
decision is more ambiguous in its agreement that continuous conduct may be
perceived as a single event, but it does not upset our analysis for two reasons.
First, it is unclear to what extent the Ninth Circuit applied a narrower reading
of the exception that would support the argument Denbury makes. The
decision only (1) recognizes that the exclusion applies to a single event or
occurrence; (2) cites an environmental tort an as example that satisfies this
language; and (3) holds that the exclusion cannot apply to the case before it,
involving thousands of separate transactions. Id. So the decision’s support of
Denbury’s position is equivocal. And second, to the extent that the Ninth
Circuit did adopt that narrower view, its limited analysis does not overcome
the text of the statute, the legislative history, and the unambiguous and
compelling analysis of the Third Circuit in Abraham.
In sum, the text of the statute, its legislative history, and other case law
interpreting the local single event exclusion guide us to a single conclusion:
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Although the exclusion certainly applies in cases in which the single event or
occurrence happens at a discrete moment in time, the single event or
occurrence may also be constituted by a pattern of conduct in which the pattern
is consistent in leading to a single focused event that culminates in the basis
of the asserted liability.
III.
Although Denbury disagrees with this interpretation, it argues that even
if this is a proper interpretation of the exclusion, this case still does not fall
within that reasoning. The Plaintiffs point to the failure of the Well as the
single event or occurrence that their claims arise from. Denbury argues that
the claims do not arise from a single event or occurrence, even under the
broader interpretation of the exclusion that we have provided above, for two
reasons, which we now discuss.
A.
First, Denbury argues that the claims actually arise from a number of
different “events,” namely, the five separate incidents of negligence that the
Plaintiffs alleged in their complaint. In Denbury’s view, these are the actual
independent events that give rise to the Plaintiffs’ claims. The Plaintiffs argue
that Denbury conflates two different concepts: (1) the event or occurrence from
which the claims arise; and (2) the underlying actions that lead to that event
or occurrence. The multiple acts of negligence that the Plaintiffs allege fall
into category (2); they are the actions that give causal substance to the event—
the failure of the Well from which the Plaintiffs’ claims arise.
The Plaintiffs provide an analogy to the Deepwater Horizon spill that is
helpful in illuminating this distinction. Both parties agree that the Deepwater
Horizon spill is “an event or occurrence” within the meaning of the exclusion.
Just as in our case, the Deepwater Horizon spill was the event that resulted
from a number of individual negligent acts related to each other, all of which
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came together to culminate in the single event. This is precisely what we have
here. The Plaintiffs allege that Denbury performed several negligent acts, and
the result of those acts was a single occurrence—the failure of the Well. And
just as in the Deepwater Horizon example, the Plaintiffs’ claims do not arise
from any one of the several alleged acts of negligence, but from the single
occurrence that resulted from the collective related acts. Thus, we cannot
embrace Denbury’s argument that the Plaintiffs’ claims arise from multiple
events or occurrences because the Plaintiffs alleged several negligent acts.
B.
Denbury also borrows the Deepwater Horizon analogy to illustrate its
second argument against the application of the exclusion. Denbury argues that
in the Deepwater Horizon example, there is no dispute that the event or
occurrence on which the claims are based actually occurred—i.e. nobody could
dispute that there was an explosion and spill. Conversely, Denbury argues
that the event or occurrence in this case—the failure of the Well—is disputed
because Denbury contests whether the Well failed at all. Basically, Denbury
asserts that the exclusion cannot be satisfied by an alleged event or occurrence.
Again, we are unpersuaded by this argument because it is only a matter
of semantics. Rather than identifying the failure of the Well as the event or
occurrence, the depletion of the Well or the untimely (in the Plaintiffs’ view)
cessation of production of the Well could also be treated as the event or
occurrence. In both cases, the event or occurrence would be undisputed—that
is, both parties agree that the Well has been depleted and is no longer
producing. The parties disagree over the cause of this occurrence, but this
argument will be addressed in the merits of the Plaintiffs’ suit in the proper
court. In short, we accept that the Well failed from the Plaintiffs’ perspective
and thus hold that the failure of the Well can be treated as an event or
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occurrence, but we of course express no opinion on whether the Well “failed” in
the sense that the merits of the Plaintiffs’ suit alleges.
C.
Irrespective of whether we denominate the event or occurrence as the
depletion or failure of the Well, the semantics of the exclusion are satisfied
based on the analysis above, specifically the ordinary meaning of the statute
and the analysis from the Third Circuit. The failure of the Well certainly fits
with the definition of “occurrence.” See Black’s Law Dictionary 1248 (10th ed.
2014) (defining “occurrence” in part as a “continuing condition that results in
personal injury or property damage”). Similarly, the alleged negligent acts in
the operation of the Well that led to its failure are the sort of “circumstances
that share some commonality and persist over a period of time” that the Third
Circuit held satisfied the exclusion. Abraham, 719 F.3d at 277. And even
though it may be impossible to define an exact moment at which the failure
occurred—e.g. before, upon, or after the capping of the Well—this does not
change our conclusion because we find nothing in the definitions of the terms
that requires that an event or occurrence must happen at an identifiable
moment in time.
In sum, we hold that here there was an ongoing pattern of conduct that
was contextually connected, which when completed created one event
consistent with the ordinary understanding and the legislative history of the
exclusion. Accordingly, we hold that the failure of the Well constitutes the
“event or occurrence” from which the claims of the Plaintiffs arise.
IV.
For these reasons, the judgment of the district court is
AFFIRMED.
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