842 F.3d 383 (6th Cir. 2016), 16-2313, Mason v. Lockwood, Andrews & Newnam, P.C.

Docket Nº:16-2313
Citation:842 F.3d 383
Opinion Judge:GRIFFIN, Circuit Judge.
Party Name:JENNIFER MASON, et al., Plaintiffs-Appellees, v. LOCKWOOD, ANDREWS & NEWNAM, P.C., a Michigan corporation; LOCKWOOD, ANDREWS & NEWNAM, INC., a Texas corporation, Defendants-Appellants, LEO A. DALY COMPANY, a Nebraska corporation, Defendant
Attorney:S. Vance Wittie, SEDGWICK LLP, Dallas, Texas, for Appellants. Mark L. McAlpine, MCALPINE PC, Auburn Hills, Michigan, for Appellees. S. Vance Wittie, SEDGWICK LLP, Dallas, Texas, Robert G. Kamenec, PLUNKETT COONEY, Bloomfield Hills, Michigan, for Appellants. Mark L. McAlpine, Jayson E. Blake, Adam...
Judge Panel:GRIFFIN, J., delivered the opinion of the court in which DONALD, J., joined. KETHLEDGE, J., delivered a separate dissenting opinion. KETHLEDGE, Circuit Judge, dissenting.
Case Date:November 16, 2016
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 383

842 F.3d 383 (6th Cir. 2016)

JENNIFER MASON, et al., Plaintiffs-Appellees,

v.

LOCKWOOD, ANDREWS & NEWNAM, P.C., a Michigan corporation; LOCKWOOD, ANDREWS & NEWNAM, INC., a Texas corporation, Defendants-Appellants, LEO A. DALY COMPANY, a Nebraska corporation, Defendant

No. 16-2313

United States Court of Appeals, Sixth Circuit

November 16, 2016

         Argued November 7, 2016.

          Appeal from the United States District Court for the Eastern District of Michigan at Ann Arbor. No. 5:16-cv-10663--John Corbett O'Meara, District Judge.

         ARGUED:

         S. Vance Wittie, SEDGWICK LLP, Dallas, Texas, for Appellants.

         Mark L. McAlpine, MCALPINE PC, Auburn Hills, Michigan, for Appellees.

         ON BRIEF:

         S. Vance Wittie, SEDGWICK LLP, Dallas, Texas, Robert G. Kamenec, PLUNKETT COONEY, Bloomfield Hills, Michigan, for Appellants.

         Mark L. McAlpine, Jayson E. Blake, Adam T. Schnatz, MCALPINE PC, Auburn Hills, Michigan, for Appellees.

         GRIFFIN, J., delivered the opinion of the court in which DONALD, J., joined. KETHLEDGE, J., delivered a separate dissenting opinion.

          OPINION

          GRIFFIN, Circuit Judge.

          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 measures. The series of events precipitating the tragedy have little to do with the issue before us on appeal. We deal, instead, with a question of procedure: must plaintiffs litigate their claim in state or federal court? In 2005, Congress revised the contours of federal diversity jurisdiction, making it easier to remove class actions to federal court, while at the same time providing an exception for cases that are " truly local in nature," commonly called the " local controversy" exception. The parties dispute whether plaintiffs' claim against defendants (civil engineering companies responsible for upgrading Flint's municipal water system) belongs in state court under this exception. Though the Flint Water Crisis captured the attention of the nation, its infamy does not make it any less local. Because plaintiffs' suit consists of a proposed class of more than two-thirds Michigan citizens, a significant local defendant, and injuries limited to the reach of Flint's water system, it satisfies the statutory requirements of the local controversy exception. We therefore affirm the district court's decision to remand this case to state court.

         I.

         In 2005, Congress enacted the Class Action Fairness Act (CAFA) in response to " perceived abusive practices by plaintiffs and their attorneys in litigating major class actions with interstate features in state courts." Coffey v. Freeport McMoran Copper & Gold, 581 F.3d 1240, 1243 (10th Cir. 2009). CAFA " loosened the requirements for diversity jurisdiction," Mississippi ex rel. Hood v. AU Optronics Corp., 134 S.Ct. 736, 739, 187 L.Ed.2d 654 (2014), authorizing federal district courts to " hear a 'class action' if the class has more than 100 members, the parties are minimally diverse, and the 'matter in controversy exceeds the sum or value of $5,000,000.'" Standard Fire Ins. Co. v. Knowles, 133 S.Ct. 1345, 1348, 185 L.Ed.2d 439 (2013) (quoting 28 U.S.C. § 1332(d)(2), (d)(5)(B)). That expansion of diversity jurisdiction was with exceptions. See 28 U.S.C. § 1332(d)(3), (d)(4)(A), (d)(4)(B). One, which Congress called the " Local Controversy Exception," S. Rep. No. 109-14 (2005), reprinted in 2005 U.S.C.C.A.N. 3, 28, is codified at § 1332(d)(4)(A). Under this exception, " [a] district court shall decline to exercise jurisdiction . . . over a class action" if: (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[.]

§ 1332(d)(4)(A). If these four elements are present, the district court must abstain from hearing the case, despite having jurisdiction under § 1332(d)(2).

          Like all statutes, the text of CAFA controls. Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 61 L.Ed. 442 (1917); Vander Boegh v. EnergySolutions, Inc., 772 F.3d 1056, 1060 (6th Cir. 2014). In this regard, its text must be read as a whole, not in isolation. United States v. Morton, 467 U.S. 822, 828, 104 S.Ct. 2769, 81 L.Ed.2d 680 (1984). The relaxation of normal diversity requirements is coupled with an exception for local controversies. The terms of the statute balance considerations of federalism--a balance defined by Congress, but implemented and respected by the federal courts.

          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.

         III.

         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...

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