Cheapside Minerals, Ltd. v. Devon Energy Prod. Co.

94 F.4th 492

CHEAPSIDE MINERALS, LIMITED; Paul R. Lucas, Jr.,

individually and as independent executor of the Estate of Mary K. Lucas, deceased;

James E. Natho; Mary Natho; McDougal Family 2003, Limited; et al., Plaintiffs-Appellees, v. DEVON ENERGY PRODUCTION COMPANY, L.P.,formerly known as GeoSouthern Dewitt Properties, L.L.C., Defendant—Appellant,

Cheapside Minerals, Limited; McDougal Family 2003, Limited;

Paul R. Lucas, Jr., individually and as independent executor of the Estate of Mary K. Lucas, deceased;

James E. Natho; Mary Natho; et al., Plaintiffs—Appellees, v. Devon Energy Production Company, L.P.,formerly known as GeoSouthern Dewitt Properties, L.L.C., Defendant—Appellant.

No. 23-40591

CONSOLIDATED WITH No. 24-40026

United States Court of Appeals, Fifth Circuit

FILED March 1, 2024

Appeal from the United States District Court for the Southern District of Texas USDC, No. 6:23-CV-34, Nelva Gonzales Ramos, U.S. District Judge

Jordan K. Mullins, Attorney, Ian M. Davis, McGinnis Lochridge, L.L.P., Austin, TX, Austin Wayne Brister, McGinnis Lochridge, L.L.P., Houston, TX, Kevin Dudley Cullen, Cullen, Carsner, Seerden & Cullen, L.L.P., Victoria, TX, Michael Avery Sheppard, I, Crain & Sheppard, Cuero, TX, for Plaintiffs—Appellees.

Jane Webre, Anthony Frank Arguijo, Amy Lee Dashiell, Daryle Davin McGinnis, Christopher Donald Sileo, Scott, Douglass & McConnico, L.L.P., Austin, TX, for Defendant—Appellant.

Before Jones, Willett, and Duncan, Circuit Judges.

Edith H. Jones, Circuit Judge:

Defendant Devon Energy Production Company, L.P. appeals from the district court's order remanding this oil-and-gas royalties dispute to Texas state court. Devon contends that the Class Action Fairness Act, 28 U.S.C. §§ 1332(d), 1453, 1711-15 (CAFA), requires that this case be heard in federal court. The district court disagreed, finding CAFA's "local controversy" exception required the court to remand. We interpret the statute differently and, accordingly, VACATE its judgment remanding this case to state court.

I. BACKGROUND

A group of 214 plaintiffs sued Devon in Texas state court, alleging that Devon had underpaid them in excess of $100 million in oil-and-gas royalties. Devon, a citizen of Oklahoma, is a lessee under certain leases concerning lands in Dewitt County, Texas.¹ Devon markets and sells hydrocarbons produced from wells on those lands and pays royalties to the Plaintiffs. Devon makes those payments to locations specified by Plaintiffs from its offices in Oklahoma City, Oklahoma. There is no dispute that more than two-thirds of Plaintiffs are citizens of Texas but that some Plaintiffs do not reside in Texas. In fact, some Plaintiffs reside in places that are thousands of miles away from Texas, such as Alaska, Massachusetts, and the United Kingdom.

Pursuant to CAFA, Devon removed this case to federal court. Plaintiffs sought remand based on CAFA's "local controversy" exception.² The district court agreed that the local controversy exception applied and ordered that the case be remanded.³

Devon appealed the remand order under 28 U.S.C. § 1291 and also filed a request to challenge the remand order under 28 U.S.C. § 1453(c). We consolidated the separate filings.

II. DISCUSSION

"We review de novo whether the local controversy exception to CAFA jurisdiction should apply in this case." Opelousas Gen. Hosp. Auth. v. FairPay Sols., Inc., 655 F.3d 358, 360 (5th Cir. 2011) (per curiam).

A.

Before turning to the merits, we first address our appellate jurisdiction. We granted Devon permission to appeal under § 1453(c), but we asked the parties to brief whether we additionally have jurisdiction based on § 1291.⁴ As it happens, both the Eighth and Eleventh Circuits hold that appellants may rely on § 1291 for jurisdiction over an order remanding a case based on CAFA's local controversy exception.⁵ See Simring v. GreenSky, LLC, 29 F.4th 1262, 1265-66 (11th Cir. 2022) (court could hear appeal under § 1291 where appellant "did not rely at all on Section 1453" and "did not need to file a motion for permissive appeal"); Kitchin v. Bridgeton Landfill, LLC, 3 F.4th 1089, 1092 (8th Cir. 2021) ("[A]fter recognizing that we had previously denied the appellants permission to appeal under § 1453(c), we nevertheless proceeded to address their separately filed § 1291 appeal, concluding that we had jurisdiction under § 1291 to review the district court's application of the local-controversy exception." (citing Jacks v. Meridian Res. Co., LLC, 701 F.3d 1224, 1228 n.2, 1229 (8th Cir. 2012))); see also 10 C. Wright, A. Miller, & E. Cooper, FEDERAL PRACTICE AND PROCEDURE § 3931.2 (3d ed. 2023) ("An order remanding after removal under the Class Action Fairness Act . . . can be appealed as of right, and § 1447(d) does not bar review if the remand is based not on a lack of jurisdiction but on a decision to decline jurisdiction under the local-controversy exception or the home-state exception." (footnotes omitted)). We follow this persuasive authority.

Generally, 28 U.S.C. § 1447(d) limits this court's jurisdiction to hear appeals from orders remanding cases to state court. Under § 1447(d), a remand order is unreviewable if the district court remands the case for lack of subject matter jurisdiction or a procedural removal "defect." See Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127-28, 116 S. Ct. 494, 497, 133 L.Ed.2d 461 (1995); Schexnayder v. Entergy La., Inc., 394 F.3d 280, 283 (5th Cir. 2004). Thus, when a case is remanded for a reason other than subject matter jurisdiction or a procedural "defect," § 1447(d) does not bar review and an appellant can rely on § 1291 to appeal the remand order. See Firefighters' Ret. Sys. v. Citco Group Ltd., 796 F.3d 520, 525 (5th Cir. 2015) ("If the statutory bars to review do not apply, a remand order is a final order for the purposes of 28 U.S.C. § 1291." (citing Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 713, 116 S. Ct. 1712, 1719, 135 L.Ed.2d 1 (1996))).

CAFA provides a basis for expedited appellate review of appeals from orders that either remand or deny remand of class action litigation. It provides: "Section 1447 shall apply to any removal of a case under this section, except that notwithstanding section 1447(d), a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed . . . ." § 1453(c)(1) (emphases added). But § 1453(c) did not supplant § 1291 and become the lone vehicle by which an appellant can obtain review of a final order remanding class action litigation to state court; it simply permits certain appeals denying remand that §§ 1447(d) and 1291 would have otherwise prohibited. See BlackRock Fin. Mgmt. Inc. v. Segregated Account of Ambac Assur. Corp., 673 F.3d 169, 175-76 (2d Cir. 2012); BP Am., Inc. v. Oklahoma ex rel. Edmondson, 613 F.3d 1029, 1032-33 (10th Cir. 2010) (Gorsuch, J.) ("Congress has specifically and explicitly suspended the operation of § 1447(d) with respect to CAFA remand orders arising, like this one, under § 1453(c)(1).").

Moreover, § 1447(d) does not trump § 1291 to deny appeal of a remand order based on the local controversy exception, because § 1447(d) does not prohibit review of remands based on "abstention principles." Wallace v. La. Citizens Prop. Ins. Corp., 444 F.3d 697, 701 (5th Cir. 2006). This court has held that orders remanding cases under CAFA's local controversy exception are based on abstention principles. Watson v. City of Allen, 821 F.3d 634, 639 (5th Cir. 2016); accord Hollinger v. Home State Mut. Ins. Co., 654 F.3d 564, 570 (5th Cir. 2011) (per curiam) (referring to the local controversy exception as a "mandatory abstention provision of CAFA"). In sum, appellants may rely on § 1291 or § 1453(c) in appealing orders remanding a case under the local controversy exception. But only in appeals predicated on § 1453(c) is this court bound to rule within sixty days of our granting permission to appeal. Compare § 1453(c)(2), with § 1447; see also Patterson v. Dean Morris, L.L.P., 444 F.3d 365, 370 (5th Cir. 2006).

B.

Turning to whether the district court erred in remanding this case, neither party disputes that the district court had subject matter jurisdiction pursuant to CAFA, § 1332(d)(2).⁶ Nevertheless, Plaintiffs urge, and the district court found, that this case belongs in state court because of CAFA's local controversy exception. That exception provides:

A district court shall decline to exercise jurisdiction under paragraph (2)—

(A)(i) over a class action in which—

(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). Plaintiffs "bear the burden of establishing that they fall within [the] exception." Opelousas Gen. Hosp. Auth., 655 F.3d at 360. The parties also agree that prongs I and II of the exception's statutory prerequisites are satisfied.

They dispute whether, as prong III requires, the "principal injuries" resulting from Devon's underpayment of royalties were sustained in Texas. For the following reasons, we agree with Devon that Plaintiffs failed to show the "principal injuries" from royalty underpayments were "incurred" in...