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8th Cir. Reverses Trial Court’s Remand Order Under CAFA’s ‘Local-Controversy’ Exception

class action fairness actThe U.S. Court of Appeals for the Eighth Circuit recently reversed a trial court’s decision to remand a removed action to state court under the local-controversy exception to the federal Class Action Fairness Act of 2005 (CAFA).

In so ruling, the Eighth Circuit concluded that CAFA’s local-controversy exception did not require remand in this case because the plaintiff landowners failed to show that the conduct of the only Missouri-citizen defendant, and thus the only possible local defendant for the purposes of the exception, formed a significant basis for the claims asserted in the complaint.

A copy of the opinion in Kitchin v. Bridgeton Landfill is available at:  Link to Opinion.

A group of landowners filed a putative class action complaint in Missouri state court against the companies that owned and/or operated a landfill that were allegedly responsible for the contamination of the landowners’ property, which the landowners claimed occurred due to the defendants’ allegedly improper acceptance and handling of radioactive waste at the landfill. Only one defendant was a citizen of Missouri at the time the landowners filed their complaint.

The defendants removed the action to federal court. As grounds for removal, the defendants claimed that federal-question jurisdiction existed under the Price Anderson Act (PAA), 42 U.S.C. § 2011 et seq., as well as the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9601 et seq., and they asserted that diversity jurisdiction existed under CAFA, 28 U.S.C. § 1332(d)(2).

The landowners moved to remand, arguing that their complaint did not trigger federal-question jurisdiction under either the PAA or CERCLA and that the trial court had to “decline to exercise [CAFA] jurisdiction” because CAFA’s local-controversy exception applied. See 28 U.S.C. § 1332(d)(4). The trial court agreed, concluding that federal-question jurisdiction did not exist, and that the local-controversy exception applied, and granted the landowners’ motion to remand.

On appeal, the defendants challenged the trial court’s application of the CAFA local-controversy exception.

The Eighth Circuit first addressed the landowners’ claim that it lacked jurisdiction over the appeal. The Court first noted that in Jacks v. Meridian Resource Co., it held that a remand order is both “final and appealable as a collateral order under [28 U.S.C. § 1291]” insofar as it was based on the trial court’s determination that the local-controversy exception applied. 701 F.3d 1224, 1229 (8th Cir. 2012).

Therefore, the Court concluded that Jacks provided that it had jurisdiction under § 1291 over the appeal in this matter. The Court also determined that, even though it had previously denied the defendants permission to appeal under 28 U.S.C. § 1453(c), Jacks allowed it to address their separately filed § 1291 appeal.

Therefore, the Eighth Circuit moved to address the merits of the defendants’ appeal. The sole issue on appeal was whether CAFA’s local-controversy exception required remand in this case.

As you may recall, CAFA gives federal district courts subject-matter jurisdiction over class actions where the parties are minimally diverse (meaning any class member and any defendant are citizens of different states), all proposed plaintiff classes include at least 100 members in total, and the amount in controversy exceeds $5 million. See Westerfeld v. Indep. Processing, LLC, 621 F.3d 819, 822 (8th Cir. 2010) (citing 28 U.S.C. 1332(d)).

Under CAFA’s local-controversy exception, however, a federal district court “shall decline to exercise jurisdiction”:

(i) over a class action in which—

(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 related 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 …

28 U.S.C. § 1332(d)(4)(A).

Although the exception is an abstention doctrine rather than a jurisdictional rule, Graphic Comm’s Local 1B Health & Welfare Fund A v. CVS Caremark Corp., 636 F.3d 971, 973 (8th Cir. 2011), it is mandatory, Westerfeld, 621 F.3d at 822. The party seeking remand on this basis has the burden to establish that the exception applies. Westerfeld, 621 F.3d at 822.

Under the significant-basis requirement, the Eighth Circuit decided that the party seeking remand must show that the local defendant’s “alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class.” § 1332(d)(4)(A)(i)(II) (bb). The Eighth Circuit observed that in Westerfeld, it adopted the Third Circuit’s comparative approach to analyzing this issue. 621 F.3d at 825 (following Kaufman v. Allstate N.J. Ins., 561 F.3d 144 (3d Cir. 2009)).

Thus, the Court determined that deciding whether the significant-basis requirement is met requires a substantive analysis comparing the local defendant’s alleged conduct to the alleged conduct of all the defendants.  Kaufman, 561 F.3d at 156. Given the plain meaning of “significant,” the Court held that the comparative approach requires that the party seeking remand show that the local defendant’s conduct is “an important ground for the asserted claims in view of the alleged conduct of all the defendants.”  Id. at 157.

The Eighth Circuit observed that in Atwood v. Peterson, it found that a complaint that did “not allege any substantive distinctions between the conduct” of the local and nonlocal defendants failed to indicate whether the local defendants’ alleged conduct is “an important ground for the asserted claims in view of the alleged conduct of all the Defendants.”  936 F.3d 835, 840 (8th Cir. 2019) (quoting Westerfeld, 621 F.3d at 825).

Here, the Eighth Circuit held that the allegations in the complaint did not satisfy the significant-basis requirement because nothing in the complaint distinguished the conduct of the local Missouri defendant from the conduct of the other defendants. Opelousas Gen. Hosp. Auth. v. FairPay Sols., Inc., 655 F.3d 358, 362 (5th Cir. 2011). The Court concluded that such collective allegations left doubt about the comparative significance of the local defendant’s conduct, preventing remand under the local-controversy exception. See Westerfeld, 621 F.3d at 823.

Lastly, the landowners asked the Eighth Circuit to take judicial notice of the EPA’s 2018 Amended Record of Decision concerning the landfill at issue and a 1993 Consent Order referred to in that document. They argued that these materials, showing that the EPA deemed the local defendant (along with three other entities) a “potentially responsible party” (PRP) for cleaning up the landfill under CERCLA, demonstrated that the local defendant’s conduct met the significant-basis requirement. See Atwood, 936 F.3d at 840.

However, the Eighth Circuit observed that the 2018 Amended Record of Decision only indicated that the local defendant was designated a PRP; it did not explain why. Because even an “innocent” party can be designated a PRP, Solutia, Inc. v. McWane, Inc., 726 F. Supp. 2d 1316, 1331 (N.D. Ala. 2010), the Court held that this designation without more did not demonstrate beyond doubt that the local defendant’s conduct formed a significant basis for the landowners’ claims. See Westerfeld, 621 F.3d at 823.

Furthermore, the Eighth Circuit noted that the 1993 Consent Order only deemed the local defendant a PRP because it was the “current owner” of the landfill. Therefore, the Court determined that the reason for the local defendant’s designation as a PRP left open the possibility, particularly when contrasted with the reasons provided for the other entities’ designations as PRPs, that the EPA deemed the local defendant a PRP even though its conduct was not “significant” for purposes of the local-controversy exception.

Thus, the Court held that the 1993 Consent Order also did not demonstrate, and again certainly not beyond doubt, that the local defendant’s conduct formed a significant basis for the landowners’ claims. See Westerfeld, 621 F.3d at 823.

Accordingly, the Eighth Circuit reversed the trial court’s order remanding this action back to state court, and the Court remanded the case back to the trial court for further proceedings.

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Daniel Miller is an associate in the Chicago office of Maurice Wutscher LLP, practicing in the firm’s Consumer Credit Litigation and Commercial Litigation groups. Daniel has substantial experience as a litigation attorney representing clients in both individual and class action cases involving the FDCPA, TCPA, FCRA, TILA, RESPA, Illinois Consumer Fraud Act, and various other federal and state statutes. He also has experience in representing corporate clients in commercial transactions and executive compensation agreements. Daniel earned his Juris Doctor from the University of Illinois College of Law, and his Bachelor of Arts in History from Durham University in the United Kingdom. He is admitted to practice law in Illinois and the U.S. District Courts for the Northern District of Illinois and the Southern District of Illinois.

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