LESLIE H. SOUTHWICK, Circuit Judge:
The Class Action Fairness Act ("CAFA") confers expansive federal jurisdiction over class actions, with few and narrow exceptions. Here, after the case was removed by the defendants under CAFA, Plaintiff Arbuckle moved to remand the case to state court under the "local controversy exception." The district court granted the plaintiff's motion, remanding the case. The defendants appealed. We REVERSE and REMAND.
The defendants are a group of related oil and gas companies who operate producing wells in Johnson and Tarrant Counties, Texas. The defendants had obtained oil and gas leases on commercial and residential property in downtown Fort Worth and adjacent locations. As a result, the defendants leased a substantial number of "third-of-an-acre, quarter-of-an-acre" plots. Allegedly, numerous lessors lost their property through foreclosure subsequent to the execution of their leases. The petition
Plaintiff Arbuckle Mountain Ranch of Texas, Inc., and the putative class, claim to be post-foreclosure owners of the disputed oil and gas interests. The putative class allegedly includes "between three thousand and five thousand" members "spread out across the United States." Arbuckle claims the defendants' oil and gas leases automatically terminated upon foreclosure and the defendants' continued operation of these wellheads constituted trespass and conversion.
Arbuckle filed the petition in this putative class action on November 19, 2014, in Texas state court. The defendants removed the case to federal court pursuant to CAFA, 28 U.S.C. §§ 1332(d), 1453. On August 7, 2015, the district court granted Arbuckle's motion to remand the case to Texas state court, holding the local controversy exception applied. We granted the defendants' petition for permission to appeal under 28 U.S.C. § 1453(c)(1).
CAFA extends federal jurisdiction to certain large class action lawsuits. Hollinger v. Home State Mut. Ins. Co., 654 F.3d 564, 569 (5th Cir.2011). CAFA jurisdiction may be exercised where the proposed class is at least 100 members, minimal diversity exists between the parties, the amount in controversy is greater than $5,000,000, and the primary defendants are not states, state officials, or other government entities. 28 U.S.C. § 1332(d)(2), (5). Here, the parties appear to agree that Section 1332(d)(2)'s requirements are satisfied. Thus, on the face of Arbuckle's petition, CAFA jurisdiction exists.
There are, though, exceptions to CAFA jurisdiction. The district court remanded this case to state court under the local controversy exception. We review a district court's remand de novo. Preston v. Tenet Healthsystem Mem'l Med. Ctr., Inc., 485 F.3d 793, 796 (5th Cir.2007).
In enacting CAFA, Congress sought to correct state and local court "[a]buses in class actions" such as "bias against out-of-State defendants" by expanding federal diversity jurisdiction over interstate class actions. Class Action Fairness Act of 2005, Pub.L. No. 109-2, § 2, 119 Stat. 4. "[T]he language, structure, and history of CAFA all demonstrate that Congress contemplated broad federal court jurisdiction with only narrow exceptions." Cedar Lodge Plantation, L.L.C. v. CSHV Fairway View I, L.L.C., 768 F.3d 425, 429 (5th Cir.2014) (quotation marks omitted). "Congress crafted CAFA to exclude only a narrow category of truly localized controversies, and the exceptions provide a statutory vehicle for the district courts to ferret out the controversy that uniquely affects a particular locality to the exclusion of all others." Hollinger, 654 F.3d at 570.
We previously noted that other circuits "recognize that the exception is intended to be narrow, with all doubts resolved in favor of exercising jurisdiction over the case." Opelousas Gen. Hosp. Auth. v. FairPay Sols., Inc., 655 F.3d 358, 360 (5th Cir.2011). The dissent questions
The local controversy exception states that a federal district court "shall decline to exercise jurisdiction" in the following situation:
28 U.S.C. § 1332(d)(4)(A).
The defendants argue remand is improper because two factors of the local controversy exception are not satisfied: (1) the requirement that the putative class include greater than two-thirds Texas citizens; and (2) the requirement that at least one local defendant's alleged conduct form a significant basis of Arbuckle's claims. Both requirements must be met, and so we focus solely on the first: whether the proposed class includes more than two-thirds Texas citizens. See Opelousas, 655 F.3d at
This jurisdictional conflict arises because the parties disagree over how to construe the class definition in Arbuckle's petition. Arbuckle contends the class includes only current owners of mineral interests, which we will call "the narrow definition." The defendants, however, contend the class includes all current and former owners of mineral interests since the foreclosure actions in 2004, "the broad definition," of course.
The class definition issue is critical to determine whether the local controversy exception applies. Arbuckle has presented sufficient evidence to show that, under the narrow definition, the proposed class consists of over two-thirds Texas citizens.
Arbuckle's petition includes the two definitions of the putative class in separate paragraphs. The narrow definition appears in paragraph 14:
The broad definition appears in paragraph 23, which is the formal description of the class that the plaintiff wishes to certify:
Paragraph 14 states "all class members are currently mineral interest owners." In conflict with that, paragraph 23 sets out that the Class and Class Members include "[a]ll non-excluded persons or entities . . . who are, or were, since 2004, purchasers of property . . . or owners who took title by, through or under such a purchaser." Paragraph 23, reasonably read, includes all non-excluded purchasers since 2004: the initial purchasers at foreclosure who no longer are owners; purchasers from the original or later purchasers who no longer are owners; and the current owners no matter when they acquired their interests on tracts that passed through foreclosures.
The two paragraphs are in direct conflict with one another. Arbuckle says the narrow definition controls on the basis that paragraph 14's definition appears earlier in the petition. We find no legal authority supporting an earlier-in-placement rule for interpreting pleadings. More important than location is purpose. Paragraph 23, containing the broad definition, begins by saying that "Plaintiff seeks and requests the certification of a class (`the Class' or `Class Members') comprised of the following," and then gives its definition. Thus, the broad definition appears in the paragraph that formally identifies the class. If either paragraph is to be given greater weight, it ought to be the paragraph that contains what the plaintiff has declared is the class definition.
Arbuckle also argues paragraph 23 should be subordinate because its language is murky in relation to paragraph 14. We find no ambiguity in saying the class includes "all" who were purchasers since 2004 or acquired title through such a purchaser.
Finally, Arbuckle argues that paragraph 23 is not in conflict with paragraph 14. Instead, it applies only to current owners because "all current owners were purchasers at some point in time." Arbuckle's proposed interpretation overlooks the beginning of paragraph 23, which expressly includes all purchasers, not merely those who still own property.
We find paragraph 23 has the stronger claim to being authoritative. We now look at the petition as a whole.
Under the federal rules, we construe pleadings in their entirety when assessing their sufficiency. See, e.g., Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-23, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). Likewise, under Texas rules, pleadings must give an opponent fair notice of the plaintiff's claims after
Reviewing Arbuckle's petition as a whole, we find at most one other paragraph that supports the narrow definition in paragraph 14 and is inconsistent with the broader language of paragraph 23. It is found in the part of the petition identifying the five causes of action, which are labeled as "Counts." Only the language in one paragraph, in one count, supports the view that only current owners are in the class. Alleging trespass in Count 3, Arbuckle claims "Plaintiff, and the Class, is the rightful owners of the mineral estates of the Properties by virtue of a valid foreclosure action." Arbuckle's employment of the present tense (even if also the singular verb) supports that Arbuckle intended its class to include only current owners.
The dissent finds further support for the narrow definition in paragraphs 42 and 43, which are found in Count 3. We disagree. In paragraph 42, Arbuckle alleges that the defendants' acts of trespass "have caused, and continue to cause damage to Plaintiff and the Class." The dissent contends this sentence could be interpreted to mean that all proposed class members continue to experience damage. The stated language, however, is not at all inconsistent with the broad definition. It might just as easily mean damage was previously caused to some class members and continues to occur for others. Further, in paragraph 43, Arbuckle "seeks injunctive relief for themselves and the Class" to prevent further acts of trespass. Conceivably, injunctive relief for all class members implies that all class members continue to suffer acts of trespass. True, the proposed class may seek different remedies: former owners will seek money damages for past harms, and current owners will seek money damages for past and current harms plus injunctive relief. The district court may eventually have to decide whether the class can and/or must be split into subclasses pursuant to Federal Rule of Civil Procedure 23(c)(4). Still, "the fact that a class is overbroad and should be divided into subclasses is not in itself a reason for refusing to certify the case as a class action," let alone a reason to divest a federal court of jurisdiction. See Culver v. City of Milwaukee, 277 F.3d 908, 912 (7th Cir.2002).
In none of the other four Counts is there support for either class definition. Count 1, seeking termination of the leases, asserts that each class member has an interest under a deed or contract, and that the prior oil and gas leases do not bind the member. Count 2 seeks an injunction and an accounting for production taken under invalid leases, and an order that proceeds from future production go to the class. Count 4 alleges conversion, and claims that class members are the rightful owners of proceeds of production. Finally, Count 5 claims that defendants have unpaid royalties due to the class. None of these remaining Counts shed any light on the correct class definition.
The petition is ambiguous. Arbuckle asks us to rely on one of our recent unpublished
Chinese-Manufactured Drywall does not affect our analysis. First, it involves interpretation of a settlement agreement, i.e., a contract, not pleadings. More importantly, it stands for the uncontroversial idea that context matters. We should look to the entire relevant document when interpreting ambiguous class size definitions. That guiding principle does not dictate how this panel should resolve the present action, where two equally plausible class size definitions are included in the same petition.
Finally, that opinion deemed it "nonsensical" to find the class included members who were "never entitled to a benefit under" the settlement agreements: "It spurns simple reasoning to require individuals to opt out of a settlement agreement under which they were never entitled to compensation." Id. at ___, 2015 WL 5771919, at *3. Conversely, in our case, Arbuckle's petition seeks money damages for all production "since the later of 2004 or from the first production," which if awarded would benefit both former and current owners.
We summarize the conflicting indications in Arbuckle's petition. The formal class definition includes "all" those who were purchasers of interests as a result of foreclosure. A different part of the petition limits the class to current owners. One paragraph in one of the causes of action is written in terms that seem reasonably limited, primarily, but not entirely, to current owners. The other causes of action include no self-contained limitations and would equally apply to the broad or narrow definition.
A party seeking removal must establish federal jurisdiction. See Hood ex rel. Miss. v. JP Morgan Chase & Co., 737 F.3d 78, 84-85 (5th Cir.2013). When CAFA's basic requirements are satisfied, as they are in this case, and where a party seeks remand under an exception to federal jurisdiction, that party "must prove that the CAFA exceptions to federal jurisdiction divest the district court of subject matter jurisdiction." Preston, 485 F.3d at 797. Underlying our analysis is our need to resolve lingering doubts in favor of exercising federal jurisdiction when an exception to jurisdiction is asserted. See Opelousas, 655 F.3d at 360.
Arbuckle's petition contains two conflicting class definitions. After reviewing Arbuckle's petition, the parties' briefs, and the record, we have no basis to conclude the class is only of current owners, or
Because the class that the petition at the time of removal sought to have certified is not clearly limited to current owners, and with inadequate evidence of the citizenship of the interim owners in the broader class, Arbuckle has not proven that the exception for local controversies applies.
We REVERSE the judgment of the district court remanding this case to state court. The case is REMANDED to district court, and we DIRECT that the case be reinstated on that court's docket.
JENNIFER WALKER ELROD, Circuit Judge, dissenting:
The majority opinion resolves this case by adopting a new rule: "when deciding whether an exception to CAFA removal applies, . . . [i]f the applicability of an exception is not shown with reasonable certainty, federal jurisdiction should be retained." The law of our circuit does not require such a presumption in favor of federal jurisdiction, nor should it. Moreover, if the facts of this case do not satisfy the local controversy exception "with reasonable certainty," then the majority's presumption is a strong one indeed. Because I agree with the district court's determination that the local controversy exception required remand of this case to state court, I respectfully dissent.
Among other limitations, CAFA's local controversy exception applies only when "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." 28 U.S.C. § 1332(d)(4)(A)(i)(I). Arbuckle, the party seeking remand, bears the burden to "prove the statutory citizenship requirement by a preponderance of the evidence." Preston v. Tenet Healthsystem Mem'l Med. Ctr., Inc. (Preston I), 485 F.3d 793, 797 (5th Cir.2007). As the majority opinion explains, whether the local controversy exception is satisfied depends on how the proposed class is defined. Under the "narrow class definition" (current mineral interest owners), Arbuckle has adduced sufficient evidence that greater than two-thirds of the proposed class members are citizens of Texas, where the case was originally filed.
In discerning the proposed class, we must be guided by two principles. First, "the application of the local controversy exception depends on the pleadings at the time the class action is removed." Cedar Lodge Plantation, L.L.C. v. CSHV Fairway View I, L.L.C., 768 F.3d 425, 426 (5th Cir.2014). Second, when CAFA jurisdiction depends on an analysis of state court pleadings, we read the pleadings as the state court would read them. See Braud v. Transport Serv. Co. of Ill., 445 F.3d 801, 803 (5th Cir.2006) (holding, for purposes of CAFA's requirement that a lawsuit have been "commenced" in state court on or after CAFA's enactment date, that "when an action is commenced in state court is determined based on the state's own rules of procedure," not Federal Rule of Civil Procedure 3).
Because state law governs our construction of the pleadings, a word on Texas's pleading rules is in order. When a plaintiff files a petition in Texas state court, the sufficiency of that petition is not judged
The strongest evidence for the narrow class definition appears in paragraph 14 of Arbuckle's petition: "Plaintiff and all class members are currently mineral interest owners (and in almost all instances also owners of the surface estate) in Johnson and Tarrant Counties, Texas." (emphasis added). That provision unambiguously limits the proposed class to current owners. The only evidence for the broad class definition appears in paragraph 23 and is much less clear:
(emphasis added). Focusing on the use of both present and past tense, defendants-appellants and the majority conclude that paragraph 23 proposes a class encompassing both current and former mineral interest owners.
That reading of paragraph 23 is not obvious. The "are, or were, since 2004" language immediately precedes a description of "purchasers," not owners, and reading the paragraph to describe persons who "are, or were, since 2004, . . . owners," as defendants-appellants would do,
Fortunately, we resolve ambiguities at the level of the petition as a whole rather than within any one paragraph. Though paragraph 23 is ambiguous when read alone, paragraph 14's crystal-clear limitation of the class to current owners illuminates the petition's true class definition: the narrow one. In giving effect to paragraph 14, we need attach little significance to its placement in the petition's "facts" section rather than among the "class action allegations." Texas pleading rules "reject[ ] any requirement that a sharp, intelligible, and consistent distinction be drawn between `evidentiary allegations,' allegations of `ultimate facts,' and allegations of `legal conclusions.'" 2 Roy W. McDonald & Elaine A. Grafton Carlson, Texas Civil Practice § 7:4(a), Westlaw (database updated Dec. 2015); see also Tex. R. Civ. P. 45(b) ("That an allegation be evidentiary or be of legal conclusion shall not be grounds for objection when fair notice to the opponent is given by the allegations as a whole. . . ."). The district court chalked paragraph 23 up to "pleading error," but we need not even go that far; paragraph 23 is ambiguous, and the petition as a whole clarifies that the proposed class includes only current mineral interest owners.
Even if the majority opinion is correct that paragraph 23 unambiguously supports the broad definition and that paragraphs 14 and 23 are consequently in direct conflict, other provisions of the petition—to which we must look in resolving any conflict—support only the narrow definition. Paragraph 40 provides that "Plaintiff, and the Class, is the rightful owners of the mineral estates of the Properties by virtue of a valid foreclosure action." (emphasis added). The use of the present tense implies current ownership, as the majority opinion concedes. Shortly thereafter, paragraph 42 alleges that "multiple acts of trespass by Defendants have caused, and continue to cause damage to Plaintiff and the Class." An act of trespass could "continue to cause damage" only to a current mineral interest owner. The majority opinion dismisses paragraph 42 on the grounds that it could be read to allege ongoing harms against some class members but not others. But that is not the most natural reading, and so paragraph 42 lends at least some credence the narrow class definition.
Finally, paragraph 43 of the petition requests injunctive relief as to the entire class, which makes sense only if the class is composed entirely of current mineral interest owners. The majority opinion posits that paragraph 43 does not preclude a class composed of both current and former owners because a mismatch between the class definition and the relief sought is not "a reason to divest a federal court of
The majority opinion is most troubling when it enshrines a presumption against the local controversy exception in this circuit's precedent. Quoting our previous decision in Opelousas General Hospital Authority v. FairPay Solutions, Inc., 655 F.3d 358 (5th Cir.2011), the majority observes that "other circuits `recognize that the exception is intended to be narrow, with all doubts resolved in favor of exercising jurisdiction over the case.'" It is important to note that Opelousas did not adopt, rely on, or further discuss that "all doubts" rule beyond noting that "[o]ther courts" have adopted it. 655 F.3d at 360 (citing Evans v. Walter Indus., Inc., 449 F.3d 1159, 1163 (11th Cir.2006); Westerfeld v. Indep. Processing, LLC., 621 F.3d 819, 822 (8th Cir.2010)). Nevertheless, today's majority opinion "adopts th[at] general approach," ultimately deciding the case in accordance with "the need to resolve lingering doubts in favor of exercising federal jurisdiction." Per the majority opinion, "[i]f the applicability of an exception is not shown with reasonable certainty, federal jurisdiction should be retained." This is a course we should not take.
First, we have previously held that an exception to CAFA jurisdiction was satisfied despite some uncertainty. In Preston v. Tenet Healthsystem Mem. Med. Ctr., Inc. (Preston II),
Second, of the "other courts" referenced by Opelousas that resolve "all doubts" in favor of federal jurisdiction, neither's reasoning is persuasive. The Eleventh Circuit's analysis contains a critical error. The Evans case reached its conclusion that "all doubts" regarding the local controversy exception should be "resolved `in favor of exercising jurisdiction over the case'" by quoting a portion of CAFA's legislative history addressing the amount-in-controversy
Even if CAFA does require that courts "resolve lingering doubts" against application of the local controversy exception, considerations of federalism and comity are not jettisoned entirely in the CAFA context. See Hood ex rel. Mississippi v. JP Morgan Chase & Co., 737 F.3d 78, 84-85 (5th Cir.2013); 14AA Charles Alan Wright, et al., Federal Practice & Procedure § 3705.1, Westlaw (database updated Apr. 2015). Only after fully exhausting the judicial toolkit with which we typically confront a difficult interpretive problem should we resign to having a "doubt" that must be resolved in favor of federal jurisdiction.
Reading Arbuckle's Texas petition as a whole, I would conclude that the narrow class definition is the correct one and that Arbuckle has consequently met its burden to show that two-thirds of the proposed class members are Texas citizens so as to trigger the local controversy exception.