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Article: September 2015: Product Liability Litigation Update

September 02, 2015
Business Litigation Reports

Ninth Circuit Restricts Scope of CAFA’s “Local Single Event” Exception. In Allen v. Boeing Co., 784 F.3d 625 (9th Cir. 2015), the Ninth Circuit recently held that a case did not fall within the Class Action Fairness Act’s “local single event” exception because the plaintiffs’ claims did not arise from a “single happening.” Id. at 627. CAFA’s local single event exception provides that the term “mass action” does not include a civil action in which all of the claims in the action arose “from an event or occurrence in the State in which the action was filed.” 28 U.S.C. §1332(d)(11)(B)(ii)(I). In reversing the district court’s remand, the court explicitly rejected the broad interpretation of the exception adopted by the Third Circuit and also declined to apply a similarly broad rule recently delineated by the Fifth Circuit. Until it is resolved, this circuit split has important practical implications for potential mass tort defendants, as the Ninth Circuit will likely exercise significantly broader jurisdiction over mass actions than its sister circuits.

The Third Circuit has determined that CAFA’s “local single event” exception applies not only to suits where liability arises from a discrete one- time occurrence, but also more broadly to those alleging harm resulting from a “continuing set of circumstances.” In Abraham v. St. Croix Renaissance Grp., L.L.L.P., 459 plaintiffs filed a tort action against the owner of a former alumina refinery, claiming that (1) the refinery allowed hazardous chemicals to be released into the air and groundwater; and (2) the defendant took no steps to remove these chemicals from its premises. 719 F.3d 270, 272-73 (3d Cir. 2013). In affirming the remand to Virgin Islands Superior Court, the Third Circuit held that both alleged acts qualified as a “single event,” noting that “where the record demonstrates circumstances that share some commonality and persist over a period of time, these can constitute an ‘event or occurrence’ for purposes of the exclusion in §1332(d)(11)(B)(ii)(I).” Id. at 276.

The Fifth Circuit has similarly declined to restrict the local single event exception to events occurring at a specific moment in time. In Rainbow Gun Club, Inc. v. Denbury Onshore, LLC, 760 F.3d 405, 409 (5th Cir. 2014), the plaintiffs alleged five separate acts of negligence in order to show that holders of oil and gas leases breached their “duty to act as a reasonable and prudent operator of the well that was drilled under these leases.” Id. at 407. On appeal from the district court’s remand, the Fifth Circuit held that CAFA’s local single event exception applied because the five alleged negligent acts “gave causal substance to [a single] event—the failure of the [w]ell—from which the [p]laintiffs’ claims arise.” Id. The court held that “[a] single event or occurrence may [ ] be constituted by a pattern of conduct . . . leading to a single focused event that culminates in the basis of the asserted liability.” Id. at 412 (emphasis added).

In sharp contrast to the Third and Fifth Circuits, the Ninth Circuit recently made clear that CAFA’s local single event exception applies only to a narrow category of suits where “all claims arise from a single event or occurrence . . . such as an environmental accident, that gives rise to the claims of all plaintiffs.” Allen, 784 F.3d at 628 (emphasis in original) (citing Nevada v. Bank of America Corp., 672 F.3d 661 (9th Cir. 2012)). In Allen, plaintiffs filed a state tort action against Boeing and Landau Associates Inc., claiming that they incurred property damage as a result of (1) Boeing’s negligence in allowing leeching of hazardous chemicals over a 40-year period from its Auburn, Washington plant; and (2) Landau’s failure to remediate the effects of Boeing’s conduct. Id. at 627-28. After defendants removed the case, the district court applied the interpretation adopted by the Third Circuit in Abraham and remanded based on CAFA’s local single event exception. Id. at 629.

The Nevada court previously determined that a complaint alleging “widespread fraud in thousands of borrower transactions” did not fall within CAFA’s “local single event” exception. 672 F.3d 661. However, because the Nevada decision was issued in 2012—one year before Abraham—the court did not previously have an opportunity to address the Third Circuit’s alternative view. Considering itself bound by its prior decision in Nevada, the panel explicitly rejected the Third Circuit’s interpretation. Id. at 633 (“[E]ven were we free to interpret the phrase as we would, we would not adopt the Third Circuit’s approach . . . [because] in the context of determining whether a legal cause of action concerns an ‘event’ or an ‘occurrence’ for purposes of CAFA, the terms most commonly and reasonably refer to a singular happening.”). The court held that its more narrow interpretation comported better with CAFA’s overall structure and legislative intent. Id. at 632 (“[E]xceptions to CAFA are to be strictly intrerpreted”) (citing, inter alia, S. Rep. No. 109-14, at 7 (2005)). The court also explained that, unlike the conduct underlying the Fifth Circuit’s Rainbow Gun Club, the plaintiffs in Allen “[did] not allege a single event or occurrence resulting from [the defendants’] acts.” Allen, 784 F.3d at 633. The court conceded that had the plaintiffs sued each defendant separately, as was the case in Rainbow Gun Club, the single event exception might have applied to each separate case. However, because the plaintiffs in Allen sued both defendants for two separate activities—Boeing’s forty-year pattern of pollution and Landau’s subsequent failure to remediate the harm that Boeing caused—that exception did not apply. Id.

The Allen decision has two key practical implications. First, defendants in mass tort actions brought in state courts within the Ninth Circuit should be able to successfully remove cases to federal district court if a plaintiff alleges “ongoing” liability-generating activity that can be separated into distinct “events” occurring at separate moments in time. Second, at least in the Ninth Circuit, toxic tort plaintiffs with claims against one defendant for the initial pollution, and another defendant for a subsequent failure to remediate, may choose to file separate lawsuits in state court, rather than face the prospect of removal. Given the Supreme Court’s demonstrated interest in CAFA, it seems likely that circuit split will soon be headed for a resolution.