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Speed v. JMA Energy Company, LLC

United States District Court, E.D. Oklahoma

June 13, 2017

DAVID LANDON SPEED, Plaintiff,
v.
JMA ENERGY COMPANY, LLC, Defendants.

          ORDER

          Ronald A. White United States District Judge

         Before the court is Plaintiff's amended motion to remand [Docket No. 21]. Plaintiff filed a class action petition against JMA Energy Company, LLC (hereinafter “JMA”) in the District Court of Hughes County on November 18, 2016, bringing claims based on JMA's alleged willful and ongoing violations of Oklahoma law related to payment of oil and gas production proceeds to well owners. Docket No. 2-1. JMA filed a notice of removal on January 4, 2017. Removal was based on the Class Action Fairness Act (“CAFA”), codified at 28 U.S.C. §§1332(d) and 1453.

         Generally, diversity jurisdiction requires complete diversity of the parties pursuant to 28 U.S.C. §1332(a). CAFA replaces this requirement with one of “minimal diversity” as stated in 28 U.S.C. §1332(d)(2)(A). “Under CAFA, a federal district court has subject matter jurisdiction ‘over class actions involving [1] at least 100 members and [2] over $5 million in controversy when [3] minimal diversity is met (between at least one defendant and one plaintiff-class member).'” Dutcher v. Matheson, 840 F.3d 1183, 1190 (10th Cir. 2016) (quoting Coffey v. Freeport McMoran Copper & Gold, 581 F.3d 1240, 1243 (10th Cir. 2009)).[1] “‘Although CAFA's language favors federal jurisdiction over class actions, Congress did not give federal courts jurisdiction over all class actions, ' as CAFA contains certain mandatory and discretionary exceptions.” Mattingly v. Equal Energy, No. 10-CV-565-TCK-PJC, 2011 WL 3320822, *1 (N.D. Okla. Aug. 1, 2011) (quoting Coffee, 581 F.3d at 1262).

         The only dispute before the court is the application of the “discretionary exception”[2] that “allows a federal court to decline to exercise jurisdiction over a class action that is otherwise covered by CAFA based on six enumerated factors.”[3] Dutcher, 840 F.3d at 1194 (citing 28 U.S.C. §1332(d)(3)). The burden in this regard is on the plaintiff, as the party seeking remand. Id. at 1190. To qualify for consideration of these factors, Plaintiff must establish two prerequisites: (1) greater than one-third but less than two-thirds of the members of the proposed class are citizens of Oklahoma and (2) the primary defendants, are citizens of Oklahoma. Id. at 1194. The parties have stipulated to the first of these prerequisites. Docket No. 21-1. As to the second, JMA, the only defendant, is a citizen of Oklahoma. Once those prerequisites are satisfied, as they are here, Plaintiff need not satisfy all six factors of section 1332(d)(3); rather, “a balancing test should be applied, taking into consideration the ‘totality of the circumstances.'” Mattingly, 2011 WL 3320822 at *2. The court will address each factor in turn.[5]

         Regarding the first factor, the Fifth Circuit states “the terms local and national connote whether the interests of justice would be violated by a state court exercising jurisdiction over a large number of out-of-state citizens and applying the laws of other states.” Preston v. Tenet Healthsystem Memorial Med. Ctr., Inc., 485 F.3d 804, 822 (5th Cir.2007). In this court's view, such a concern is not present in the case at bar.

         In a case similar to the one now before the court where the defendants were citizens of Oklahoma and had their principal place of business in Oklahoma, the acts giving rise to the plaintiffs' claims occurred in Oklahoma, and the subject oil and gas wells were all located in Oklahoma, the court found that the first factor weighed in favor of remand. Mattingly, 2011 WL 3320822 at *3. See also Gibson v. Continental Resources, Inc., No. CIV-15-611-M, 2016 WL 4083652, at *2 (W.D. Okla. Jan. 28, 2016) (finding the alleged “ordinary state law claims” did not “invoke any type of national interest.”). Here, all of the subject oil and gas wells are located in Oklahoma, all class members own interests in the subject Oklahoma wells, Plaintiff is an Oklahoma citizen (along with 48.46% of the class), JMA is an Oklahoma citizen with its principal place of business in Oklahoma, the business activities that gave rise to this case occurred in Oklahoma, and the claims are based upon Oklahoma law. Docket No. 21, at 4; Docket No. 23, at 2.

         JMA argues that the first factor's focus is not necessarily application of law, but rather the national interest in the sense of the interests of the national and domestic oil and gas industry, as well as to royalty owners throughout the United States. JMA also argues that other jurisdictions consider the rulings of Oklahoma courts in determining their own oil and gas rules and laws. The court is not persuaded. One court may always “consider” the ruling of another court, but this does not create a national interest. The Fifth Circuit, in upholding a remand regarding a class action arising out of Hurricane Katrina, observed: “Just because the nation takes interest in Hurricane Katrina does not mean that the legal claims at issue in this class action lawsuit qualify as national or interstate interest.” Preston, 485 F.3d at 822. This factor weighs in Plaintiff's favor.

         As to the second factor, Plaintiff asserts he only bring claims under Oklahoma law, the State where the action was originally filed. In response, JMA contends the claims are likely to be governed by the laws of multiple states, not the laws of Oklahoma only. The court in Mattingly found that it was “without sufficient information, at this stage of the proceedings, to conduct a complete choice of law analysis.” Mattingly, 2011 WL 3320822, at *3. Therefore, the court found the factor was “neutral.” Id.

         This approach reflects a difficulty in the application of this factor. A motion to remand will always be presented at an early stage, and therefore a conflict of law analysis appearing premature might always result in finding the factor “neutral.” It would seem the court must make the best determination it can based on the present record. This court notes, as did the Mattingly court, that the decision by the Oklahoma Supreme Court in Weber v. Mobil Oil Co., 243 P.3d 1 (Okla. 2010), concludes that Oklahoma law would govern class members' fraud claims even though some members were citizens of other states. Mattingly, 2011 WL 3320822, at *3 (citing Weber, 243 P.3d at 6).

         JMA also suggests possible implication of federal law, but not definitively and only tangentially. One treatise notes that “[c]ourts have generally held that the second factor . . . can weigh in favor of remand even if other claims (including claims under federal statutes or the laws of other states) are involved in the suit.” William B. Rubenstein, Newberg on Class Actions § 6:21 (5th ed. 2017). The court finds the second factor also slightly weighs in favor of the Plaintiff.

         Next, the court inquires whether the class action has been pleaded in a manner that seeks to avoid federal jurisdiction.[7] JMA asserts that it was, as demonstrated by the state court petition (1) excluding public traded companies and their affiliated entities that produce, gather, process, or market gas and (2) suing only Oklahoma citizens as defendants, despite the possibility of including other, diverse defendants. Again, the court is not persuaded. This factor “evaluates whether the proposed class encompasses all of the potential class members and claims that would be expected to be included in the class action.” Buck v. Metro-Goldwyn-Mayer Studios Inc., No. CV 14-03637 DDP, 2014 WL 3510151, at *3 (C.D. Cal. July 14, 2014). “‘If the plaintiff proposed a natural class - a class that encompasses all of the people and claims that one would expect to include in a class action, ' or, in other words, the ‘class definition and claims appear to follow a natural pattern, ' Factor C would weigh in favor of the federal court remanding the complaint.” Id. The court finds that Plaintiff proposed a natural class.[8] The court finds this factor weighs in favor of remand.

         The fourth factor addresses the forum's nexus to class members, alleged harm, or defendants. Under similar facts, the Mattingly court stated:

This action relates to interests in real property located in Oklahoma and the proposed class members all own interests in such Oklahoma property. The proposed class members therefore have a strong connection to Oklahoma even if they are not all Oklahoma residents. Further, Defendants are citizens of Oklahoma, and the underlying actions giving rise to this suit took place in Oklahoma. In light of these facts, the Court ...

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