Recently, the Sixth Circuit upheld the district court’s decision to remand a suit brought by a putative class of Flint, Michigan residents arising out of the Flint Water Crisis, a public health disaster regarding the contamination of Flint’s water supply, to state court. See Jennifer Mason, et al v. Lockwood, Andrews & Newnam, et al, No. 16-2313 (6th Cir. November 16, 2016). The Court remanded based upon its determination that the case fell within the “local controversy” exception to the Class Action Fairness Act, which would otherwise have allowed the suit to proceed in federal court. Id.
The Class Action Fairness Act (“CAFA”) was passed by Congress in 2005 with the goal of making it easier to remove class actions to federal court in light of federal diversity jurisdiction requirements. See 28 U.S.C. § 1332(d)). Specifically, CAFA “loosened the requirements for diversity jurisdiction, authorizing federal district courts to hear a class action if the class has more than 100 members, the parties are minimally diverse, and the matter in controversy exceeds the sum or value of $5,000,000.” Jennifer Mason, et al v. Lockwood, Andrews & Newnam, et al, at *2 (citations omitted). There are, however, several exceptions to this expansion of diversity jurisdiction, including the local controversy exception.
Pursuant to that exception, “[a] district court shall decline to exercise jurisdiction . . . over a class action” if: (1) greater than two-thirds of the members of the proposed class are citizens of the forum state; (2) at least one defendant is a defendant who is a citizen of the forum state and from whom significant relief is sought; and (3) principal injuries resulting from the alleged conduct were incurred in the forum state. §1332(d)(4)(A). In this case, Plaintiffs argued that the local controversy exception was applicable because: the putative class consisted of Flint residents; at least one significant defendant, Lockwood, Andrews & Newman, Inc., a firm hired by Flint for design engineering services in connection with rehabilitating Flint’s Water Treatment Plant, was a Michigan professional corporation; and the class members’ injuries were sustained in Flint, Michigan. See Jennifer Mason, et al v. Lockwood, Andrews & Newnam, et al, at *5.
The Sixth Circuit agreed that the Flint class action met the local controversy standard. Id. at *18 (““Indeed, it defies common sense to say a suit by Flint residents against those purportedly responsible for injuring them through their municipal water service is not a ‘local controversy.’”). The Court explained that “[t]he local controversy exception exists to ensure that ‘a truly local controversy—a controversy that uniquely affects a particular locality to the exclusion of all others’—remains in state court. Id. (citing S. Rep. No. 109-14, 39 (2005), reprinted in 2005 U.S.C.C.A.N. 3, 38).
The Sixth Circuit’s decision provides insight into the scope of CAFA and the application of one of its exceptions. First, The Sixth Circuit joined other circuits in ruling that “the party seeking to remand under an exception to CAFA bears the burden of establishing each element of the exception by a preponderance of the evidence.” Id. at *7. Second, with respect to the citizenship of potential class members, in holding that the Plaintiffs satisfied the two-thirds citizenship requirement, the Court explained that an allegation of residency creates a rebuttable presumption of domicile, and therefore citizenship. Id. at *8 (citing D.C. v. Murphy, 314 U.S. 441, 455 (1941)).
In so ruling, the Court rejected the Defendants’ argument that a “naked averment of . . . residence . . . is insufficient to show…citizenship.” Id. at 9 (quoting Robertson v. Cease, 97 U.S. 646, 648 (1878))(noting that they were “not persuaded this line of cases presents compelling authority for rejecting the residency-domicile presumption in this case.”). The Court acknowledged that although alleging residence is insufficient to establish citizenship for the purpose of establishing federal subject matter jurisdiction, because the local controversy exception is “not jurisdictional,” a party seeking to establish citizenship under the exception does not face “the unrelenting headwinds of limited federal jurisdiction.” Id. at *11.
We will continue to monitor whether the Sixth Circuit’s recent decision in Jennifer Mason, et al v. Lockwood, Andrews & Newnam, et al, will impact other class action lawsuits pending in federal court pursuant to CAFA.