The Tenth Circuit has upheld a trial court ruling remanding a proposed class action under the “local controversy exception” to federal jurisdiction under the Class Action Fairness Act (CAFA).  See Coffey v. Freeport-McMoRan Copper & Gold, No. 09-6106 (10th Cir.  9/4/09).  Plaintiffs filed a proposed class action in state court in Oklahoma on behalf of themselves and all other similarly situated persons asserting state law claims based on the defendants’ alleged contamination of their property through operation of the Blackwell Zinc Smelter in Blackwell, Oklahoma. The case alleges that the mining companies failed to clean up lead, arsenic and cadmium contamination in the Blackwell area from the decades-out-of-operation smelter plant.

Defendants removed to federal court, and plaintiffs filed a motion to remand, arguing that there was no basis for federal jurisdiction. The district court granted the motion, concluding that plaintiffs had demonstrated that their case fell within the “local controversy exception” to CAFA, and did not raise a federal question under CERCLA.

CAFA was enacted to respond to perceived abusive practices by plaintiff attorneys in litigating major class actions. CAFA allows federal jurisdiction over class actions involving at least 100 members and over $5 million in controversy when minimal diversity is met (between at least one defendant and one plaintiff-class member). It is undisputed that those standards were met here. Congress did create an exception to CAFA, however, for those cases consisting of primarily local, intrastate matters, which it characterized as the “Local Controversy Exception,” S. Rep. No. 109-14, at 39 (2005).  The court concluded this case presents a classic example of what Congress intended to cover when it created this exception. It is a “truly local controversy— a controversy
that uniquely affects a particular locality to the exclusion of all others.”

There are three main requirements for plaintiffs to meet in order to satisfy the “local controversy exception.”  The defendants did not contest that plaintiffs met two of the three requirements—all of the members of the plaintiff class are Oklahoma citizens, and the principal injuries occurred in Oklahoma. What was in dispute was that requirement that there be at least “one real local defendant.” In order to satisfy this “local defendant” requirement, plaintiffs must show that at least 1 defendant is a defendant from whom significant relief is sought by members of the plaintiff class; whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class; and who is a citizen of the State in which the action was originally filed.  In particular, defendants argued that plaintiffs failed to show that defendant BZC — the alleged local — was a defendant from whom significant relief is sought or that BZC was a citizen of Oklahoma.

Although BZC was the operator of the smelter from 1922-1974, defendants argued that the language “from whom significant relief is sought” requires consideration of a defendant’s ability to pay a judgment, citing Robinson v. Cheetah Transportation, No. 06-0005, 2006 WL 468820 (W.D. La. Feb. 27, 2006).  Since BZC had no assets to satisfy any potential judgment, therefore BZC could not be considered a defendant from whom significant relief is sought.  The district court ultimately rejected defendants’ position, concluding that the CAFA exception refers to a defendant from whom significant relief is “sought,” rather than a defendant from whom the relief “may be obtained” or “can be collected” or words of similar import. The 10th Circuit agreed with the district court’s plain language analysis. The statutory language was found to be unambiguous, and a “defendant from whom significant relief is sought” does not mean a “defendant from whom significant relief may be obtained.”  There was nothing in the language of the statute that indicates Congress intended district courts to wade into the factual swamp of assessing the financial viability of a defendant as part of this preliminary consideration, said the per curiam opinion.

On the second issue, citizenship, a district court’s determination about a corporation’s principal place of business “is a question of fact that we review for clear error.”  BZC owned the real property in Oklahoma and pays taxes on that property; it had filed an application for a permit to operate a groundwater treatment plant in Oklahoma.  Thus, the court concluded that BZC’s clean up activity was a “substantial activity in which it is currently engaged” and that this “activity suffices to establish Oklahoma as BZC’s principal place of business.”

Although the appeals court has discretion to exercise its appellate jurisdiction to review the CERCLA issue, the Tenth Circuit said, it declined to exercise that discretion.