94 F.4th 492
5th Cir.2024Background
- Over 200 plaintiffs sued Devon Energy in Texas state court, alleging over $100 million in underpaid oil-and-gas royalties.
- Devon Energy, an Oklahoma entity, was the primary defendant, with other Texas entities also named as defendants.
- Devon removed the case to federal court under the Class Action Fairness Act (CAFA), which generally allows federal jurisdiction over large class actions with minimal diversity and sufficient amount in controversy.
- Plaintiffs moved to remand the case to state court based on CAFA’s "local controversy" exception, which, if satisfied, requires federal courts to decline jurisdiction.
- The district court agreed with plaintiffs and granted remand, but Devon appealed, arguing the exception did not apply; the Fifth Circuit reviewed the statutory interpretation de novo.
Issues
| Issue | Plaintiffs' Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does CAFA’s local controversy exception require the case be remanded to state court? | Most plaintiffs experienced their injuries and were to be paid in Texas, so the local controversy exception applied. | Some plaintiffs reside and were paid outside of Texas, so not all "principal injuries" occurred in Texas, defeating the exception. | Not all principal injuries were in Texas; exception does not apply. |
| Where are "principal injuries" from underpayment of royalties incurred? | Injury occurs at location designated for payment, i.e., Texas per the lease. | Injury is a loss to personal property felt where each plaintiff resides, some outside Texas. | Injury is incurred where plaintiff resides; non-Texas residents suffered injury outside Texas. |
| Does "principal" mean majority or all injuries must occur in the forum state? | Satisfying the exception is enough if most injuries occurred in Texas. | Statute requires all principal injuries be incurred in forum state, not just most. | All principal injuries must be in the forum state; majority is not sufficient. |
| Can the remand order be appealed under both §§ 1291 and 1453(c)? | No substantial argument presented. | Yes, either route is proper for appeal of CAFA remand orders. | Appeal jurisdiction exists under both provisions. |
Key Cases Cited
- Phillips Petroleum Co. v. Adams, 513 F.2d 355 (5th Cir. 1975) (distinguishes royalty interests in oil and gas as personal vs. real property)
- CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066 (9th Cir. 2011) (economic injuries are felt where plaintiff resides)
- Cantor Fitzgerald Inc. v. Lutnick, 313 F.3d 704 (2d Cir. 2002) (economic injury occurs where the loss is felt)
- Callejo v. Bancomer, S.A., 764 F.2d 1101 (5th Cir. 1985) (economic injury for breach occurs where the plaintiff resides)
- Spence v. Glock, Ges.m.b.H., 227 F.3d 308 (5th Cir. 2000) (location of injury determined by where loss is sustained, not where product originated)