Arbuckle Mountain Ranch of Texas, Inc. v. Chesapeake Energy Corp.
2016 U.S. App. LEXIS 200
5th Cir.2016Background
- Defendants are oil and gas companies that leased and produced from small urban tracts in Johnson and Tarrant Counties, Texas; many leases allegedly became unbound after foreclosure and defendants continued production.
- Arbuckle filed a putative class action in Texas state court asserting (inter alia) that leases terminated on foreclosure and that continued production constituted trespass, conversion, and related claims; the class allegedly includes 3,000–5,000 members.
- Defendants removed under the Class Action Fairness Act (CAFA); Arbuckle moved to remand based on CAFA’s local controversy exception (28 U.S.C. § 1332(d)(4)(A)).
- The local controversy exception requires, inter alia, that >2/3 of putative class members be citizens of the forum state and that at least one in-state defendant’s conduct form a significant basis of the claims.
- The parties disputed the class definition in Arbuckle’s petition: a “narrow” definition (current mineral owners) versus a “broad” definition (all purchasers/owners since 2004, including former owners). The district court adopted the narrow reading and remanded; the Fifth Circuit reversed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper class definition for CAFA-local-controversy analysis | Arbuckle: petition limits the class to current mineral-interest owners (so >2/3 are Texas citizens) | Defendants: the formal class paragraph includes all purchasers/owners since 2004 (including interim/non‑Texas owners) so plaintiff has not proven >2/3 Texas citizenship | The court held the petition’s formal class paragraph supports the broader definition; because Arbuckle failed to prove citizenship of interim owners, the local controversy exception was not shown — federal jurisdiction retained and remand reversed |
| Burden and standard when an exception to CAFA is asserted | Arbuckle: had the evidence to meet preponderance under narrow definition | Defendants: ambiguities in the petition and lack of evidence for broader class defeat remand | The panel reaffirmed that the party seeking remand must prove an exception by a preponderance, and resolved lingering ambiguity in favor of exercising federal jurisdiction (i.e., doubts mean retain jurisdiction) |
Key Cases Cited
- Hollinger v. Home State Mut. Ins. Co., 654 F.3d 564 (5th Cir. 2011) (discusses CAFA’s broad federal jurisdiction and narrow exceptions)
- Opelousas Gen. Hosp. Auth. v. FairPay Sols., Inc., 655 F.3d 358 (5th Cir. 2011) (noting other circuits resolve doubts in favor of federal jurisdiction under CAFA)
- Cedar Lodge Plantation, L.L.C. v. CSHV Fairway View I, L.L.C., 768 F.3d 425 (5th Cir. 2014) (local controversy exception depends on pleadings at time of removal)
- Preston v. Tenet Healthsystem Mem’l Med. Ctr., Inc., 485 F.3d 793 (5th Cir. 2007) (party seeking remand must prove citizenship requirement by preponderance; district court may make a credible estimate)
- Dart Cherokee Basin Operating Co. v. Owens, 135 S. Ct. 547 (U.S. 2014) (no antiremoval presumption attends CAFA; jurisdictional factual showing standard)
- Westerfeld v. Independent Processing, LLC, 621 F.3d 819 (8th Cir. 2010) (treats local-controversy exception narrowly)
- Evans v. Walter Industries, Inc., 449 F.3d 1159 (11th Cir. 2006) (same; cited re: resolving doubts in favor of federal jurisdiction)
- Culver v. City of Milwaukee, 277 F.3d 908 (7th Cir. 2002) (overbroad class that should be subclassed does not defeat certification or federal jurisdiction)