Reece et al v. AES Corporation et al

Filing 243

ORDER by Judge Joe Heaton: denying #147 Motion to Remand; lifting the stay (Re: #222 Order on Motion to Stay) (cjt, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF OKLAHOMA
WILLIAM REECE, ET AL.,
Plaintiff,
vs.
AES CORPORATION, ET AL.,
Defendants.

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NO. CIV-12-0457-JH

ORDER
Plaintiffs have moved to remand this case to state court. Multiple defendants have
responded and the motion is fully briefed. The court conducted an evidentiary hearing on
the motion on March 21, 2013, and took the motion under advisement at that time. After
consideration of the parties’ briefs, arguments, and hearing submissions, the court concludes
the motion should be denied.
Background
Plaintiffs filed this case in state court as a putative class action. As originally filed in
October 2011, the defendants included AES Corporation, alleged to be the owner of a coal
burning electric power plant located at Shady Point, LeFlore County, Oklahoma (“AES”),
certain of its subsidiaries, and various companies alleged to have transported coal ash waste
products from the plant to a disposal facility near Bokoshe, Oklahoma. Also named as
defendants were Making Money Having Fun, LLC (“MMHF”), the owner/operator of the
disposal facility, its owners, the Jacksons, and numerous truckers or trucking companies
alleged to have hauled produced fluids or other waste materials from oil and gas drilling

operations to the disposal facility.1
Approximately one year after the initial filing, plaintiffs amended their petition to add
numerous additional defendants. These included defendants involved in the drilling and
production of oil and gas wells in Oklahoma and Arkansas, such as XTO Energy Inc.
(“XTO”). In October 2012, XTO removed the case to this court pursuant to the Class Action
Fairness Act (“CAFA”), 28 U.S.C. § 1332(d)(2).
The putative class is defined in the first amended petition as “consisting of all citizens
and/or residents and/or property owners of the State of Oklahoma” within the class area. Id.
at ¶145. The class area is described as that portion of LeFlore County, Oklahoma located
within
a. A three mile radius or more of the open pit (interchangeably referred to as
the “Disposal Pit” or the “Dump Site”) located approximate one (1) mile south
of Bokoshe, Oklahoma, with the following legal description: W/2 of Sec.16,
E/2 of Sec.17, NE NE NE of Sec. 20 & N/2 N/2 NW/4 of Sec. 21, T8N R24E
LeFlore, County, Oklahoma and into which the Defendants, or any one of
them, have transported, received, or disposed of coal combustion waste, fly
ash, bed ash (collectively referred to as “Coal Waste”) and/or oil and gas well
produced fluids including saltwater, frac fluids, hydrocarbons, and other
chemicals (collectively referred to as “Produced Fluid”) which have been and
continue to be dumped;
b. a three mile radius of any disposal pit or dump site located within LeFlore
County, Oklahoma, the presence or precise location of which Plaintiffs
identify during the course of discovery in this action, and into which disposal
pit or dump site Defendants, or any one of them, have transported, received,
or disposed of Coal Waste and/or Saltwater or Produced Fluid;

1

Plaintiffs use the term “produced fluid” to refer to fluids produced by defendant oil and gas
companies “in the course of drilling, fracing, completing, and operation” of their oil and gas wells.
2

c. One thousand (1000) yards of the State of Oklahoma, LeFlore County,
Town of Bokoshe, or private, roads, streets, and driveways, which are or have
been:
I. used by vehicles hauling Coal Waste from the AES Shady Point
coal-fired plant located at Shady Point, LeFlore County, Oklahoma, to
the Disposal Pit described in subparagraph “a” above;
ii. used by vehicles hauling Coal Waste from the AES Shady Point
coal-fired plant to any disposal pit or dump site within LeFlore County,
Oklahoma described in subparagraph “b” above; and,
iii. used by vehicles hauling Produced Fluids, including saltwater, from
oil and gas well drill sites, and production sites located in Oklahoma
and Arkansas to the Disposal Pit.
First Amended Petition, ¶2.
Plaintiffs generally claim they and their property (real and personal) have been
damaged by defendants’ “generation, storage, transport, and disposal” of coal waste from the
power plant to the disposal pit, which began in the 1990's, and the “production, storage,
transportation, and dumping” of saltwater and deleterious produced fluids from oil and gas
operations in Oklahoma and Arkansas into the disposal pit, which actions allegedly began
in the early 2000's. First Amended Petition, ¶¶ 8, 9,11. Plaintiffs assert strict liability claims
against AES, MMHF, the coal companies and the coal waste trucking companies, based on
their alleged engagement in abnormally dangerous activities. They assert public and private
nuisance, trespass, negligence, negligence per se, and unjust enrichment claims against all
defendants. They seek injunctive relief in addition to compensatory and punitive damages.

Discussion
3

CAFA “extends the subject matter jurisdiction of the federal courts to encompass
putative class actions in which at least one plaintiff class member is diverse from one
defendant, [there are at least 100 class members] and where the amount in controversy
exceeds $5 million.” Weber v. Mobil Oil Corp., 506 F.3d 1311, 1313 (10th Cir.2007); 28
U.S.C. § 1332(d). Although “CAFA's language favors federal jurisdiction over class
actions,” Evans v. Walter Indus., Inc., 449 F.3d 1159, 1163 (11th Cir.2006), Congress “did
not give federal courts jurisdiction over all class actions, specifically excluding those
consisting of ‘primarily local matters.’ ” Johnson v. Advance America, 549 F.3d 932, 938
(4th Cir. 2008), citing Sen. Rep. No. 109-14, at 6 (2005), U.S.Code Cong. & Admin.News
2005, at 3, 7. Plaintiffs’ motion to remand seeks to invoke CAFA’s local controversy and
home state exceptions. 28 U.S.C. §§ 1332(d)(4)(A), (d)(4)(B). Plaintiffs also assert the court
should decline to exercise jurisdiction under the Act’s “interests of justice” exception. 28
U.S.C. § 1332(d)(3).
As a threshold matter, it is undisputed that this case was properly removed pursuant
to CAFA. While plaintiffs argued in their written submissions that defendant XTO
improvidently removed the case, they acknowledged at the hearing that the court has subject
matter jurisdiction under CAFA, i.e. that the requirements for minimal diversity, number of
class members and amount in controversy have been met. See 28 U.S.C. § 1332(d)(2),
(d)(5). Therefore the question becomes whether plaintiffs can establish that one of the three
statutory exceptions to the court’s exercise of jurisdiction applies. It is their burden to do so
by a preponderance of the evidence. See In re Sprint Nextel Corp., 593 F.3d 669, 673 (7th
4

Cir. 2010) (“Once Sprint Nextel established that CAFA jurisdiction exists, the burden fell
on the plaintiffs, who were seeking remand, to show that the home-state exception applies.”);
see also Amoche v. Guarantee Trust Life Ins. Co., 556 F.3d 41, 48 (1st Cir. 2009).
Each of the exceptions plaintiffs rely on requires that a certain portion of the class
members be Oklahoma citizens – two-thirds or more for the home state exception, more than
two-thirds for the local controversy exception and more than one-third, but less than twothirds, for the interests of justice exception. 28 U.S.C. §§ 1332(d)(4)(B),(d)(4)(A), (d)(3).
Defendants assert that “[p]laintiffs failure to adduce evidence proving the class citizenship
requirements is fatal to their reliance on any exception[].” XTO Energy Co.’s response, p.
2. The court agrees.
Central to the court’s conclusion in this regard is what did and did not happen at the
evidentiary hearing. Plaintiffs did not offer any evidence in the conventional sense. Rather,
they sought to use what they characterized as “demonstrative exhibits” to establish their
position.2 These exhibits included a pie chart purporting to reflect the percentage of
“Oklahoma Class Populace” (8%) versus the “Non-Oklahoma Class Populace” (92%). The
explanation for the chart was not totally clear. It was apparently based, at least in part, on
counsel’s analysis (or that of others working under counsel’s supervision) of mailing
addresses for persons shown on the records of the county assessor and/or treasurer as owning

2

The two demonstrative exhibits most pertinent to the citizenship determination, labeled
“Motion Demonstrative 2" and “Motion Demonstrative 2A,” both carry the additional inscription
“For Demonstrative Purposes Only”.
5

property in the class area or having resided there.3 Plaintiffs eventually sought to have the
court take judicial notice of these exhibits, presumably for use as substantive evidence, but
the court declined to so recognize them. The essence of the exhibits is a conclusion by
counsel or some other person on plaintiffs’ behalf as to what certain other public documents
purportedly show (i.e. that 8% of owners of record have addresses outside Oklahoma). There
was no testimony as to what specific records were inspected, how the calculations were
made, or the like. Moreover, the pertinent conclusions do not qualify for judicial notice —
the underlying records might have, if offered, but someone’s unsubstantiated conclusions
(disputed by defendants) as to what they show do not. See Fed.R.Evid. 201 (embracing facts
“generally ... known within the trial court’s territorial jurisdiction” or those whose accuracy
can be “readily determined from sources whose accuracy cannot reasonably be questioned.”)
The bottom line is that plaintiffs produced no evidence at the hearing on the
citizenship issue,4 ultimately relying solely on the inferences to be drawn from the face of
the first amended petition.
Both in their briefs and at the hearing plaintiffs contended they are not “required to
present extrinsic citizenship evidence in support of [their] First Amended Petition,” and that

3

The exhibit’s treatment of residents versus property owners was not clear from counsel’s
explanation. Further, the analysis appears to have been based on a group of persons significantly
smaller (1200 or so, per counsel’s estimate) than the number actually having a connection to the
petition-defined Class Area, though it would perhaps have been useable as some sort of sampling
if otherwise admissible.
4

As noted above, for any of the pertinent CAFA exceptions to apply, plaintiffs must show that
a certain percentage of the proposed class consists of Oklahoma citizens. 28 U.S.C. §§
1332(d)(4)(A), 1332(d)(4)(B), 1332(d)(3).
6

“federal district courts have on occasion looked solely at the allegations set forth in the
pleadings to determine likely class citizenship.” Those propositions may be true in certain
circumstances, but they do not stretch far enough to accomplish what plaintiffs must show
here.5
It is no doubt possible to describe a prospective class in such a way that only the
citizens of a particular state are class members. See, e.g. Coffey v. Freeport McMoran
Copper & Gold, 581 F.3d 1240, 1243 (10th Cir. 2009). In such a case, examination of the
face of the complaint might well end the issue. Here, however, the proposed class is not so
limited. It includes not only Oklahoma citizens, but also Oklahoma residents. Those
concepts, though similar, are not the same. “For purposes of federal diversity jurisdiction,
an individual’s state citizenship is equivalent to domicile.” Smith v. Cummings, 445 F.3d
1254, 1259 (10th Cir. 2006). A person is domiciled in a particular state when he or she is
physically present in the state and intends to remain there. Id. The Tenth Circuit has
concluded that “allegation of mere ‘residence’ may not be equated with ‘citizenship’ for the

5

Plaintiffs characterize Kaufman v. Allstate New Jersey Ins. Co., 561 F.3d 144, 157 (3d Cir.
2009), as directing “[the] lower court to focus on allegations in [the] complaint, not extrinsic
evidence.” Plaintiffs’ motion, p. 5. However, in Kaufman the defendants “[did] not contest that
more than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens
of New Jersey.” Id. at 152. The district court was directed to focus on the complaint’s allegations
to determine whether a particular defendant’s conduct was a significant basis for the proposed
class’s claims, not to determine citizenship. Lafalier v. Cinnabar Serv. Co., Inc., 2010 WL 1486900
(N.D.Okla. 2010), cited by plaintiffs at the hearing, is not to the contrary. That case focused on the
allegations in the complaint when considering the local defendant requirement for the local
controversy exception to CAFA, but also noted that “[m]ere allegations that plaintiffs are citizens
of Oklahoma will not suffice, and plaintiffs must come forward with some evidence establishing their
citizenship.” Id. at *5.
7

purposes of establishing diversity.” Whitelock v. Leatherman, 460 F.2d 507, 514 (10th Cir.
1972); Martinez v. Martinez, 62 Fed.Appx. 309, 313 (10th Cir. 2003) (unpublished).6
Similarly, the Seventh Circuit considered in In re Sprint Nextel Corp., 593 F.3d 669 (7th Cir.
2010), whether the district court had properly concluded that “the class definition itself,
keyed as it is to Kansas cell phone numbers and mailing addresses, made it more likely than
not that two-thirds of the putative class members are Kansas citizens.” Id. at 673. The court
noted that “[g]ranted, being a resident isn't the same thing as being a citizen, that is to say,
a domiciliary.” Id. While it was “inclined to think that at least two-thirds of those who have
Kansas cell phone numbers and use Kansas mailing addresses for their cell phone bills are
probably Kansas citizens,”id. at 674, the Seventh Circuit “agree[d] with the majority of
district courts that a court may not draw conclusions about the citizenship of class members
based on things like their phone numbers and mailing addresses.” Id.7
If the only uncertainty here was based on the difference between “citizenship” and
“residence”, the court’s decision might be otherwise. But the proposed class also includes
“owners” of real or personal property in the Class Area. In this context, courts have not
found inferences as to citizenship based on property ownership to be particularly persuasive,

6

The fact of “residence” in a particular state is at least some evidence of domicile and
citizenship, and might, in some circumstances, be sufficient to meet the two-thirds or other such
standard if that description was the sole basis for the class. But that is not the case here.
7

The Seventh Circuit’s references to phone numbers and mailing addresses are particularly
instructive here as, even if plaintiffs’ “demonstrative exhibits” had been viewed as substantive
evidence, their reliance on mailing addresses for property owners would have made them less than
conclusive on the citizenship issue.
8

and for obvious reasons — a person may own property in a particular state without being a
citizen of it. See Gerstenecker v. Terminix Int'l, Inc., 2007 WL 2746847 (S.D.Ill. 2007) (in
case in which class was defined as all individuals and entities that owned property in Illinois
and purchased extermination contracts from the defendant, court refused to remand case
under local controversy exception in the absence of evidence of citizenship as the class
“appears to include individual who own property in Illinois but do not live in Illinois”); see
also Evans v. Walter Indus., Inc., 449 F.3d 1159, 1166 (11th Cir. 2006). A person may own
property in Oklahoma without being an Oklahoma citizen and there was no admissible
evidence produced establishing the percentage of non-citizen owners.
The difficulty in assuming citizenship based on residence or property ownership
becomes significantly greater here because the proposed class is not limited in time. The
amended petition does not explicitly limit class membership to any particular time or period
of time, and plaintiffs’ counsel made clear at the hearing that plaintiffs viewed the proposed
class as embracing persons who had been residents in the mid-1990's, the time when the coalrelated activities began, and those impacted as early as 2003 by the disposal of produced oil
and gas fluids.8 Inclusion in the class definition of people who lived in, or owned property
in, the class area within the last twenty years injects an additional and substantial amount of
uncertainty into the citizenship determination. Some portion of former residents and/or

8

At the hearing, plaintiff’s counsel argued that prior residents were included in the class, but
not prior property owners. The court can discern no basis for that distinction in the petition’s
definition of the proposed class.
9

owners will have since moved and become citizens of states other than Oklahoma. Even a
relatively low annual rate of such “turnover” for an area could, over twenty years,
substantially impact the citizenship composition of the proposed class.9
Finally, the court notes the existence of a number of ambiguities in the definition of
the “Class Area” to which the proposed class membership is tied.

Although these

ambiguities are not of major significance for present purposes, given that the entire class
area, however defined, is within the confines of LeFlore County, they nonetheless inject
some additional element of uncertainty into the citizenship determination.
In short, there are simply too many variables here for the court to assume, based
purely on the class definition in the first amended petition, that the pertinent citizenship
thresholds are met.10 And, as plaintiffs offered no other admissible evidence of citizenship
directed to that issue, the result is that a necessary precondition for each of the CAFA

9

Defendant XTO asked the court to take judicial notice of certain “relocation” information
generated by the National Association of Realtors and arguably addressing this issue. At the
hearing, the court declined to take judicial notice of defendant’s exhibit 9 and, upon further
reflection, now concludes it will also decline to consider exhibit 10. Both are based on research
by the realtor’s association which, in the circumstances existing here, does not warrant judicial
notice under Rule 201. However, as the burden is on the plaintiff to affirmatively show a basis for
CAFA’s exceptions, the exclusion of defendants’ purported evidence to the contrary is not
determinative.
10

Plaintiffs also assert that it is “the stated intent of the Plaintiffs that the putative class
membership will be entirely or predominantly comprised of Oklahoma citizens residing in LeFlore
County, Oklahoma.” Plaintiffs’ reply, p. 4. However, class membership is determined by the
allegations in the complaint, not plaintiffs’ intentions. See Baker v. GE Retail Sales Finances, Inc.,
2011 WL 9352058, at * 4 (N.D.Cal. 2011).
10

exceptions plaintiffs rely on has not been established.11
As to the home state and interests of justice exceptions, there are additional reasons
why those exceptions are not applicable. Both exceptions require that “the primary
defendants” be “citizens of the State in which the action was originally filed.” 28 U.S.C. §§
1332(d)(4)(B),1332(d)(3).12 Although there is some disagreement regarding the definition
of “primary,” compare Villalpando v. Exel Direct Inc., 2012 WL 5464620 at * 8 (N.D. Cal.
Nov. 8, 2012) with

Nicholson v. Prime Tanning Corp., 2009 WL 2900042, at *2 n.5

(W.D.Mo. Sept.3, 2009), most courts have construed the term “primary Defendants” to mean
all primary defendants. Meiman v. Kenton County, 2011 WL 350465 at *8 (E.D. Ky. 2011)
(citing cases); see 28 U.S.C. § 1332(d)(4)(B) (“primary defendants”). In other words,
remand is authorized under these exceptions only when all of the primary defendants were
citizens of Oklahoma when the lawsuit was filed.
Whether defined merely as a defendant “with direct liability to the plaintiffs,”
Villalpando, 2012 WL 5464620 at * 8 or a defendant “who (1) has the greater liability
exposure; (2) is most able to satisfy a potential judgment; (3) is sued directly, as opposed to
vicariously, or for indemnification or contribution; (4) is the subject of a significant portion

11

The question is closer as to the “interests of justice” exception, 28 U.S.C. § 1332(d)(3),
because that exception requires in-state citizenship between 1/3 and 2/3 of the class and it is a
shorter leap of faith to conclude those thresholds are met. Nonetheless, in the absence of evidence
a significant element of speculation is still involved and, in any event, other requirements make the
“interests of justice” exception unavailable.
12

The determination of whether a defendant is “primary” is made based on the allegations
in the complaint. Villalpando v. Exel Direct Inc., 2012 WL 5464620 at * 8 (N.D. Cal. 2012);
Nicholson v. Prime Tanning Corp., 2009 WL 2900042, at *2 (W.D.Mo. 2009).
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of the asserted claims; or (5) is the only defendant named in one particular cause of action,”
Nicholson, 2009 WL 2900042, at *1, the court concludes, based on the allegations in the first
amended petition, that at one least one foreign defendant – AES – is a “primary defendant.”
AES owns or controls the coal generating plant,13 is sued directly, is the subject of all the
asserted claims and has significant liability exposure as the plant it owns or controls
generated the fly ash that is at the core of the controversy. AES’s presence in the litigation
prevents plaintiffs from demonstrating that all primary defendants are Oklahoma citizens and
thus from relying on the home state and interests of justice exceptions.
Conclusion
Although plaintiffs view this case as a truly local controversy, they have failed to
satisfy their burden of establishing that it belongs in state court by reason of one of CAFA’s
exceptions. The proposed class is not limited to citizens, but includes property owners and
residents from potentially as far back as the mid-1990's who, even if they once were
Oklahoma citizens, may have changed their citizenship in the intervening years. Plaintiffs
might have established the required citizenship of the class members through admissible
evidence and, as the judge in Lafalier, 2010 WL 1486900, at *5 noted, “[m]ost courts ... have
not imposed a heavy burden on plaintiffs in a class or mass action to establish their
citizenship for the purpose of the local controversy exception.” However plaintiffs offered
13

The first amended petition, at ¶ 20, alleges AES is the owner of the plant. Counsel’s
comments at the hearing suggest AES is not the immediate owner, but is apparently thought by
plaintiffs to be responsible for the plant’s operations. There are other foreign defendants, such as
XTO which, based on the allegations in the first amended petition, would also likely qualify as
primary defendants.
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nothing that the court could properly consider. As “the Court cannot make a ‘leap of faith’
and assume that plaintiffs are citizens of Oklahoma,” id., it must conclude plaintiffs have not
met their burden of demonstrating that a CAFA exception applies.14
Accordingly, plaintiff’s motion to remand [Doc. #147] is DENIED.
The court previously stayed proceedings pending resolution of the motion to remand.
Order, February 14, 2013 [Doc. #222]. The remand issue having been resolved, the order
staying the case is VACATED. Plaintiff’s shall respond to the pending motions to dismiss
within the time stated in that order.
The parties are directed to confer and submit by April 30, 2013, if agreement can be
reached, a proposed scheduling order for further proceedings in this case. Absent a joint
proposal,15 the case will be set for status conference in due course.

14

As the court concludes jurisdiction is proper here under CAFA, and that the case should
remain here, it is unnecessary to determine whether subject matter jurisdiction might also be proper
in this court based on 28 U.S.C. § 1334(b), as urged by some of the defendants.
15

The court appreciates that, with the number of parties involved, a joint agreement and
proposal may be difficult.
13

IT IS SO ORDERED.
Dated this 2nd day of April, 2013.

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