Riding a Train Wreck Into Federal Court: The Class Action Fairness Act Carries the Defendants to the Federal Court Station.

Download the MP3 file of this posting. Lanier v. Norfolk Southern Corporation, 2006 WL 1878984, No. 1:05-3476-MBS (D.S.C. July 6, 2006) You could almost hear the district judge shout, "All aboard!"  The South Carolina District Court let the defendants ride the CAFA train into federal court, and then derailed the plaintiff’s case on a motion to dismiss, stopping only to address the burden of proof issue.  On July 6, 2006, United States District Judge Margaret B. Seymour issued an opinion and order not only retaining federal court jurisdiction under CAFA, but also dismissing the plaintiffs’ complaint.  The plaintiff filed the action in South Carolina state court on December 9, 2005 seeking to certify a class of individuals who were laid off or discharged from Avondale Mills facilities in Graniteville, South Carolina after a train derailment which released chlorine gas damaged the mill facility. The chlorine gas damaged the property and equipment, and it interrupted production capacity thereby causing a reduction in employment levels. The plaintiffs alleged that the defendants’ negligence resulted in the derailment, subsequent release of chlorine gas, the disruption of the facilities, and the reduction in work force.  The defendants removed the action to federal court pursuant to CAFA.  The plaintiff, wanting off of the train headed to federal court, responded with a motion to remand.  The defendants, wanting to punch the plaintiffs' ticket, also filed a motion to dismiss the plaintiffs' complaint.  Judge Seymour examined each motion in turn.  First, the remand motion focused solely on CAFA. The defendants argued that the burden of proof, under CAFA, shifts to the plaintiff to demonstrate that removal is improvident. The court disagreed and noted that the Seventh Circuit in Brill, the Ninth Circuit in Abrego and the Eleventh Circuit in Miedema had all rejected the argument.  Specifically, the court quoted Miedema for its proposition that “a committee report cannot serve as an independent statutory source having the force of law.” (Editors' Note:  See the CAFA Law Blog's analysis of Brill posted on November 2, 2005, the CAFA Law Blog analysis of Abrego posted on May 25, 2006, the CAFA Law Blog analysis and critique of Miedema posted on August 22, 2005, and a discussion and Law Review article by the Editors that disagrees with these holdings entitled “CAFA’s New Minimal Diversity Standard For Interstate Class Actions Creates A Presumption That Jurisdiction Exists, With The Burden Of Proof Assigned To The Party Opposing Jurisdiction” here).  The Court did find, however, that the defendants carried the burden noting that “once the proponent of jurisdiction has set out the amount in controversy, only a legal certainty that the judgment will be less forecloses federal jurisdiction.” The court also made short work of the minimal diversity requirement holding that the Plaintiff was from South Carolina and the defendants were Virginia corporations. The remand motion was denied. Thereafter, the court granted the defendants’ motion to dismiss on the ground that the plaintiff could not allege a cause of action for negligence on the basis of purely economic loss. The plaintiff was asserting the indirect damages from the train derailment as economic loss. The court held that there were policy reasons that limit tort liability for this exact type of indirect economic loss. Even though the federal court retained jurisdiction, in the same opinion it dismissed the case.