Lead Opinion
GRIFFIN, J., delivered the opinion of the court in which DONALD, J., joined. KETHLEDGE, J. (pp. 397-400), delivered a separate dissenting opinion.
OPINION
This state-law professional negligence proposed class action suit arises out of the Flint Water Crisis, a public health disaster that drew national media coverage when the City of Flint decided to supply water to its residents using the Flint River without implementing necessary anti-corrosion
I.
In 2005, Congress enacted the Class Action Fairness Act (CAFA) in response to “perceived abusive practices by plaintiffs and them attorneys in litigating major class actions with interstate features in state courts.” Coffey v. Freeport McMoran Copper & Gold,
(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
(III) principal injuries resulting from the alleged conduct or any relate ed 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[.]
§ 1332(d)(4)(A), If these four elements are present, the district court must abstain
Like all statutes, the text of CAFA controls. Caminetti v. United States,
II.
In April 2013, the City of Flint, Michigan, decided to switch its primary drinking water provider from the Detroit Water and Sewerage Department (“DWSD”) to the newly formed Karegnondi Water Authority (“KWA”). The KWA would not be operational for another three years, however, so Flint needed an interim source of drinking water. It decided to draw from the Flint River, which had previously supplied back-up water services to the City. Relying on the Flint River, however, posed a few problems. According to several reports, the river was a highly sensitive drinking water source that required anti-corrosive treatment in order to prevent heavy metals from leaching into the water. On top of that, these issues needed to be remedied quickly, as the City’s contract with DWSD was set to expire a year, later in April 2014.
The City turned to Lockwood, Andrews & Newnam, Inc., a Texas-based corporation that touted itself as a “national leader in the heavy civil infrastructure engineering industry,” and its Michigan-based affiliate, Lockwood, Andrews & Newnam, P.C. (collectively,, “defendants”) for assistance. On June 26, 2013, the City entered into a contract with defendants for design engineering services in connection with rehabilitating Flint’s Water Treatment Plant (“the Plant”). After confirming with City officials that they could make the necessary improvements and provide the necessary “quality control” in time for the April 2014 switch, defendants proceeded to develop rehabilitation plans for the Plant. In April 2014, the Michigan Department of Environmental Quality approved defendants’ rehabilitation plans. Notably, the plan did not include necessary upgrades for anti-corrosive treatment measures. Indeed, earlier that month, defendants and officials from the City and the Michigan Department of Environmental Quality considered the issue, but decided that more data was advisable before implementing any measures for “optimization for lead.”
On April 25, 2014, the City of Flint began supplying its residents drinking water from the Flint River, The harmful effects were as swift as. they were severe. Within days, residents complained of foul smelling and tasting water. Within weeks, some residents’ hair began to fall out and their skin developed rashes. And within a year, there were positive tests for E..coli, a spike in deaths from Legionnaires’ disease, and worst of all, reports of dangerously high blood lead levels in Flint children. All of this resulted, according to one expert who studied the crisis, because the “water from the Flint River was 19 times more corrosive than the water pumped from Lake. Huron by the DWSD, and that without .corrosion control treatment, lead was leaching out of the lead-based service lines at alarming rates and finding its way to the homes of Flint’s residents.” In his view, -it was “predictable,” but preventable.
On January 25, 2016, eight Flint residents filed suit in state court, alleging one count of professional negligence against defendants. Plaintiffs contended that defendants knew the Plant required upgrades for lead contamination treatment, yet failed to ensure such safeguards were implemented as part of the rehabilitation, resulting in widespread personal injuries and property damage. They sought relief on behalf of themselves and all other similarly situated “residents and property owners in the City of Flint” who used water from the Flint River from April 25, 2014, to the present day.
Defendants removed the action to federal court on the basis of diversity jurisdiction under 28 U.S.C. § 1332(d)(2). Plaintiffs filed a motion to remand to state court. They did not contest the basic requirements for diversity jurisdiction under CAFA. They argued instead that the mandatory “local controversy” exception to CAFA jurisdiction applied. Plaintiffs asserted that the class citizenship and principal injuries elements were not in dispute, citing the allegations in their complaint that the class consisted of Flint residents and that their injuries were suffered in Flint. They alsó argued that LAN, P.C., a Michigan professional corporation, was a significant defendant because it was the entity responsible under Michigan law for certifying that defendants’ work satisfied applicable standards of care. Finally, they contended that no party had filed a similar suit against defendants in the past three years.
Defendants countered that the class citizenship element was very much in dispute and that the mere allegation of residency, alone, was not sufficient to establish citizenship. Defendants also argued that the mere fact that LAN, P.C. certified the engineering plans does not establish its conduct formed a significant basis of plaintiffs’ negligence claim. Rather, LAN, Inc., a Texas corporation, was the more significant defendant since it contracted with Flint to provide the engineering services that plaintiffs alleged were negligently performed.
The district court granted plaintiffs’ motion to remand. It found that more than two-thirds of the putative class members were likely Michigan citizens. Relying primarily on the rebuttable presumption of domicile based on residency and the absence of any contrary evidence, the court also observed that the proposed class consisted of residents who, over a relatively limited period of time, experienced a continuing injury localized in Flint. The court also found that LAN, P.C.’s (the Michigan defendant’s) conduct formed a significant basis of plaintiffs’ claim because defendants’ engineering services were provided “through LAN, P.C.”
Defendants timely petitioned for permission to appeal, which this' court granted on September 20, 2016. In re Lockwood, Andrews & Newnam, P.C., No. 16-0102, at 2 (6th Cir. Sept. 20, 2016). Our order initiated a 60-day clock in which we are required to issue a decision. In re Mortg. Elec. Registration Sys., Inc.,
IV.
A.
We begin our analysis on an issue that enjoys unanimity, both between the parties and among the circuits, but which is nonetheless an important starting point: the burden of proof. The parties and every circuit to have addressed this issue all agree that the party seeking to remand under an exception to CAFA bears the burden of establishing each element of the exception by a preponderance of the evi-
We agree with the universal wisdom of our sister circuits for two, interrelated reasons. First, the language of “local controversy” exception indicates that it is not part of the initial jurisdictional calculus. Section 1332(d)(4) provides that “[a] district court shall decline to exercise jurisdiction under paragraph (2)” if certain conditions are met. Congress’s use of “decline” is important. It necessarily implies a prior determination of jurisdiction, since “a court could not ‘decline’ jurisdiction that it never had in the first place.” Clark v. Lender Processing Sews.,
Plaintiffs, as the moving party, must establish all four elements of the local controversy exception. But, as defendants only contest the two-thirds citizenship and “significant basis” requirements, we confine our inquiry to those elements. We take each in turn.
B.
The first element of the local controversy exception requires- the movant to show that “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 filedf.]” § 1332(d)(4)(A)(I). “Citizen” and its variant “citizenship” have acquired a particular meaning in our law as being equivalent to “domicile.” Von Dunser v. Aronoff,
According to their complaint, plaintiffs seek to represent all “residents and property owners in the City of Flint” who used water from the Flint River from April 25, 2014, to the present day, and were thereby injured by defendants’ professional negligence. Defendants contend that the district court erred in finding that, more like
In evaluating defendants’ challenge, two long-standing propositions of law inform our analysis. The first relates to our standard of review: an appellate court will not disturb a district court’s factual findings, including those regarding the citizenship of parties, “unless the record leaves us with the definite and firm conviction that a mistake has been committed.” Ne. Ohio Coal. for the Homeless v. Husted,
In elemental terms, domicile consists of (1) residence and (2) an intent to remain there. Miss. Band of Choctaw Indians v. Holyfield,
In recognizing the primacy of residency in the domicile calculus, Story was simply drawing from established legal tradition. As early as 1790, England’s House of Lords declared that “[a] person’s being at a place is prima facie evidence that he is domiciled at that place, and it lies on those who say otherwise to rebut that evidence.” Bruce v. Bruce, 2 Bos. & Pull. 229, note (a). Not long after, the presumption made its way into American law. See 10 Am. & Eng. Ency. Law, Domicile, at 22 (2d ed.) (collecting early state and federal cases). In 1852, the United States Supreme Court announced that' “[w]here a person lives, is taken prima facie to be his domcil, until other facts establish the contrary.” Ennis v. Smith,
We emphasize the historical pedigree of the residency-domicile presumption because the district court primarily based its finding that plaintiffs met their burden under § 1332(d)(4)(A)(I) on the same. As a class that consists of Flint residents, the district court was correct, in light, of the long-standing authority charted .above, to afford plaintiffs the rebuttable presumption that each resident class member was domiciled there. Rather than rebut the presumption with evidence undermining
In support of their assertion, defendants point to a competing line of case law holding that “naked averment of ... residence ... is insufficient to show his citizenship.” Robertson v. Cease,
On closer inspection, however, we are not persuaded this line of cases presents compelling authority for rejecting the residency-domicile presumption in this case. The reason for this lies in the context from which the “mere averment of residency” line of cases emerged—federal subject-matter jurisdiction.
In that context, “[t]he established rule is that a plaintiff, suing in a federal court, must show in his pleading, affirmatively and distinctly, the existence of whatever is essential to federal jurisdiction[.]” Smith v. McCullough,
The tension between the residency-domicile presumption and the presumption against federal jurisdiction came to a head in Robertson v. Cease,
By tracing the origin of the “mere averment of residency” line of cases, we see that the residency-domicile presumption was not rejected because it was specious (indeed, Robertson could “not ... den[y] that there is some force in the[ ] suggestion[],” id.), but because, in the unique context of federal diversity jurisdiction, a contrary presumption of constitutional import takes precedence. See Mansfield, C. & L.M. Ry. Co. v. Swan,
• Though the residency-domicile presumption did hot prevail against the unrelenting headwinds of limited federal jurisdiction, there is no reason it should suffer a similar fate under the local controversy exception. As established at the outset of our analysis,- the local controversy exception is not jurisdictional. See also Clark,
Indeed, the residency-domicile presumption fits particularly well in the CAFA exception context, where the moving party is tasked with demonstrating a fact-centered proposition about a mass of individuals, many of whom may be unknown at the time the complaint is filed and the case removed to federal court. See Nicole Ochi, Are Consumer Class and Mass Actions Dead? Complex Litigation Strategies After CAFA & MMTJA, 41 Loy. L.A. L. Rev. 965, 1030 (2008) (“To achieve the objective of these [CAFA] exceptions, courts should grant plaintiffs a presumption of citizenship when they define their classes according to state residency.”); Stephen J. Shapiro, Applying the Jurisdictional Provisions of the Class Action Fairness Act of 2005: In Search of a Sensible Judicial Approach, 59 Baylor L. Rev. 77, 135 (2007) (advocating the same). The citizenship inquiry under the local controversy exception should not be “exceptionally difficult,” Mondragon v. Capital One Auto Fin.,
Those circuits that have rejected the rebuttable presumption in the CAFA context have relied on case law addressing federal subject-matter jurisdiction. See Reece, 638 FedAppx. at 769 (citing White-lock v. Leatherman,
One district court in our circuit has previously rejected the rebuttable presumption of citizenship for a different, albeit equally unpersuasive, reason. In Lancaster v. Daymar Colleges Grp., LLC, the district court declined to adopt the presumption as inconsistent with the proposition that the movant bears the burden of proving citizenship. No. 3:11-CV-157-R,
In a similar vein, defendants contend that our approach was rejected by the Seventh Circuit as “guesswork. Sensible guesswork, based on a sense of how the world works, but guesswork nonetheless.” In re Sprint Nextel Corp.,
The dissent takes issue with our analysis because it purportedly conflicts with the principle of abstention that we have a “virtually unflagging obligation” to exercise jurisdiction given to us. Because we have “no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not given,” the dissent contends, “we cannot presume a fact that allows us to decline jurisdiction, any'more than we can presume a fact that allows us to find that jurisdiction exists in the first place.” (first quoting Cohens v. State of Virginia,
The dissent’s recitation of abstention principles is accurate, but the conclusion it draws from them does not follow. The abstention doctrines the dissent invokes are judge-made exceptions to the powerful default rule that Congress alone has the constitutional authority to define the contours of federal jurisdiction. Zwickler v. Koota,
But all of these common law restrictions on abstention have no place here because Congress has expressly directed courts to decline jurisdiction over local controversies. For this reason, we disagree with the dissent’s assertion that “[w]e have nothing like a clear justification for abstention here”—Congress has provided the all justification we need in § 1332(d)(4)(A). We would agree with the dissent that we have a “virtually unflagging obligation” to not decline jurisdiction when Congress’s only word on the matter is to. exercise jurisdiction. But, when Congress directs something different, our obligation remains with the Constitution and the text of the statute enacted by Congress. And here Congress directed something different. In enacting CAFA, Congress expanded diversity jurisdiction while carving out an exception for “local controversies.’-’ Read together and in harmony, CAFA’s provisions explicitly instruct federal district courts to remand class action cases that satisfy the elements of §, 1332(d)(4)(A), notwithstanding the fact that the jurisdictional requisites are met. In light ,of Congress’s explicit directive to decline jurisdiction, the dissent’s
Furthermore, we would be remiss if w¿ did not also observe that defendants drew the very same residency-domicile inference in their notice of removal. In their notice, defendants alleged that minimal diversity existed because “Plaintiffs were citizens of the State of Michigan.” And in support, defendants cited paragraph 2 of the first amended complaint, which merely alleged residency, not citizenship. Yet, defendants insist plaintiffs cannot draw the same inference when it comes to similarly situated Flint residents. Were we to take defendants’ and the dissent’s argument to its logical end point, we would be compelled— on the very authority that defendants argue requires this case remain in federal court—to conclude that defendants failed to establish the citizenship requirement of federal diversity jurisdiction.
In addition to the presumptive force of residency, there are other attributes of plaintiffs’ proposed class that bolster the inference that the putative class members, as residents of Flint, intend to remain there indefinitely. First, according to plaintiffs’ class definition, the class members have continuously resided in Flint, Michigan, for several years. Nat’l Artists Mgmt. Co. v. Weaving,
Against this backdrop, defendants submitted no evidence to rebut the presumption that the putative class members were citizens of Michigan. Instead, they merely relied on case law from other circuits stating that mere allegations of residency are not sufficient to establish citizenship. They did so at their peril. In light of the longstanding presumption of domicile based on residency, the additional domicile factors apparent from the class definition, and the complete absence of any evidence tending to rebut the presumption óf domicile based on residency, we hold that the district court did not clearly err in finding that, more likely than not, more than two-thirds of the proposed class of Flint residents were Michigan citizens.
C.
Defendants also contest the district court’s finding that LAN, P.C.’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).
We have yet to interpret this provision, but those circuits that have are in general agreement that this provision “effectively calls for comparing the local de
This case involves a single claim of professional negligence against three defendants: LAN, P.C. (a Michigan corporation), LAN, Inc. (a Texas corporation), and Leo A. Daly Company (a Nebraska corporation). The conduct underlying plaintiffs’ claim is the provision of engineering design sex-vices in connection with upgrades to Flint’s Water Treatment Plant, including drafting and implementing the engineering plans and providing “quality control” measures.
We begin with the third defendant, Leo A. Daly Company. Plaintiffs’ complaint does not allege that Leo A. Daly Company engaged in any engineering services. Instead, plaintiffs allege that Leo A. Daly Company is LAN, P.C.’s and LAN, Inc.’s corporate alter ego, thereby making Leo A. Daly Company vicariously hable for LAN’s tortious conduct. Given plaintiffs’ theory of liability, Leo A. Daly Company’s role in plaintiffs’ negligence claim is minimal at best.
That leaves LAN, P.C. and LAN, Inc. The complaint alleges professional negligence against both defendants and further alleges that all engineering work was conducted “through LAN, P.C.” More specifically, the complaint alleges that LAN, P.C. was formed to conduct LAN, Inc.’s work in Michigan, and that Flint relied on LAN, P.C.—as the LAN entity that “work[ed] with several water systems around the state”’—to “perform quality control.” The failure to provide that quality control is the very core of plaintiffs’ professional negligence claim. We therefore agree with the district court that LAN, P.C.’s conduct forms an “important” and integral part of plaintiffs’ professional negligence claim.
Defendants argue that the professional services agreement with the City shows that its professional relationship was with LAN, Inc., not LAN, P.C. Even assuming we may properly consider this extrinsic evidence, compare Coleman v. Estes Exp. Lines, Inc.,
Defendants also argue that, according to plaintiffs’ own complaint, LAN, P.C. conducted a majority of its business in LAN, Inc.’s Chicago office. However, the “significant basis” provision is not concerned with where the conduct occurred, but rather with who engaged in the con
V.
For the foregoing reasons, we agree with the district court that plaintiffs established the class citizenship and significant basis requirements of the local controversy exception to CAFA. It is also important that we not lose sight of the forest for the trees. The local controversy exception exists to ensure that “a truly local controversy—a controversy that uniquely affects a particular locality to the exclusion of all others”—remains in state court. S. Rep. No. 109-14, 39 (2005), reprinted in 2005 U.S.C.C.A.N. 3, 38. By that definition, and the statutory elements Congress set forth to achieve that vision, the case before us exemplifies the quintessential local controversy. Indeed, it defies common sense to say a suit by Flint residents against those purportedly responsible for injuring them through their municipal water service is not a “local controversy.”
For these reasons, we affirm the judgment of the district court.
DISSENT
Dissenting Opinion
dissenting.
To meet a burden of proof, a party usually must provide some. Here, it is common ground that the federal courts have jurisdiction over this case and that the plaintiffs bear the burden of proving that we may lawfully abstain from exercising that jurisdiction. The plaintiffs have not met that burden, or even tried.
By way of background, the federal courts “have a strict duty to exercise the jurisdiction that is conferred upon them by Congress.” Quackenbush v. Allstate Ins. Co.,
We have nothing like a clear justification for abstention . here. The federal courts undisputedly have' jurisdiction over this case under the Class Action Fairness Act. See 28 U.S.C. § 1332(d). Instead the question here, broadly stated, is whether we may abstain from exercising that jurisdiction per the Act’s so-called “local-controversy exception.” For .that exception to apply—and thus for us lawfully to send the case back to state court—the plaintiffs must prove, among other things, both that more than two-thirds of the putative class-members “are citizens of the State in which the action was originally filed” (i.e., Michigan) and that the alleged conduct of the sole Michigan defendant “forms a significant basis for the claims” of the putative class. Id. § 1332(d)(4)(A)(I), (II)(bb).
The plaintiffs have proved neither. As for the first requirement, every circuit to have considered the issue—five so far— has held that “there must ordinarily be at least some facts in evidence from which the district court may make findings re
The majority concludes otherwise by means of a presumption.- As an initial matter, the guesswork here begins with even defining the putative class, since the plaintiffs neglected to defíne it in their putative class-action complaint. But the complaint does say that the class-members are similarly situated to the plaintiffs, and that the plaintiffs are “residents and property owners in the City of Flint” who (or which, as the case may be) were exposed to water supplied from the Flint River after April 25, 2014. Complaint ¶¶ 1, 84.- Plaintiffs’ counsel also clarified during oral argument that the phrase “property owners” does not modify “residents,” but instead describes a separate group within the putative class. Thus, taking the allegations and clarification together, one can surmise that the class includes residents exposed to the Flint water supply after April 25, 2014, and property owners likewise exposed.
At this point the majority’s presumption arises. According to the majority, the plaintiffs have alleged that the class members are residents of Flint, which (in the majority’s view) creates a presumption that they are citizens as well, which in turn throws upon the defendants the burden of proving that one-third of the putative class are not citizens of Michigan. But this reasoning is mistaken both factually and legally. The factual mistake is the assertion that the plaintiffs have alleged that all the class members are Flint residents, since— per the statement of plaintiffs’ counsel at oral argument—the class includes Flint “property owners” who need not be residents of Flint (or Michigan) to be members of the class. Thus, the majority’s presumption of citizenship does not apply to “property owners”—whose numbers are anyone’s guess. Even the majority’s presumption, therefore, does not provide us with anything near what the law would regard as a proper basis to conclude that two-thirds—as opposed to one-third, or one-half, or three-quarters—of the putative class-members are Michigan citizens. We thus lack the requisite “clearest of justifications” to decline to exercise our jurisdiction here. Rouse,
The majority’s legal mistake is more complicated. The majority observes, correctly, that “there is a presumption against federal jurisdiction,]” Maj. Op. at 391; which in any particular case the party asserting jurisdiction must overcome. See Kokkonen v. Guardian Life Ins. Co. of Am.,
What the majority overlooks, however, is the “virtually unflagging obligation of the federal courts to exercise the jurisdiction given them.” Colorado River,
I would therefore dispense with all the dueling presumptions, and instead simply ask what the other circuits ask: whether the plaintiffs have produced “evidence from which the district court may make findings” that more than two-thirds of the putative class-members are citizens of the State in which the case was originally filed. Mondragon,
More briefly, the plaintiffs have likewise failed to show that the only Michigan defendant in this case—Lockwood, Andrews & Newnam, P.C. (“Lockwood P.C.”)—is one “whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class[.]” 28 U.S.C. § 1332(d)(4)(A)(II)(bb). As an initial matter, as the Ninth Circuit has persuasively explained, the statutory reference to “alleged conduct” means that (in contrast to the citizenship requirement) we look solely to the allegations in the complaint when determining whether the plaintiffs have met this prerequisite to abstention. See Coleman v. Estes Exp. Lines, Inc.,
Here, the plaintiffs’ allegations as to the Michigan defendant—Lockwood P.C.—are an enigma. The complaint alleges that the City of Flint retained a Texas corporation—Lockwood, Andrews Newnam, Inc. (“Lockwood Inc.”), , which is likewise a defendant here—“to conduct studies and reports of a new water supply that was being developed” for the City. Complaint ¶ 3. The complaint also alleges that Lockwood P.C. “was incorporated in 2008 by” Lockwood Inc. after the latter was so retained,
It should take a better showing than this for a federal court to cast off its unflagging duty to exercise the jurisdiction assigned to it by Congress. I respectfully dissent.