Rowell et al v. Shell Chemical LP et al

Filing 49

ORDER & REASONS: denying 36 Re-Urged Motion to Remand. Signed by Judge Carl Barbier on 11/18/15. (sek)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

SHEILA ROWELL, ET AL.

CIVIL ACTION

VERSUS

NO: 14-2392

SHELL CHEMICAL LP, ET AL.

SECTION: “J” (3)

ORDER AND REASONS
Before the Court is a Re-Urged Motion to Remand (Rec. Doc.
36) filed by Plaintiffs, Sheila Rowell, Gloria Riley, and Deanna
Porter; an opposition thereto (Rec. Doc. 38) filed by Defendant,
International-Matex Tank Terminals (“IMTT”); an opposition (Rec.
Doc. 40) filed by Defendant, Shell Chemical LP (“Shell”); a reply
to the oppositions (Rec. Doc. 43) filed by Plaintiffs; and a surreply (Rec. Doc. 48) filed by IMTT. Having considered the motion
and legal memoranda, the record, and the applicable law, the Court
finds that the motion should be DENIED.
FACTS AND PROCEDURAL BACKGROUND
This matter arises out of the alleged emission of noxious
fumes from a chemical refining facility in St. Rose, Louisiana.
Plaintiffs are an unquantifiable group of people who reside, work,
or routinely visit the St. Rose area, located in St. Charles
Parish, and in close proximity to the 1,000 acre chemical refinery
facility

(“the

facility”),

which

1

is

jointly

operated

by

Defendants, Shell and IMTT. Plaintiffs allege that as early as
June 1, 2014, Defendants began emitting toxic substances from the
facility, namely sulfur dioxide and asphalt fumes. Plaintiffs
further allege that these fumes carried such a noxious and pungent
odor that they “prevented Plaintiffs from venturing outside and
enjoying the use of their properties with family and friends.”
(Rec. Doc. 12-2, at 3.) Plaintiffs also claim that exposure to
these fumes and emissions caused certain Plaintiffs to suffer from
physical side effects, such as “nausea, vomiting, headaches, eye
irritation, and respiratory difficulties.” (Rec. Doc. 12-2, at 4.)
On September 11, 2014, three named Plaintiffs, Sheila Rowell,
Gloria Riley, and Deanna Porter, filed suit against IMTT and Shell
in the Civil District Court for the Parish of Orleans. In their
original petition for damages, Plaintiffs asserted various state
law claims alleging negligence, trespass, and violation of the
terms of a servitude. (Rec. Doc. 1-6, at 5-6.) Plaintiffs seek
damages

for,

enjoyment

of

inter

alia,

property,

personal

medical

injuries,

expenses,

loss

mental

of

use

and

anguish,

and

diminution of property value. (Rec. Doc. 1-6, at 6-7.) On September
18, 2014, Plaintiffs filed their First Amended and Supplemental
Petition

for

Damages,

in

which

they

included

class

action

allegations and sought damages on behalf of all unnamed parties
similarly situated as Plaintiffs.

2

On October 17, 2014, Defendants jointly removed Plaintiffs’
lawsuit to this Court, alleging federal jurisdiction pursuant to
the Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. §
1332(d). Defendants assert that they have met the requirements for
removal pursuant to CAFA because the putative class exceeds one
hundred persons, minimal diversity under CAFA is satisfied, and
the aggregate damages sought by the class exceed $5 million.
Plaintiffs

then

filed

their

first

Motion

to

Remand,

requesting that the Court remand the matter to the Civil District
Court for the Parish of Orleans, on the basis that the matter
lacked federal subject matter jurisdiction. The parties’ arguments
turned on whether the local controversy exception to CAFA applied.
Plaintiffs asserted that the exception applied because IMTT’s
principal place of business was in Louisiana, making it a Louisiana
citizen. Shell and IMTT contended that IMTT’s principal place of
business was in New York at the relevant time. This Court found
that IMTT’s citizenship was unclear and ordered the parties to
conduct

discovery

on

the

issue

of

IMTT’s

principal

place

of

business.
Following
instant

motion

the
on

close

of

September

discovery,
30,

2015.

Plaintiffs
IMTT

and

filed

Shell

the

filed

oppositions on October 14. (Rec. Doc. 38; Rec. Doc. 40.) Plaintiffs
filed a reply to the oppositions on October 21. (Rec. Doc. 43.)

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After obtaining the leave of this Court, IMTT filed a sur-reply on
October 27. (Rec. Doc. 48.)
PARTIES’ ARGUMENTS
Before

July

2014,

IMTT’s

undisputed

principal

place

of

business was in Louisiana, the location of its headquarters and
high-level management staff, including its CEO and its President.
However, in July 2014, Macquarie Infrastructure Company (“MIC”),
a fifty-percent owner of IMTT, purchased the remaining fifty
percent and became the full owner of IMTT. MIC is fund owned by
Macquarie, a financial services company, and is based in New York
City.
In their Motion to Remand, Plaintiffs assert that IMTT’s
principal place was in Louisiana when they initially filed suit in
state court. First, Plaintiffs emphasize that IMTT’s “corporate
headquarters” has always been located in New Orleans, as IMTT
itself has often asserted. According to Plaintiffs, only two
executives

worked

in

New

York

in

fall

2014;

all

other

IMTT

executives and employees were located in Louisiana. Plaintiffs
point out that all of IMTT’s terminal managers reported to IMTT
President Richard “Rick” Courtney, who worked in New Orleans.
Moreover, Plaintiffs argue that any IMTT business conducted by the
New York-based executives was performed in New Orleans. If IMTT’s
principal place of business shifted to New York, Plaintiffs argue
that this occurred in October 2014, after their case was filed,
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because IMTT’s SEC quarterly filing dated October 29 referred to
the beginning stages of New York executives exercising control
over IMTT.
IMTT and Shell argue that the principal place of business
analysis turns on the location of the highest ranking officers who
exercised significant control over IMTT. According to Defendants,
James Hooke, then IMTT’s Chief Executive Officer, and James May,
then IMTT’s Chief Financial Officer, controlled the company from
New York. After MIC assumed full ownership of IMTT on July 7, 2014,
Hooke and May began exercising ultimate decision-making authority
from New York. Thus, IMTT’s principal place of business in the
fall of 2014 was New York, where it remained until February 2015
when Hooke stepped down as CEO. Shell specifically points out that
Hooke and May handled the refinancing of IMTT’s credit in the fall
of 2014 in New York. Also, New York executives implemented spending
procedures

for

IMTT

personnel,

hired

and

determined

the

compensation of senior officials, approved contracts of a certain
value, and made other policy decisions. Shell also points out that
MIC’s Board approved IMTT’s budget.
LEGAL STANDARD
A defendant may remove a civil action filed in state court if
a federal court would have had original jurisdiction over the
action. See 28 U.S.C. § 1441(a). The removing party bears the
burden of establishing that federal jurisdiction exists at the
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time of removal. DeAguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th
Cir. 1995). Ambiguities are construed against removal and in favor
of remand because removal statutes are to be strictly construed.
Manguno v. Prudential Prop. & Cas. Ins., 276 F.3d 720, 723 (5th
Cir. 2002).
Congress enacted CAFA to provide for the “removal of class
actions involving parties with minimal diversity.” In re Katrina
Canal Litig. Breaches, 524 F.3d 700, 705 (5th Cir. 2008). In order
to justify removal pursuant to CAFA: (1) the class action must
involve an aggregate amount in controversy in excess of $5 million;
(2) there must exist minimal diversity between the parties; and
(3) the class must include at least one hundred members. Rasberry
v. Capitol Cnty. Mut. Fire Ins. Co., 609 F. Supp. 2d 594, 600 (E.D.
Tex. 2009). In order to satisfy minimal diversity, any member of
a class of plaintiffs must be a citizen of a state different from
any defendant. 28 U.S.C. § 1332(d)(2)(A).
Pursuant to the local controversy exception, a court shall
decline to exercise jurisdiction:
(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
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(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.
28 U.S.C. § 1332(d)(4)(A). The burden falls to the party seeking
remand to establish that an exception to CAFA applies. Preston v.
Tenet Healthsystem Mem'l Med. Ctr., Inc., 485 F.3d 793, 797 (5th
Cir. 2007).

The

Fifth

Circuit

has

recognized

that

the

local

controversy exception is intended to be a narrow one, “with all
doubts resolved in favor of exercising jurisdiction over the case.”
Id. (citing Westerfield Indep. Processing, LLC, 621 F.3d 819, 822
(8th Cir. 2010); Evans v. Walter Indus. Inc., 449 F.3d 1159, 1163
(11th Cir. 2006)).
In

considering

whether

the

local

controversy

exception

applies, “the jurisdictional facts that support removal must be
judged at the time of removal.” Broyles v. Cantor Fitzgerald &
Co., No. 10-854, 2011 WL 4737197, at *2 (M.D. La. Sept. 14, 2011).
Generally, when a case is removed based on diversity, the case
must have been removable at the time it was filed in state court,
meaning that post-filing changes in a party’s citizenship will not

7

convert a nonremovable case into a removable one. 1 Gibson v. Bruce,
108 U.S. 561, 563 (1883). For purposes of traditional diversity
jurisdiction,

the

citizenship

of

a

general

partnership

is

determined by the citizenship of the partnership’s constituent
partners. Int’l Paper Co. v. Denkmann Assocs., 116 F.3d 134, 137
(5th Cir. 1997); Temple Drilling Co. v. La. Ins. Guar. Ass’n, 946
F.2d 390, 393 (5th Cir. 1991). However, for purposes of the local
controversy

exception,

CAFA

instructs

that

“an

unincorporated

association shall be deemed to be a citizen of the State where it
has its principal place of business and the State under whose laws
it is organized.” 28 U.S.C. § 1332.
The test for determining the location of a company’s principal
place of business was developed in Hertz Corp. v. Friend, in which
the Supreme Court of the United States determined that the phrase
“principal place of business” “is best read as referring to the
place

where

coordinate

a

the

corporation’s
corporation’s

officers

direct,

activities,”

also

control,
known

as

and
the

company’s “nerve center.” 559 U.S. 77, 92-93 (2010). The Supreme
Court further recognized that this should be the place “where the
corporation

maintains

its

headquarters

–

provided

that

the

1 CAFA provides that the citizenship of members of the plaintiff class must be
determined as of the date of filing the complaint. 28 U.S.C. § 1332(d)(7). While
CAFA does not provide the proper time to examine the citizenship of the
defendants, the general rule is the same as the statutory rule. Therefore, the
citizenship of IMTT must also be determined as of the date of the filing of
Plaintiffs’ petition.

8

headquarters is the actual center of direction, control, and
coordination, i.e., the ‘nerve center,’ and not simply an office
where the corporation holds its board meetings.” Id. at 93.
A company can have only one principal place of business, which
is “where top officers direct the corporation's activities and not
necessarily where a corporation's general business activities take
place or where its plants, sales locations, or employees are
located.” Elizondo v. Keppel Amfels, L.L.C., No. 14-220, 2015 WL
1976434, at *4 (S.D. Tex. May 1, 2015). When the high-level
officers are dispersed geographically, the principal place of
business

is

where

“a

critical

mass

of

controlling

corporate

officers” works or where “significant corporate decisions and
strategy-forming are made,” even if some officers live and work in
another state where the company’s day-to-day activities occur. Id.
at *7; see Hoschar v. Appalachian Power Co., 739 F.3d 163, 172
(4th Cir. 2014) (“[I]f a corporation's day-to-day operations are
managed in one state, while its officers make significant corporate
decisions and set corporate policy in another, the principal place
of business is the latter.”)
DISCUSSION
The parties do not dispute that, as a general partnership,
IMTT is a citizen of Delaware, having been organized under the
laws of Delaware. (Rec. Doc. 12-2, at 12; Rec. Doc. 23, at 18).
Thus, the determination of IMTT’s citizenship, and the application
9

of the local controversy exception, turns on the location of IMTT’s
principal place of business as of September 2014.
Once MIC became the sole owner of IMTT in July 2014, it began
implementing changes to the company. MIC CEO James Hooke became
IMTT’s CEO, and Macquarie Vice President James May became IMTT’s
CFO and Senior Vice President. The IMTT Board of Directors was
reorganized to consist of Hooke, May, and Todd Weintraub, all of
whom worked in New York. (Rec. Doc. 36-5, at 5.) The remainder of
the

management

positions

were

filled

by

Louisiana-based

IMTT

officials.
The level of control exercised by Hooke, May, and the IMTT
Board indicates that the “center of overall direction, control,
and coordination” was New York. See Hertz Corp., 559 U.S. at 96.
The Board was responsible for implementing a delegated authority
framework and for setting company policies, including employee
policies, accounting policies, and risk management policies. (Rec.
Doc. 38-9.) The Board also had the exclusive powers to amend the
company’s governing documents; set and amend the annual budget;
set a five-year business plan; make investment decisions; appoint
the CEO, auditors, financial advisors, and legal counsel; and make
decisions about the company’s insurance policies. Id. In addition,
the

Board

was

responsible

for

approving

major

litigation

settlement decisions and contracts when the value of the settlement
or

contract

exceeded

$2,500,000.
10

Id.

Finally,

the

Board

was

empowered to hire, evaluate, and determine the compensation of
employees who reported directly to the CEO. Id.
Hooke and May were also responsible for the overall direction
and control of IMTT. Approval from Hooke or May was required to
approve any litigation settlements, contracts, or transactions
between $500,000 and $2,500,000; change employee benefits below
$500,000; contract with aggregate expenditures above $5,000,000;
hire and determine compensation of senior officers or others
reporting

to

CEO;

file

tax

returns;

operate

and

close

bank

accountings and determine signature authority; and establish board
debt reserves. (Rec. Doc. 36-5, at 7.) As Chairman of the Board
and

CEO,

Hooke

determined

who

would

be

appointed

to

IMTT’s

executive positions. (Rec. Doc. 36-5, at 6.) May had overall
authority

for

financial

services,

such

as

insurance

and

accounting. (Rec. Doc. 36-7.)
Hooke and May also made several important policy decisions
for IMTT. May testified in a deposition that he and other MIC
executives developed a business plan to maintain all of IMTT’s
locations

and

provide

the

same

customer

service

after

the

acquisition. (Rec. Doc. 36-3, at 13-14.) May also led the push to
develop financial and safety objectives for the company. (Rec.
Doc. 36-9.) In addition, Hooke, May, and the IMTT Board implemented
new corporate philosophies after the acquisition, focusing on
implementing more diversified financing with different groups,
11

longer terms, and more fixed rates. (Rec. Doc. 38-5, at 8.) The
high-level executives also increased the free cash flow of IMTT so
that MIC could declare greater dividends to its shareholders. (Rec.
Doc.

38-3,

worked,

set

at

17.)

Thus,

corporate

IMTT’s

policy,

and

high-ranking
directed

decision-makers

the

corporation’s

business activities in New York. See Balachander v. AET Inc. Ltd.,
No. 10-4805, 2011 WL 4500048, at *8 (S.D. Tex. Sept. 27, 2011)
(citing Cent. W. Va. Energy Co. v. Mountain State Carbon, LLC, 636
F.3d 101 (4th Cir. 2011)).
As Plaintiffs point out, the remaining IMTT officials at the
relevant time were based in Louisiana. Also, Hooke and May each
traveled to New Orleans two or three times in the fall of 2014 to
conduct IMTT business. However, the top decision-makers – Hooke,
May, and the IMTT Board – worked primarily in New York. Plaintiffs
argue that all terminal managers reported to IMTT President Richard
Courtney, who was based in Louisiana. However, Courtney reported
directly to Hooke. (Rec. Doc. 23-12, at 2; Rec. Doc. 36-3, at 12.)
Other IMTT executives reported to May, including the Head of Human
Resources, the Chief Accounting Officer, the Head of Financial
Planning and Analysis, the Head of Risk Management, the Chief
Banking Officer, and the Head of Information Technology. (Rec.
Doc. 36-3, at 12.)
While day-to-day management activities occurred in Louisiana,
this fact is irrelevant to the determination of a company’s nerve
12

center. See Balachander, 2011 WL 4500048, at *6. Rather, the
important consideration is the place of ultimate control by the
top decision-makers. As of September 2014, that place was New York.
This conclusion is bolstered by the Supreme Court’s remark that
the nerve center test is designed to eliminate the need for courts
to “try to weigh corporate functions, assets, or revenues different
in kind, one from the other.” Hertz Corp., 559 U.S. at 96.
Based on the record and the Supreme Court’s bright-line Hertz
test,

IMTT’s

“nerve

center”

in

September

2014

was

New

York.

Therefore, IMTT was a citizen of New York and Delaware as of the
date of filing the lawsuit in state court. Because IMTT was not a
citizen of Louisiana, the local controversy exception to CAFA does
not apply, and this Court has subject matter jurisdiction over
this case.
CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that Plaintiffs’ Re-urged Motion to
Remand (Rec. Doc. 36) is DENIED.
New Orleans, Louisiana this 18th day of November, 2015.

____________________________
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE

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