Arbuckle Mountain Ranch of Tex., Inc. v. Chesapeake Energy Corp., 15–10955.

• Citation: 810 F.3d 335
• Decision Date: 07 January 2016
• Docket Number: No. 15–10955.,15–10955.
• Parties: ARBUCKLE MOUNTAIN RANCH OF TEXAS, INCORPORATED, Plaintiff–Appellee v. CHESAPEAKE ENERGY CORPORATION; Chesapeake Operating, Incorporated, also known as Chesapeake Operating, L.L.C. ; Chesapeake Operating, L.L.C., formerly known as Chesapeake Operating, Incorporated; Chesapeake Exploration, L.L.C., as successor by merger to Chesapeake Exploration, L.P.; Chesapeake Energy Marketing, Incorporated; Total E & P USA, Incorporated, Defendants–Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

810 F.3d 335

ARBUCKLE MOUNTAIN RANCH OF TEXAS, INCORPORATED, Plaintiff–Appellee

v.CHESAPEAKE ENERGY CORPORATION; Chesapeake Operating, Incorporated, also known as Chesapeake Operating, L.L.C. ; Chesapeake Operating, L.L.C., formerly known as Chesapeake Operating, Incorporated; Chesapeake Exploration, L.L.C., as successor by merger to Chesapeake Exploration, L.P.; Chesapeake Energy Marketing, Incorporated; Total E & P USA, Incorporated, Defendants–Appellants.

No. 15–10955.

United States Court of Appeals, Fifth Circuit.

Jan. 7, 2016.

George Parker Young, Esq., Vincent Paul Circelli (argued), Kelli Walter, Circelli Walter & Young, P.L.L.C., Walker C. Friedman, Elizabeth Sturdivant Kerr, Friedman, Suder & Cooke, P.C., Daniel Wesley McDonald, McDonald Law Firm, Fort Worth, TX, for Plaintiff–Appellee.

Jane Webre (argued), John Kenneth Hicks, Christopher Donald Sileo, Scott, Douglass & McConnico, L.L.P., Austin, TX, for Defendants–Appellants.

Appeal from the United States District Court for the Northern District of Texas.

Before CLEMENT, ELROD, and SOUTHWICK, Circuit Judges.

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.

FACTUAL AND PROCEDURAL BACKGROUND

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 petition¹ filed in state court claimed the defendants had not always obtained subordinations of prior mortgages to the oil and gas leases, which allegedly caused the mortgaged property to pass free and clear of the leases to those who purchased through foreclosure. The petition further asserts that after foreclosure, the defendants continued to produce from the relevant wells without "undertaking the significant, expensive curative work" to address the ownership changes.

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.²

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).

DISCUSSION

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 authorities cited in Opelousas. See 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).³ Regardless of such concerns, it is unquestionable that "CAFA greatly expands federal jurisdiction over interstate class action lawsuits." Hollinger, 654 F.3d at 569. Therefore, when deciding whether an exception to CAFA removal applies, we adopt the general approach from sister circuits recognized in Opelousas. If the applicability of an exception is not shown with reasonable certainty, federal jurisdiction should be retained.

The local controversy exception states that a federal district court "shall decline to exercise jurisdiction" in the following situation:

(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;

(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).

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 361. For the reasons that follow, we hold Arbuckle has failed to demonstrate the local controversy exception applies.

I. Conflicting Class Definitions

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.⁴ Arbuckle has failed, though, to present any evidence about those owners who purchased mineral interests post-foreclosure but have since sold or otherwise relinquished their interests. During a deposition of Arbuckle's class-citizenship expert witness, the witness conceded that he had not examined the citizenship of interim owners. It was Arbuckle's burden, as the party seeking remand, to "prove the statutory citizenship requirement by a preponderance of the evidence." Preston, 485 F.3d at 797. Therefore, if the broad definition controls, Arbuckle has failed to satisfy its burden of proof in the absence of necessary class citizenship evidence.

Arbuckle's petition includes the two definitions of the putative class in separate paragraphs. The narrow definition appears in paragraph 14:

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. Some members of the class, and numerous third party lenders (collectively "lenders"), were prior mortgagees, i.e. mortgage owners, with valid, properly recorded mortgages on properties, and mineral interest, ("property" or "properties") whereby those lands and mineral interests were pledged as collateral on loans to lenders ("mortgages").

The broad definition appears in paragraph 23, which is the formal description of the class that the plaintiff wishes to certify:

Plaintiff seeks and requests the certification of a class ("the Class" or "Class Members") comprised

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