On January 7, 2016, in Arbuckle Mountain Ranch of Tex., Inc. v. Chesapeake Energy Corp., et al, the US Court of Appeals for the Fifth Circuit reversed the district court's remand order, and ruled that federal jurisdiction should be retained in cases under the Class Action Fairness Act (CAFA) when the party seeking remand fails to prove that an exception applies (No. 15–10955, (5th Cir. 2016)).

In this dispute over the operation of oil and gas wellheads, the defendants are a group of oil and gas companies operating wells in two counties in Texas. The defendants obtained oil and gas leases on small parcels of property, many of which belonged to lessors who lost their property through foreclosures after the leases were signed. The plaintiff, Arbuckle Mountain Ranch of Texas, Inc. (Arbuckle) represented a purported class of current owners of the disputed oil and gas interests. The plaintiff alleged that the oil and gas leases automatically terminated upon foreclosure of the underlying property, and that the defendants' continued operation on the land constituted trespass and conversion.

On November 19, 2014, Arbuckle brought a putative class action against the Chesapeake defendants in Texas state court. The defendants removed the case to federal court under CAFA (28 U.S.C. §§ 1332(d), 1453) and Arbuckle moved to remand the case back to state court.

The district court granted Arbuckle's motion, and remanded the case back to state court based on CAFA's local-controversy exception, which requires a federal district court to decline jurisdiction where, among other things, "greater than two-thirds of the members of all proposed plaintiff classes...are citizens of the State in which the action was originally filed" (28 U.S.C. § 1332(d)(4)(A)(i)(I)). The defendants appealed the district court's decision.

The Fifth Circuit reversed the order, holding that Arbuckle failed to demonstrate that the local-controversy exception to removal under CAFA applied. In deciding that the plaintiff did not satisfy the exception, the court explicitly adopted the rule from several other circuits that if the applicability of an exception is not shown with reasonable certainty, federal jurisdiction should be retained (Opelousas Gen. Hosp. Auth. V. FairPay Sols., Inc., 655 F.3d 358, 360 (5th Cir. 2011)). In this case, the Fifth Circuit found that the plaintiff did not reasonably demonstrate that the class included greater than two-thirds Texas citizens by comparing:

The court explained that whether remand was appropriate depended on which definition provided by these contradictory paragraphs the Fifth Circuit applied to the case. Arbuckle conceded that if the definition alleged in paragraph 23 was adopted, it could present no evidence that two-thirds of the class consisted of Texas citizens. Because paragraph 23 defined the class for which the plaintiff sought certification and the context provided by the petition supported defining the class in broader terms, the Fifth Circuit held that the local-controversy exception to CAFA did not apply in this matter.

Practitioners in the Fifth Circuit should be aware that when a defendant properly removes a state court action to a federal court under CAFA, the party seeking remand must show with reasonable certainty that an exception to CAFA applies. If not, the class action should remain in federal court.