MD Haynes, Inc. v. Valero Marketing and Supply Co. et al
ORDER striking as moot 15 Motion for Leave to File; striking as moot 19 Motion to Dismiss. Case terminated on 4/19/17; granting 6 Motion to Remand. This case is hereby REMANDED to the County Court at Law Number 1, in Nueces County, Texas.(Signed by Judge Hilda G Tagle) Parties notified.(mserpa, 2)
United States District Court
Southern District of Texas
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
MD HAYNES, INC.; dba CICI’S PIZZA
#88 (AYERS), et al,
VALERO MARKETING AND SUPPLY
CO., et al,
April 19, 2017
David J. Bradley, Clerk
CIVIL NO. 2:17-CV-6
The Court is in receipt of Plaintiff’s motion to remand, Dkt. No. 6; Plaintiffs’
motion for leave to conduct jurisdictional discovery, Dkt. No. 14; Defendant Ergon
Asphalt & Emulsions, Inc.’s motion for leave to file objections to Plaintiffs’ remand
evidence, Dkt. No. 15; and Plaintiffs’ opposed motion to dismiss their claims
pursuant to Federal Rule of Civil Procedure 41(a)(2), Dkt. No. 19.
This is a putative class action arising out of a water contamination event in
the City of Corpus Christi, Texas that resulted in a four-day ban on the use of
municipal tap water (the “Contamination Event”). See Dkt. No. 1-3 at 2-36
[hereinafter “Pl.’s Third Am. Pet.”]. On December 15, 2016, Plaintiffs, a group of
Corpus Christi individuals and businesses, filed suit in Court at Law No. 1 in
Nueces County, Texas against Defendants Ergon Asphalt & Emulsions, Inc.
(“Ergon”) and a number of affiliated Valero entities1 (“Valero,” and collectively with
Contamination Event, and seeking a temporary restraining order and damages. See
These entities are: Valero Terminaling and Distribution Company, Valero Marketing and Supply
Company, Valero South Texas Marketing Company, Valero Bill Greehey Plant, and Valero RefiningTexas, L.P. Dkt. No. 14 at 2, n.1.
id. Specifically, Plaintiffs allege that Defendants caused an incident “at the Valero
plant in Corpus Christi, Texas . . . which put an asphalt emulsifier pollutant, called
Indulin AA-86, into the water supply.” Id. at ¶ 4.5. They assert state law claims
against Defendants for negligence, gross negligence, negligence per se, strict
liability for ultra-hazardous activity, public and private nuisance, and trespass. See
id. And they seek to file their claims “on behalf of the natural or artificial persons or
entities served or otherwise dependent on water provided by the Corpus Christi
municipal water supply who were affected by Defendants’ actions or omissions
which resulted in the contamination of the water supply and consequent tap water
usage ban, governed by Texas law.” Id. at ¶ 1.7.
On January 10, 2017, Ergon filed a notice of removal in this Court pursuant
to 28 U.S.C. §§ 1441, 1446, and 1453, citing 28 U.S.C. § 1332(d), the Class Action
Fairness Act of 2005 (“CAFA”), as the basis for removal providing this Court with
subject matter jurisdiction. See Dkt. No. 1. Valero consented to this removal.2 See
Dkt. No. 4. Ergon alleges that the Court has original jurisdiction over Plaintiffs’
petition under CAFA on the basis that: “(i) it purports to be a class action, (ii) the
matter in controversy exceeds the sum or value of five million dollars, exclusive of
interests and costs, (iii) a member of the class of Plaintiffs is a citizen of a State
different from Ergon, (iv) no defendants are states, state officials, or government
entities, and (v) the putative class exceeds one hundred members.” Id. at 4.
Plaintiffs filed a motion to remand on January 12, 2017. Dkt. No. 6. They do not
dispute that their petition satisfies the CAFA requirements articulated by Ergon.
See id. They do, however, plead that “this case falls squarely within CAFA’s local
controversy exception,” and therefore should be remanded to state court. Id. at 3.
Ergon filed a response to this motion on February 1, 2017, Dkt. No. 12, to which
Plaintiffs filed a reply on February 15, 2017, Dkt. No. 14. Plaintiffs’ reply included a
motion for leave to conduct jurisdictional discovery, including the deposition of
This consent was not necessary to establish this Court’s jurisdiction under CAFA, however. See
Werner v. KPMG LLP, 415 F.Supp.2d 688, 694 (S.D.Tex. 2006) (“Cases subject to CAFA may be
removed by a single defendant, eliminating the rule that all defendants must consent to removal.”)
Valero executives, “to demonstrate the role the Valero Defendants played in causing
Plaintiffs’ injuries.” Id. at 8.
On February 23, 2017 Ergon filed an opposed motion for leave to file
objections to evidence submitted by Plaintiffs in support of their motion to remand,
as well as an objection to Plaintiffs’ request to conduct jurisdictional discovery. Dkt.
Nos. 15, 16. On March 3, 2017, Valero filed its own opposition to Plaintiffs’ request
for jurisdictional discovery, arguing that the Court can rule on its jurisdiction under
CAFA on the pleadings as they stand, and that it would be costly and prejudicial to
Defendants to allow Plaintiffs’ request for “premature and out-of-order discovery” on
the merits of their claims. See Dkt. No. 17. Plaintiffs responded to these objections
on March 13, 2017. Dkt. No. 18. On this same day, Plaintiffs also filed an opposed
motion to dismiss their claims pursuant to Federal Rule of Civil Procedure 41(a)(2),
which seeks to offer the Court another procedural avenue for remanding Plaintiffs’
claims to state court. See Dkt. No. 19 at 5 (“This case belongs in state court,
particularly now that an MDL has been formed.”) Ergon filed a response to this
motion on March 31, 2017, characterizing it as an “attempt at forum shopping” that
“undermines CAFA’s policy purposes.” Dkt. No. 23 at 2. Plaintiffs replied to this
response on April 3, 2017, arguing that they do not contest CAFA jurisdiction, and
that nothing is procedurally improper with their request that the Court either
remand their claims according to CAFA’s “local controversy” exception or dismiss
their claims pursuant to Rule 41(a)(2). See Dkt. No. 24.
II. Legal Standard
CAFA grants the federal courts original jurisdiction to hear interstate class
actions where they involve a proposed class of more than 100 members, “involve an
aggregate amount in controversy of at least $5 million and present at least minimal
diversity of parties.” In re Katrina Canal Litigation Breaches, 524 F.3d 700, 706
(5th Cir. 2008); 28 U.S.C. §1332(d). Even where CAFA jurisdiction exists, however,
a district court can decline jurisdiction pursuant to various exceptions. These
exceptions are “designed to draw a delicate balance between making a federal forum
available to genuinely national litigation and allowing the state courts to retain
cases when the controversy is strongly linked to that state.” Preston v. Tenet
Healthsystem Memorial Med. Center, 485 F.3d 793, 803 (5th Cir. 2007). CAFA’s
“local controversy” exception is established at 28 U.S.C. §1332(d)(4)(A), and states
that “the district court ‘shall decline to exercise jurisdiction’ if, inter alia, the alleged
conduct of at least one local defendant ‘from whom significant relief is sought’ ‘forms
a significant basis for the claims asserted by the proposed plaintiff class.’”3 Cedar
Lodge Plantation v. CSHV Fairway View I, 768 F.3d 425, 426 (5th Cir. 2014) (citing
Under CAFA, as with removal jurisdiction generally, a removing defendant
has the burden of establishing that removal was proper. Lone Star OB/GYN Assocs.
v. Aetna Health Inc., 579 F.3d 525, 528 (5th Cir. 2009). Yet once CAFA jurisdiction
is established, the movant seeking to apply CAFA’s local controversy exception
bears the burden of establishing its applicability, and “the exception is intended to
be narrow.” Opelousas General Hosp. Authority v. FairPay Solutions, Inc., 655 F.3d
358, 360 (5th Cir. 2011). The Fifth Circuit recently described the movant’s burden
thus: “If the applicability of an exception is not shown with reasonable certainty,
federal jurisdiction should be retained.” Arbuckle Mountain Ranch of Texas, Inc. v.
Chesapeake Energy Corp., 810 F.3d 335, 338 (5th Cir. 2016). Further, any “lingering
doubts” in a court’s jurisdictional analysis should be resolved “in favor of exercising
federal jurisdiction where an exception to jurisdiction is asserted.” Id. at 342.
Here, the parties do not dispute that this case meets the threshold
requirements for establishing federal jurisdiction under CAFA. Neither do they
dispute the majority of the elements Plaintiffs must meet to satisfy the “local
controversy” exception to CAFA jurisdiction. Instead, Ergon urges the Court to deny
Plaintiffs’ motion to remand solely on the basis of its allegation that Plaintiffs “have
failed to allege specific facts regarding the conduct of any local defendant.” Dkt. No.
The parties do not dispute the other criteria of the “local controversy” exception not listed here.
12 at 8. Specifically, Ergon argues that Plaintiffs do not distinguish between the
conduct of various defendants in their live complaint, and also fail to allege specific
facts “regarding the conduct of a particular local defendant.” Id. at 8, 9. Plaintiffs
reply that the allegations in their complaint satisfy Texas’s notice pleading
standard, and that “the live pleadings” and “extrinsic, publicly available evidence”
in this case “show that the defendants each had a role in the [Contamination
Event].” Dkt. No. 14 at 3-4, 5. Ergon counters, in objections that effectively
constitute a sur-reply, that the Court should not consider extrinsic evidence
submitted by Plaintiffs. Dkt. No. 16. Plaintiffs respond that no binding precedent
determination as to the applicability of CAFA’s “local controversy” exception. See
Dkt. No. 18.
As to the merits of Plaintiffs’ motion to remand, the only element of the “local
controversy” exception at issue between the parties is § 1332(d)(4)(A)(i)(II)(bb),
which demands that the alleged conduct of at least one local defendant form a
“significant basis of all the claims asserted.” See Opelousas, 655 F.3d at 361
(quoting Kaufman v. Allstate N.J. Ins. Co., 561 F.3d 144, 156 (3d Cir. 2009)).
Plaintiffs have sued five Valero defendants, at least two of whom the parties agree
are proper defendants and Texas citizens, and Ergon, a Mississippi defendant. See
Dkt. No. 6 at 9; Dkt. No. 12 at 8. If the alleged conduct of at least one proper Valero
defendant with Texas citizenship “forms a significant basis for the claims asserted
by the proposed plaintiff class,” Plaintiffs have satisfied their burden to show that
the “local controversy” exception to CAFA applies. See § 1332(d)(4)(A)(i)(II)(bb).
In their live complaint, Plaintiffs allege that “[b]ased on information and
belief, Defendants’ conduct caused the ‘backflow incident’ at the Valero plant in
Corpus Christi, Texas which put an asphalt emulsifier pollutant, called Indulin AA86 into the water supply.” Pl.’s Third Am. Pet. at ¶ 4.5. This allegation underlies
Plaintiffs’ claims of negligence, gross negligence, negligence per se, strict liability
for ultra-hazardous activity, public and private nuisance, and trespass against
Defendants. See id. Yet Plaintiffs do not distinguish between the conduct of
individual Valero defendants and Ergon in making their claims, and Ergon argues
that Plaintiffs’ ‘global’ references to Defendants’ collective conduct constitutes
deficient pleading. See Dkt. No. 12. Specifically, Ergon argues that Plaintiffs are
bound by CAFA to have alleged in their initial complaint “specific facts regarding
the conduct of a particular local defendant,” and that the sufficiency of their
complaint must be assessed by the pleading standard expounded in Ashcroft v.
Iqbal, 556 U.S. 662 (2009). Dkt. No. 12 at 10, 13.
As to Ergon’s procedural argument, Plaintiffs filed their complaint in
compliance with the notice pleading standard required by Texas Rule of Civil
Procedure 47(a), not according to the dictates of the federal rules. See Tex. R. Civ. P.
47(a) (“An original pleading which sets forth a claim for relief, whether an original
petition, counterclaim, cross-claim, or third party claim, shall contain: (a) a short
statement of the cause of action sufficient to give fair notice of the claim
involved[.]”). While the Fifth Circuit has applied the federal 12(b)(6) standard to
judge the sufficiency of complaints in certain remand contexts, see, e.g., Int’l Energy
Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 205 (5th Cir.
2016) (applying the standard to the assessment of improper joinder of parties), the
Court is not aware of precedent requiring application of this standard in assessing
the applicability of CAFA’s “local controversy” exception. To be sure, “the
application of the local controversy exception depends on the pleadings at the time
the class action is removed.” Cedar Lodge, 768 F.3d at 426. Yet this requirement
does not equate to a mandate that federal courts apply federal procedure in their
interpretation of state-court pleadings. See Arbuckle, 810 F.3d 335, 343 (Elrod, J.,
dissenting in part) (citing Braud v. Transport Serv. Co. of Ill., 445 F.3d 801, 803
(5th Cir. 2006)). Additionally, the Court is empowered to conduct a “review of the
entire pleading when assessing CAFA jurisdiction.” Id., 810 F.3d at 341.
Further, Plaintiffs’ live complaint details a series of allegations relating to
the operation of the Valero plant, and satisfies their burden to show that Valero’s
conduct “forms a significant basis for the[ir] claims” under § 1332(d)(4)(A)(i)(II)(bb)
irrespective of any extrinsic evidence. Defendants rely heavily on one Fifth Circuit
case, Opelousas, in urging the Court to find otherwise. In Opelousas, the Fifth
Circuit considered the appeal of a district court’s decision to remand a case to
Louisiana state court under § 1332(d)(4)(A)(i)(II)(bb). See id., 655 F.3d 358.
Ultimately, the court vacated remand of the case based on an assessment that the
plaintiff had failed to demonstrate the conduct of its “sole local defendant” formed “a
significant basis of the claims of the potential class.”4 Id. at 359. Yet the Fifth
Circuit was unsatisfied with the allegations in the Opelousas plaintiff’s complaint
because the complaint alleged “a racketeering activity [under Louisiana statute]
requiring the joint efforts of all of the defendants,” without making an effort to
“distinguish the conduct of [the only local defendant] from the conduct of the other
defendants.” Id. at 362. Here, by contrast, Ergon is the only non-local entity among
multiple potential local Defendants, and Plaintiffs’ live complaint identifies “the
Valero plant,” located in Corpus Christi, Texas, as the source of the Contamination
While Plaintiffs do not explicitly distinguish the conduct of individual
Defendants in their complaint, unlike the plaintiff in Opelousas they have no
obligation to show any joint activity to support their claims. See id., 655 F.3d at 362
(“Other than conclusory arguments, [plaintiff] presents nothing to support any
direct contact or communication between the defendants as a group to support its
claim of an illegal racketeering enterprise . . . and the evidence submitted by the
defendants tends to show that no enterprise exists.”) Thus, while the Fifth Circuit
admonished the Opelousas plaintiff that it could not “rely on its claims of a
racketeering enterprise to fill in gaps of proof it [wa]s required to provide” to justify
remand, see id., 655 F.3d at 363, here Plaintiffs attempt no such maneuver. Instead,
Plaintiffs directly identify the Valero plant as the site of the Contamination Event,
The Fifth Circuit found that this outcome was justified whether it “limit[ed] [its] inquiry to the
allegations of the complaint or examine[d] the evidence before the district court”—while declining to
affirmatively rule on the propriety of considering extrinsic evidence, as the issue had not been
briefed before the trial court. Id. at 361. Whether courts may consider extrinsic evidence in the
CAFA context has not been explicitly addressed by the Fifth Circuit.
and plead that Defendants’ negligent conduct in operation of the plant renders them
liable on a number of common law claims. Pl.’s Third Am. Pet. at ¶ 4.5.
Valero admitted in its answer to Plaintiffs’ operative complaint that “the
premises where the alleged incident occurred” is “Valero’s Corpus Christi asphalt
terminal,” and that this terminal is both “owned” and “operated” by Valero
defendant entities whose status as proper parties in this litigation is undisputed.
Dkt. No. 1-3 at 67-71, Valero’s Orig. Ans. at ¶ III. Meanwhile, Plaintiffs’ complaint
pleads that Defendants were negligent for their conduct in “[o]perating the Plant”—
which is specifically defined in their complaint as the “Valero plant”—and details a
series of related allegations that implicate Valero, as the owner and operator of the
terminal. Pl.’s Third Am. Pet. at ¶ 5.2. For instance, Plaintiffs allege, among other
conduct, that Defendants caused their injuries as a result of: “Operating the Plant
with institutional ignorance of or defiance to a culture of safety and accountability”;
“Operating the Plant without appropriate and trained staffing and supervision of
plant units”; “Failing to maintain a reliable system and/or device at the Plant to
prevent the release or to warn of the release of toxic and poisonous chemicals”; and
“Failing to warn residents of the affected community after it was known that
dangerous and toxic chemicals were being released into the water supply.” Id.
Again, to satisfy the only element of CAFA’s “local controversy” exception in
dispute here, Plaintiffs must allege that at least one local Valero defendant’s
conduct “forms a significant basis” of their negligence and other common law claims.
In alleging that the Contamination Event occurred at the Valero plant in Corpus
Christi, and was caused by Valero’s negligent conduct, they have done this.
Accordingly, while the CAFA “local controversy” exception is a narrow one,
Plaintiffs have demonstrated with reasonable certainty that it should prevent this
Court from exercising jurisdiction over their claims. The Court GRANTS Plaintiffs’
motion to remand.
Additionally, as the Court’s analysis of this motion does not rely on extrinsic
evidence provided by Plaintiffs, the Court STRIKES AS MOOT Ergon’s motion for
leave to file objections to Plaintiffs’ reply, and STRIKES AS MOOT Plaintiffs’
motion for leave to conduct jurisdictional discovery, made pursuant to their reply
brief in support of their motion to remand. The Court further STRIKES AS MOOT
Plaintiffs’ opposed motion to dismiss pursuant to Rule 41(a)(2).
For the foregoing reasons, the Court:
GRANTS Plaintiffs’ Motion to Remand, Dkt. No. 6;
STRIKES AS MOOT Plaintiffs’ motion for leave to conduct
jurisdictional discovery, Dkt. No. 14;
STRIKES AS MOOT Ergon’s Opposed Motion for Leave to File
Objections to Plaintiffs’ Extrinsic Evidence and Plaintiffs’ request to
Conduct Jurisdictional Discovery, Dkt. No. 15; and
STRIKES AS MOOT Plaintiffs’ Opposed Motion to Dismiss, Dkt. No.
This case is hereby REMANDED to the County Court at Law Number 1, in
Nueces County, Texas.
It is so ORDERED.
SIGNED this 19th day of April, 2017.
Senior United States District Judge
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