872 F.3d 1122
10th Cir.2017Background
- Plaintiff David Landon Speed filed a putative class action in Hughes County, Oklahoma, alleging JMA Energy willfully failed to pay statutorily required interest on late royalty payments and fraudulently concealed that obligation.
- JMA removed under the Class Action Fairness Act (CAFA); parties conducted jurisdictional discovery and stipulated that the amount in controversy exceeds $5 million and that 48.46% of putative class members are Oklahoma citizens (more than one-third but less than two-thirds). JMA is an Oklahoma citizen.
- Speed moved to remand based solely on CAFA’s discretionary (home-state) exception, 28 U.S.C. § 1332(d)(3); the district court granted remand after weighing the six statutory factors and concluding they favored remand.
- JMA appealed, arguing the district court abused its discretion in applying the § 1332(d)(3) factors (disputing several factor analyses, and arguing a county-level forum test should apply for the nexus factor).
- The Tenth Circuit reviewed for abuse of discretion (legal errors reviewed de novo), found no legal error or clear factual error, and affirmed the remand to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1332(d)(3) prerequisites are met | Speed: prerequisites met (1/3–2/3 Oklahoma class members; JMA is Oklahoma citizen) so factors should be considered | JMA: prerequisites met but urges heightened skepticism of remand; proposes sliding-scale weight based on percent of in-state members | Court: prerequisites satisfied; refused to adopt sliding-scale; plaintiff bears burden to justify remand but no extra penalty applied |
| Whether claims involve national or interstate interest (factor A) | Speed: claims are local — wells, conduct, and statute are Oklahoma-centered | JMA: nationwide distribution of payees and potential industry-wide impact argue for federal interest | Court: weighed factor for remand—case is predominantly local to Oklahoma; national-interest examples (e.g., pharmaceuticals) distinguishable |
| Choice of law (factor B) — whether other states’ law governs | Speed: primary claim and fraud theory are grounded in Oklahoma law about Oklahoma property, so Oklahoma law governs | JMA: fraud claims might implicate laws of other states depending on payees’ residences | Court: factor slightly favors remand; Oklahoma law likely governs given the subject (interests in Oklahoma land/wells) |
| Nexus to forum (factor D) — whether forum has distinct nexus | Speed: Oklahoma has a distinct nexus to class, harms, and defendant (wells and JMA located there) | JMA: forum should be the county (Hughes County); plaintiff’s choice of county doesn't show distinct nexus to that county specifically | Court: rejected county-only test; a distinct nexus to the State suffices absent proof of a magnet/local abuse—factor favors remand |
Key Cases Cited
- Arbuckle Mountain Ranch of Tex., Inc. v. Chesapeake Energy Corp., 810 F.3d 335 (5th Cir. 2016) (describing CAFA’s purpose to expand federal diversity jurisdiction over interstate class actions)
- Dutcher v. Matheson, 840 F.3d 1183 (10th Cir. 2016) (explaining § 1332(d)(3) prerequisites and the six-factor discretionary analysis)
- Dart Cherokee Basin Operating Co. v. Owens, 135 S. Ct. 547 (2014) (no presumption against removal under CAFA; plaintiff bears burden to justify remand)
- Preston v. Tenet Healthsystem Mem’l Med. Ctr., Inc., 485 F.3d 804 (5th Cir. 2007) (abuse-of-discretion standard and guidance on evaluating § 1332(d)(3) factors)
- Weber v. Mobil Oil Corp., 243 P.3d 1 (Okla. 2010) (Oklahoma Supreme Court discussion supporting application of Oklahoma law to royalty/production-related fraud claims)