Court Opinion

ID: 2737766
Source: CourtListenerOpinion
Date Created: 2014-09-27 05:00:58.50467+00
Date Added: 2024-06-11T10:03:49.826028
License: Public Domain

Case: 14-30735   Document: 00512783989    Page: 1   Date Filed: 09/26/2014

        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT    United States Court of Appeals
                                                   Fifth Circuit

                                                                      FILED
                                                               September 26, 2014
                                No. 14-30735
                                                                   Lyle W. Cayce
                                                                        Clerk
CEDAR LODGE PLANTATION, L.L.C.; PHILLIPS C. WITTER, Individually
and on behalf of all similarly situated persons,

                                          Plaintiffs – Appellees
v.

CSHV FAIRWAY VIEW I, L.L.C.; CSHV FAIRWAY VIEW II, L.L.C.;
CAMPUS ADVANTAGE, INCORPORATED,

                                          Defendants – Appellants

                Appeal from the United States District Court
                    for the Middle District of Louisiana

Before JOLLY, JONES, and HIGGINSON, Circuit Judges.
EDITH H. JONES, Circuit Judge:
      Plaintiffs-Appellees (collectively, “Cedar Lodge”) first brought their
proposed class action against a group of apartment-owning and managing
entities (“Fairway Defendants”) in Louisiana state court.          The Fairway
Defendants removed the case to federal court under the Class Action Fairness
Act (“CAFA”). 28 U.S.C. § 1332(d). Cedar Lodge then amended the complaint
to add Sewer Treatment Specialists, L.L.C. (“STS”), a Louisiana citizen, as a
defendant. With the addition of STS as a “significant local defendant,” Cedar
Lodge moved to remand the case to state court, arguing that the “local
controversy exception” to CAFA jurisdiction applied. 28 U.S.C. § 1332(d)(4)(A).
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                                       No. 14-30735
The district court 1 agreed and remanded. We granted the Fairway Defendants
permission to appeal the remand order. 28 U.S.C. § 1453(c). We now hold that
the application of the local controversy exception depends on the pleadings at
the time the class action is removed, not on an amended complaint filed after
removal. Accordingly, we REVERSE the district court and REMAND the case
for further proceedings in federal court.
       Cedar Lodge purports to represent a class of individuals and entities who
are living or have lived at the Fairway View Apartments in Baton Rouge, or
who work or own property or a business in the immediate vicinity of the
apartment complex. In its initial complaint, Cedar Lodge alleged that the
Fairway Defendants exposed them to harm caused by underground sewage
leaks that discharged higher than permitted levels of contaminants and
hazardous substances.          The amended complaint asserts that the Fairway
Defendants hired STS to maintain the apartment complex’s water treatment
system in 2009, and that STS’s negligence caused injuries to the class.
       The issue in this appeal is whether the district court erred when it
remanded on the basis of the post-removal addition of STS, a Louisiana citizen.
This court reviews the district court’s remand order, which turns on an
interpretation of the statute, de novo.             Under CAFA, federal jurisdiction
extends to class actions alleged under federal or state law with minimal
diversity of citizenship 2 and at least $5,000,000 in controversy. 28 U.S.C.
§ 1332(d)(2). The parties do not dispute that there is federal jurisdiction over

       1  Before issuing its remand order, the district court referred Cedar Lodge’s motion to
the magistrate judge, whose written opinion recommended remand based on the addition of
STS. The district court adopted the magistrate’s report without further comment. For the
sake of simplicity, we refer to the magistrate and the district judge together as “the district
court.”
        2 Pursuant to 28 U.S.C. § 1332(d)(10), the defendant L.L.C.’s are citizens of Delaware

and Illinois; the district court incorrectly applied a non-CAFA standard to the L.L.C.’s.
Campus Advantage is a citizen of Texas and Delaware.
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                                       No. 14-30735
the original complaint.        Nevertheless, CAFA’s local controversy exception
states that the district court “shall decline to exercise jurisdiction” if, inter alia,
the alleged conduct of at least one local defendant “from whom significant relief
is sought” “forms a significant basis for the claims asserted by the proposed
plaintiff class.” 28 U.S.C. § 1332(d)(4)(A)(i). 3 Cedar Lodge contends that the
district court properly declined to exercise federal jurisdiction because the
addition of STS in the amended complaint triggered the local controversy
exception and required the federal court to remand. The Fairway Defendants
respond that the amended complaint does not invoke the local controversy
exception because, under the statutory language which embraces the “time-of-
removal” rule, the local controversy exception must be determined at the time
of removal and is not affected by subsequent events. Cf. Grupo Dataflux v.
Atlas Global Grp., L.P., 541 U.S. 567, 570-71, 124 S. Ct. 1920, 1924 (2004)
(recognizing that the time of filing rule is “hornbook law”). 4
       It is well-established that the time-of-removal rule prevents post-
removal actions from destroying jurisdiction that attached in a federal court
under CAFA. See State of Louisiana v. American National Property & Casualty
Co., 746 F.3d 633, 639-40 (5th Cir. 2014) (describing “overwhelming and
unanimous authority” among the circuit courts for the position that post-
removal events do not oust CAFA jurisdiction). In State of Louisiana, the state
brought a post-hurricane Katrina class action in state court against several
insurers to recover on homeowner policies that were purchased by Louisiana

       3 The parties do not dispute that the other criteria of the local controversy exception
are satisfied. 28 U.S.C. § 1332(d)(4)(A)(i)(I) and (III).

       4Alternatively, the Fairway Defendants maintain that even if the amended complaint
were considered, the allegations against STS are not sufficient to deem it a “significant
defendant”. Because we conclude that the local controversy exception is determined by the
pleadings when the case was removed, we do not reach this argument. Cf. Opelousas Gen.
Hosp. Auth. v. FairPay Solutions, Inc., 655 F.3d 358, 360-63 (5th Cir. 2011).
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                                  No. 14-30735
citizens but later assigned to the state. Id. at 634. Following removal of the
case to federal court on the basis of CAFA, the insurers sought to dismiss
plaintiff’s claims on the ground that the assignments were prohibited under
Louisiana law.    Id. at 634-35. A Fifth Circuit panel certified the relevant
question to the Louisiana Supreme Court, which ruled that each policy must
be evaluated individually to determine whether the assignment is permissible.
Id. at 636. In response to this ruling, plaintiff severed the claims from the class
action into individual actions, and filed a separate amended complaint—1,504,
altogether—for each individual policy. Id. Following severance, the federal
district judges assigned to the individual actions held that CAFA no longer
supported jurisdiction and remanded the severed claims.           Id.    This court
reversed.
      The State of Louisiana opinion described its analysis as a choice between
two competing jurisdictional principles: the time-of-removal rule, which
prohibits post-removal actions from affecting federal court jurisdiction, and
“the rule that an action severed from the original case must have an
independent jurisdictional basis, which in turn calls for jurisdictional facts to
be determined post-removal, at the time of severance.” Id. at 636-37. The text
of CAFA supplied the answer. The statute, the court explained, “defines class
action as any civil action filed under [Federal Rule of Civil Procedure] Rule 23
or a state class action statute.” Id. at 639 (emphasis in original). Thus, what
matters for the purpose of determining CAFA jurisdiction is “the status of an
action when filed—not how it subsequently evolves.” Id. The court cited the
relevant legislative history bolstering this interpretation.            The Senate
Judiciary Committee’s Report on the bill dismissed concerns that post-filing
events might destroy jurisdiction by clarifying that once a complaint is
properly removed to federal court, its jurisdiction cannot be ‘ousted’ by later
events. Id. (internal citation omitted). Finally, the court declined to contradict
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                                      No. 14-30735
the “overwhelming and unanimous authority” of the other circuit courts. Id.
at 640. Five other appellate courts have considered whether post-removal
actions defeat CAFA jurisdiction and have unanimously ruled that they do not.
Id. at 639 (citing cases).
       As Cedar Lodge correctly asserts, the issue here is not identical to the
question presented in State of Louisiana. In that case, the plaintiff sought
remand because after severance, no class action remained for disposition under
CAFA. Here, Cedar Lodge added a defendant post-removal and relies on
CAFA’s local controversy exception, whereby the district court “shall decline to
exercise jurisdiction” over a class action that meets the exception's
requirements.       28 U.S.C. § 1332(d)(4)(emphasis added).                Cedar Lodge
maintains that this declination must occur whenever, during the litigation and
assuming no purposeful forum manipulation, the class action falls within the
parameters laid out by the exception. This is not, it asserts, a case where the
basis for jurisdiction was “destroyed” but one where Congress commanded
abstention and forbade federal courts to step in. See, e.g., Hollinger v. Home
State Mut. Ins. Co., 654 F.3d 564, 570 (5th Cir. 2011) (referring to the local
controversy exception as the “mandatory abstention provision of CAFA”);
Graphic Commc’ns Local 1B Health & Welfare Fund A v. CVS Caremark Corp.,
636 F.3d 971, 973 (8th Cir. 2011) (explaining that the local controversy
exception operates as an abstention doctrine). Congress’s evident purpose was
to remove purely local controversies from the otherwise broad scope of CAFA.
Cedar Lodge thus distinguishes all of the prior caselaw—and mysteriously fails
even to cite State of Louisiana—as being concerned solely with preventing
“jurisdiction-destroying” post-removal actions. 5

       5Cedar Lodge cites no supporting on-point authority for its position. Our research
indicated that the Third Circuit, while ruling on another aspect of the local controversy
exception, determined that the exception “requires consideration of the defendants presently
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                                      No. 14-30735
       Despite its superficial appeal, we reject this argument for several
reasons. Foremost, as with all cases involving statutory interpretation, is that
Cedar Lodge’s argument runs into a similar textual problem that existed in
State of Louisiana. Under the statute, the local controversy exception applies
to the district court’s jurisdiction “over a class action.”                     28 U.S.C.
§ 1332(d)(4)(A)(i). The term “class action” has the same definition here as it
does in the portion of the statute that sets the initial requirements for federal
jurisdiction over class actions. Id. § 1332 (d)(2). In both cases, “class action”
refers to the “civil action filed.” Id. § 1332(d)(1)(B) (emphasis added). Thus,
when Congress provided that district courts are to decline to entertain
jurisdiction over “class actions,” it meant that the courts are to look at the
action when it is filed in order to determine whether the conditions for
abstention are present.
       As State of Louisiana has definitively construed the relevant statutory
language, we are bound by its holding insofar as the same language controls
the local controversy exception. Additionally, if we were to accept Cedar
Lodge’s interpretation, it would result in the very odd situation that while post-
removal events could eliminate the class status of the case yet not “destroy”
CAFA jurisdiction, see, e.g., State of Louisiana, the post-removal addition of a
“significant” local defendant would require remand. Congress, however, was
well aware of the potential for forum manipulation in class actions by the
addition of local, non-diverse defendants. According to the Senate Judiciary
Committee Report, this was one of the most common tactics used to guarantee
a state court tribunal.           S. Rep. 109-14, at 26 (2005), reprinted in

in the action [i.e., not three defendants who had been dismissed].” Kaufman v. Allstate New
Jersey Ins. Co., 561 F.3d 144, 153 (3d Cir. 2009)(emphasis added). We are not persuaded by
the court’s inapt analogy to 28 U.S.C. § 1332(d)(7), but we are bound, in any event, by State
of Louisiana.
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                                No. 14-30735
2005 U.S.C.C.A.N. 3, 26.    CAFA’s local controversy exception reduces the
possibility of this manipulation somewhat and increases the likelihood that a
“significant” local defendant will be added at the outset of a case to defeat
removal. Consequently, a post-removal attempt to add a local defendant may
raise doubts about that party’s “significance.” In any event, consistent with
CAFA’s overarching purpose to curb class action abuse, the Judiciary
Committee described the local controversy exception as “a narrow exception
that was carefully drafted to ensure that it does not become a jurisdictional
loophole.” Id. at 39 (emphasis added).
      In sum, the language, structure, and history of CAFA all “demonstrate
that Congress contemplated broad federal court jurisdiction with only narrow
exceptions.” Evans v. Walter Indus., 449 F.3d 1159, 1164 (11th Cir.
2006)(citation omitted). Allowing Cedar Lodge to avoid federal jurisdiction
through a post-removal amendment would turn the policy underlying CAFA
on its head.
      For these reasons, the district court’s order of remand is REVERSED,
and the case is REMANDED for further proceedings in accord herewith.

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