Montana District Court Interprets Local Controversy Exception to Class Action Fairness Act

United States District Court for the District of Montana.

Plaintiff Korey L. Aarstad, along with 191 other plaintiffs moved to remand their case back to state court in Montana on the basis that the case had been improperly removed under the local controversy exception to the Class Action Fairness Act (“CAFA”) (28 U.S.C. §1332(d)(4)(A)). Defendants BNSF Railway Company and John Swing opposed, arguing that the case had been properly removed as a mass action. Following the parties’ briefings before the Magistrate Judge, and the court’s adoption of the Magistrate Judge’s findings and recommendations, the Ninth Circuit ultimately remanded the case for further proceedings, specifically on the Magistrate Judge’s failure to address the third element of the local controversy exception, which required the district court to make a finding as to whether “the principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred” in Montana. Following the submission of additional proofs, the Magistrate Judge issued a finding that “all or almost all of the injuries” allegedly caused by BNSF had occurred in Montana. BNSF filed objections, and the United States District Court for the District of Montana reviewed the findings de novo.

BNSF argued that the allegations at issue involved its shipment of asbestos from Libby, Montana, across state lines, which injured people in other states. BNSF further argued that the Magistrate Judge improperly focused on an analysis of where the plaintiffs in the case were injured, instead of whether the conduct in the complaint could have caused other injuries outside of Montana.

The local controversy exception to the CAFA requires that the “principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed.” Federal courts are divided as to whether this exception requires the court to look solely at the principal injuries of the class, or at the principal injuries of all people resulting from the alleged conduct. While the Ninth Circuit has yet to interpret this requirement, other federal district courts in the circuit appear to follow the latter approach, looking at the principal injuries of all people resulting from the alleged conduct. In essence, this inquiry focuses on whether the alleged harm at issue could have been national in scope.

Here, however, the court noted that BNSF’s alleged misconduct involved the mishandling of asbestos-contaminated vermiculite at its loading facility in Libby Montana, and its alleged negligent transport of the material on its four and one-half mile long Libby Logger rail line between the loading facility and the railyard. Thus, this alleged conduct was limited to activity inside of Montana, and there was no allegation of injury to those in other states. Whether or not that asbestos-contaminated product later left Libby, Montana and crossed state lines was irrelevant to the allegations at issue. The court also noted the Environmental Protection Agency’s (“EPA”) classification of Libby, Montana as a public health emergency due to the same or similar alleged contamination at issue in this case, as thousands of Libby residents had been diagnosed with asbestos-related diseases over the course of decades. Given this, it was clear that BNSF’s conduct in Montana uniquely injured Montanans.

The court opined that the retention of federal jurisdiction would transform a distinctly local issue involving the vermiculite mine and the four and one-half mile rail line into a national issue, which was not the intent of the CAFA. As such, it found no error in the Magistrate Judge’s findings and recommendations, and remanded the case to the Montana state court.

Read the case decision here.