Arbuckle Mt. Ranch of Tex., Inc. v. Chesapeake Energy Corp., U.S. 5th Circuit Court of Appeals, January 7, 2016, 2016 U.S. App. LEXIS 200

To escape the impact of the Class Act Fairness Act, conferring jurisdiction over class actions to the federal courts, it must be shown that 2/3 of the class members are citizens of the state where the class action suit is brought.

The Class Action Fairness Act (CAFA) confers expansive federal jurisdiction over class actions, with narrow exceptions. Here, Chesapeake moved to remove the class action filed against it to federal court. Arbuckle moved to remand the action under the “local controversy exception.” The Arbuckle’s class, alleged to be 3 to 5 thousand individuals, consisted of all present and past royalty owners who claimed that they had been underpaid by Chesapeake. CAFA applies if there is at least 100 members in the proposed class, the controversy is greater than $5 million, and the primary defendants are not government entities. One requirement of the local controversy exception requires 2/3 of the class members to be citizens of the state in which the action was filed. Arbuckle failed to provide any evidence of who the owners were who purchased interests but since sold their interest. Thus, Arbuckle failed to make the required showing and the case was retained in federal court.