On August 16, 2013, the Third Circuit Court of Appeals
upheld the United States District Court for the Western District of
Pennsylvania’s order to remand a class action lease dispute to the Mercer
County Court of Common Pleas. While the Third Circuit upheld the District Court’s
decision to remand the action, it overturned the application of the “home state
exception” to CAFA’s federal jurisdiction provision, and instead applied the “local
controversy exception.” Vodenichar v.
Halcon Energy Properties, Inc., 2013 WL 4268840
(3rd Cir. Aug. 16, 2013).
The action before the Third
Circuit arose from a dispute between various landowners in Mercer County, who
had hired agents to negotiate oil and gas leases on their behalf with Halcon Energy.
According to the record, the landowners argued that “Halcon agreed to accept
the leases absent a title defect, an adverse environmental claim, or
restrictions on the ability to explore, drill for or produce oil, gas, or
hydrocarbons.” The well operator, Halcon, however, argued that “geology”
language in the recession provision was fraudulently omitted by the agents
acting on behalf of the landowners.
After the landowners filed a putative
class action against Halcon alleging breach of the lease and the duty of fair
dealing, Halcon informed the landowners and the District Court it intended to
join the landowner’s agents. The landowners voluntarily filed a motion to
dismiss this action (the first action) without prejudice, and decided to file
direct claims against both the agents and Halcon in the state court (the second
action). The District Court granted these motions, and ordered the parties to
continue current alternative dispute resolution and maintain discovery. The
landowners filed suit in the Mercer County Court of Common Pleas, and Halcon
removed the second action to the District Court for the Western District of
Pennsylvania. Landowners filed for a motion to remand under CAFA’s “home state”
and “local controversy” exceptions. The District Court granted the motion for
the “home state exception.” It, however, denied the motion for the “local
controversy exception” because it does not apply where “other class actions”
have been pursued in a three year period. Halcon appealed.
The Third Circuit held that the “home
state exception” did not apply in this case because Halcon, which is not a Pennsylvania
citizen, was a primary defendant. The court found Halcon to be a primary
defendant because the landowner’s sought equally apportioned and direct
liability from all the Defendants, including Halcon. The Third Circuit also
held that the “local controversy exception” did apply because the second action
was not a separate action, but rather a continuation of the first action
brought by the plaintiffs. The court explained that “no other action” was
brought by the second complaint because the complaints from the two actions
were nearly identical, and the District Court maintained ADR and discovery
between the parties. These directives from the District Court signaled the
second action was simply a continuation of the first, rather than an
independent “other action.” Therefore, the landowner’s motion to remand was
granted under the “local controversy exception” of CAFA.
Written by: Garrett Lent, Research Assistant
Agricultural Law Resource and Reference Center
August 2013
