Class Action Fairness Act (CAFA) Permits Removal to Federal Court by Any Primary Defendant Without Consent of Other Defendants and States have no Citizenship for Purposes of CAFA’s “Local Controversy” Exception
A putative class action was filed in Louisiana state court against a Canadian company, Pioneer Americas, and Louisiana’s Department of Environmental Quality arising following the release of excessive amounts of mercury into the atmosphere at Pioneer’s hydrogen processing facility. Frazier v. Pioneer Americas LLC, 455 F.3d 542 (5th Cir. 2006). Pioneer’s defense removed the class action to federal court without DEQ’s consent, and the district court denied plaintiffs’ motion to remand it back to state court. In the face of the Class Action Fairness Act of 2005 (CAFA), plaintiffs “did not challenge defendants’ allegation of prima facie CAFA jurisdiction – minimal diversity and at least $5 million in controversy” – but rather argued that two exceptions applied: the exception for class actions against States and the “local controversy exception.” Id., at 544. The district court agreed with the defense that neither exception applied, and the Fifth Circuit affirmed.
Preliminarily, the Circuit Court addressed the $5 million threshold requirement for jurisdiction, even though it found that plaintiffs had not properly raised the issue. The Court explained that CAFA requires only “minimal diversity” and concluded that “the petition, seeking damages for severe injuries suffered by at least 500 people and attorneys’ fees, makes it ‘facially apparent’ that at least $5 million is in controversy, in the aggregate.” Frazier, at 545 (footnotes omitted).
Turning to the exceptions advanced by plaintiff, the Fifth Circuit held first that CAFA’s exception under § 1332(d)(5)(A) for “any class action in which . . . the primary defendants are States, State officials, or other governmental entities” requires that all primary defendants be States. The exception did not apply because Pioneer is a primary defendant. Frazier, at 546. The court also explained why this conclusion did not affect the rights of states to assert governmental immunity. Id., at 546-47.
With respect to the “local controversy exception” of § 1332(d)(4), the Circuit Court rejected plaintiffs’ argument that DEQ is a citizen of Louisiana because “it is long-settled that a state has no citizenship for § 1332(a) diversity” and “[w]e see no reason to give different meaning to citizenship under § 1332(d).” Frazier, at 547. Because neither exception advanced by plaintiffs applied, the Court affirmed the district court order denying the motion to remand the action to state court.
NOTE: The Fifth Circuit found it unnecessary to resolve the conflict among other circuits as to whether CAFA places the burden of proving prima facie jurisdiction on the plaintiff or defense. Frazier, at 545. Also, the Circuit Court noted that Pioneer did not need DEQ’s consent to remove the action to federal court because CAFA eliminated that requirement as a condition for removal. Id., at 544 n.3 (citing 28 U.S.C. § 1453(b)). Finally, the Court noted that “CAFA explicitly allows aggregation of each class member’s claim” for purposes of meeting the $5 million threshold amount for jurisdiction. Id., at 545 n.10 (citing 28 U.S.C. § 1332(d)(6)).