Opinion ID: 3200861
Heading Depth: 2
Heading Rank: 2

Heading: Significant Basis

Text: CAFA’s local controversy exception also requires that the alleged conduct by the in-state defendant “forms a significant basis for the claims” asserted by the class. 28 U.S.C. § 1332(d)(4)(A)(i)(II)(bb). Boeing offers two arguments in support of its contention that Plaintiffs have not alleged that Landau’s conduct forms a “significant basis” for their claims. First, Boeing argues that Landau’s involvement, and thus its exposure to liability, is insignificant in comparison to Boeing’s involvement and exposure. Second, Boeing questions whether Plaintiffs can state a viable claim against Landau under Washington law. Neither argument is persuasive. 22 ALLEN V. BOEING CO. 1. Plaintiffs allege sufficient facts to support a determination that Landau’s conduct forms a “significant basis” for their claims. As previously noted, Boeing’s first argument is based on a faulty premise. Boeing contends that because it used the hazardous chemicals that created the toxic plumes for nearly forty years before Landau had any involvement, Landau’s conduct cannot be important relative to Boeing’s. However, the gravamen of Plaintiffs’ claims is not that Boeing used volatile organic chemicals, but that the chemicals have spread beyond Boeing’s property. Plaintiffs assert separate claims against Boeing and Landau for their alleged failures to investigate, remediate and clean-up the chemical plumes. Should Plaintiffs prove their claims against Landau, its liability may be as great as Boeing’s. Boeing further asserts that Plaintiffs have not alleged that Landau’s conduct forms a “significant basis” for their claims, as required by subsection (bb), because they have not distinguished Landau’s acts from Boeing’s acts. Boeing argues that Landau is at most an isolated player and that Plaintiffs have failed to establish that Landau’s conduct was important relative to Boeing’s. In Benko we adopted a comparative approach for determining whether plaintiffs asserted that the conduct of an in-state defendant forms a “significant basis” for their claims. 789 F.3d at 1118 (holding that “[t]o determine if the “basis for the claims” against [the in-state defendant] is important or fairly large in amount or quantity, we compare the allegations against [the in-state defendant] to the allegations made against the other Defendants.”). In Benko, the in-state defendant was one of six defendants and was responsible for ALLEN V. BOEING CO. 23 only 15 to 20 percent of the activities of all defendants. 780 F.3d at 1118–19. Nonetheless, we concluded that the plaintiffs had “colorable claims” against the in-state defendant. Id. at 1119. Here, in contrast, Landau is one of only two defendants and all of the Plaintiffs have asserted claims against Landau. Following Benko, Plaintiffs have adequately alleged claims against Landau that are “important or fairly large in amount or quantity” relative to the claims against Boeing. Id. at 1118. Moreover, our reasons for rejecting Boeing’s similar arguments in regard to subsection (aa) are equally applicable when applied to subsection (bb). Plaintiffs allege that they have been harmed by Landau’s independent failure for over ten years to properly investigate and remediate the spreading toxic chemical plumes. We do not read the statute, our decisions, or the decisions of our sister circuits as requiring anything more. 2. Plaintiffs have sufficiently alleged a cause of action under Washington law. Boeing reiterates the argument it made in its prior appeal in support of its claim of fraudulent joinder: that Plaintiffs have failed to state a viable claim for negligence against Landau under Washington law. It argues that (a) negligence requires the existence of a duty owed to the complaining party; (b) knowledge of potential future harm does not impose a duty to prevent it; and (c) a voluntarily undertaken duty arises only if the plaintiff detrimentally and reasonably relied on the defendant’s affirmative act or the act increased the plaintiff’s risk of harm. Boeing cites Burg v. Shannon & Wilson, Inc., 110 Wash. App. 798 (2002), to support its argument. 24 ALLEN V. BOEING CO. Boeing recognizes that in Allen, 784 F.3d at 634–35, we rejected its fraudulent joinder argument. It asserts, however, that “evaluating whether a claim survives a fraudulent joinder argument (as to which defendant bears the burden, and doubts are resolved in favor of remand) is not the same as evaluating a claim for purposes of applying the local controversy exception (as to which plaintiff bears the burden, and doubts are resolved against remand).” Although the burden of persuasion may shift from the defendant to the plaintiffs, the focus of the court’s inquiry remains constant: whether Landau’s conduct forms a significant basis for Plaintiffs’ claim against the in-state defendant. See Coleman, 631 F.3d at 1015. Our prior rejection of Boeing’s fraudulent joinder argument does not bar Boeing from asserting that Landau’s conduct was not a significant basis for Plaintiffs’ claims, but Boeing’s arguments remain unpersuasive. Initially, we reject Boeing’s assertion that our language in Allen, 784 F.3d at 636, was a command or an invitation for Plaintiffs to amend their complaint. We declined to consider the local controversy exception because (a) it had not been considered by the district court, and (b) Boeing’s arguments raised intricate questions of Washington law. We quoted language from Coleman that the district court “may, in its discretion, require or permit the plaintiff to file an amended complaint,” id. (quoting Coleman, 631 F.3d at 1021), but specifically left the issue “for the district court to consider,” id. at 637. The fact that the district court did not require an amendment raises no presumption of error from Plaintiffs’ failure to amend their complaint. Boeing’s challenge to the viability of Plaintiffs’ claims against Landau is not convincing. First, Boeing fails to appreciate that in assessing the “significant basis” prong ALLEN V. BOEING CO. 25 under subsection (bb), we are limited to looking at the pleadings. Coleman, 631 F.3d at 1017. This inherently limits the amount of specificity required for a showing that an action falls within the local controversy exception. More importantly, Boeing does not address the core reasoning for our rejection of its fraudulent joinder argument. In Allen, citing Warner v. Design & Build Homes, Inc., 128 Wash. App. 34, 43 (2005), we concluded that the contract between Boeing and Landau could reasonably be construed as intending to benefit Plaintiffs. Allen, 784 F.3d at 635. In Warner, the court held that the plaintiffs, who had purchased a home “as is,” were not third-party beneficiaries of the implied warranty of habitability or workmanlike performance. However, the court explained that in determining whether there are third-party beneficiaries, “[t]he test of intent is an objective one: Whether performance under the contract necessarily and directly benefits the third party.” 128 Wash. App. at 43; see also Postlewait Constr., Inc. v. Great Am. Ins. Cos., 106 Wash. 2d 96, 99 (1986) (en banc) (stating that “the test of intent is an objective one; the key is not whether the contracting parties had an altruistic motive or desire to benefit the third party, but rather, ‘whether performance under the contract would necessarily and directly benefit’ that party. The contracting parties’ intent is determined by construing the terms of the contract as a whole, in light of the circumstances under which it is made.”). Boeing’s brief contains no mention of Warner or Postlewait or the test they articulate, and nothing else in Boeing’s brief undermines our determination that Plaintiffs may be able to state a cause of action against Landau. The 26 ALLEN V. BOEING CO. case cited by Boeing, Burg, 110 Wash. App. 798, is clearly distinguishable. In Burg, the court held that homeowners whose houses were severely damaged in landslides had no standing as third-party beneficiaries to sue the engineering firm that had provided the city with an analysis of the stability of certain real property. Id. at 800, 808. The engineering firm was “hired by the City to make recommendations about increasing the land’s stability.” Id. at 801. Here, the FAC alleges that Landau did not contract to make only recommendations, but to investigate, remediate and clean up the toxic chemical plumes. Boeing cites language in Key Development Investment, LLC v. Port of Tacoma, 173 Wash. App. 1, 29 (2013), stating “[i]t is insufficient that performance of a contract may benefit a third party, rather the contract must have been entered for that party’s benefit or the benefit must be a direct result of performance within the parties’ contemplation.” But Plaintiffs plead facts sufficient to demonstrate that their properties were intended to and will directly benefit from the performance of the contract. Indeed, plaintiffs and their property appear to be the primary beneficiaries of Landau’s and Boeing’s undertaking to investigate and remediate the pollution. In sum, for jurisdictional purposes, Plaintiffs have adequately pled a negligence claim against Landau, as the obvious intended third-party beneficiaries of the BoeingLandau contract. We therefore agree with the district court that Plaintiffs have adequately alleged that Landau’s conduct forms a “significant basis” for their claims, thus meeting the requirement of subsection (bb) and qualifying for the local controversy exception. ALLEN V. BOEING CO. 27