Mason v. Lockwood, Andrews & Newnam, P.C.

Decision Date16 November 2016
Docket NumberNo. 16-2313,16-2313
Citation842 F.3d 383
Parties 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.
CourtU.S. Court of Appeals — Sixth Circuit

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.

Before: GRIFFIN, KETHLEDGE, and DONALD, Circuit Judges.

GRIFFIN, J., delivered the opinion of the court in which DONALD, J., joined. KETHLEDGE, J. (pp. –––– – ––––), 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. , ––– U.S. ––––, 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 , ––– U.S. ––––, 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 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 also 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...

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