Beth Freeman v. Blue Ridge Paper Products, Inc ( 2008 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 08a0461p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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BETH FREEMAN, Individually, and on behalf
Plaintiff-Appellee, --
of all others similarly situated,
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No. 08-6321
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>
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v.
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Defendant-Appellant. -
BLUE RIDGE PAPER PRODUCTS, INC.,
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Appeal from the United States District Court
for the Eastern District of Tennessee at Greeneville.
No. 08-00035—J. Ronnie Greer, District Judge.
Argued: December 9, 2008
Decided and Filed: December 29, 2008
*
Before: DAUGHTREY, ROGERS, Circuit Judges, and RESTANI, Judge.
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COUNSEL
ARGUED: Linda J. Hamilton Mowles, LEWIS, KING, KRIEG & WALDROP, P.C.,
Knoxville, Tennessee, for Appellant. Gordon Ball, BALL & SCOTT LAW OFFICES,
Knoxville, Tennessee, for Appellee. ON BRIEF: Linda J. Hamilton Mowles, LEWIS,
KING, KRIEG & WALDROP, P.C., Knoxville, Tennessee, for Appellant. Gordon Ball,
BALL & SCOTT LAW OFFICES, Knoxville, Tennessee, for Appellee.
ROGERS, J., delivered the opinion of the court, in which RESTANI, J., joined.
DAUGHTREY, J. (pp. 9-11), delivered a separate dissenting opinion.
*
The Honorable Jane A. Restani, Chief Judge of the United States Court of International Trade,
sitting by designation.
1
No. 08-6321 Freeman v. Blue Ridge Paper Products, Inc. Page 2
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OPINION
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ROGERS, Circuit Judge. This class action for nuisance in the form of water
pollution from a paper mill involves an effort by plaintiffs to avoid removal to federal
court under the Class Action Fairness Act (CAFA) of 2005. Pub. L. No. 109-2, 119 Stat.
4 (codified in scattered sections of 28 U.S.C.). Plaintiffs divided their suit into five
separate suits covering distinct six-month time periods, with plaintiffs’ limiting the total
damages for each suit to less than CAFA’s $5 million threshold. See 28 U.S.C.
§ 1332(d)(2). The suits were filed in state court with identical parties and claims, except
that the suits were for a series of different, sequential six-month periods. Each suit
limited the total class damages to less than $4.9 million. The cases were removed to
federal court by the defendant paper mill, but remanded by the district court. Because
no colorable basis for dividing the claims has been identified by the plaintiffs other than
to avoid the clear purpose of CAFA, remand was not proper.
Plaintiffs are three-hundred landowners who own property in Tennessee
downriver from Blue Ridge’s paper mill in Canton, North Carolina. A previous
Tennessee court class action involving the same class of plaintiffs and covering a six-
year time period (June 1, 1999 to August 17, 2005) resulted in an aggregate award of $2
million. See Freeman v. Blue Ridge Paper Prods., Inc., 229 S.W.3d 694, 701 (Tenn. Ct.
App. 2007). Subsequent to that trial, on October 11, 2005 plaintiffs initiated in
Tennessee state court the first of the five suits involved in this appeal. Plaintiffs sought
damages accruing from August 17, 2005 until the date of trial in that case. The parties
met the minimal diversity of citizenship requirements as required by the CAFA
amendments to 28 U.S.C. § 1332. See § 1332(d)(2). In the complaint, the plaintiff
disavowed recovery in excess of $4.9 million:
The amount in controversy as to the Plaintiff and each member of the
Proposed Class does not exceed Seventy-four Thousand Dollars
($74,000.00) each, exclusive of interest and costs. The Plaintiff,
therefore, disclaims any compensatory damages, punitive damages,
No. 08-6321 Freeman v. Blue Ridge Paper Products, Inc. Page 3
declaratory, injunctive, or equitable relief greater than seventy-four
thousand dollars ($74,000.00) per individual Class member, and Plaintiff
and the Proposed Class limit their individual compensatory damage
claims to Seventy-four Thousand Dollars ($74,000.00) per Class
member, and limit their total class wide claims to less than Four Million
Nine Hundred Thousand Dollars ([$]4,900,000.00).
Freeman v. Blue Ridge Paper Products, Inc., No. 2:06-CV-05, at 2 (E.D. Tenn. Sept. 19,
2006). Blue Ridge removed this first suit to the United States District Court for the
Eastern District of Tennessee on January 12, 2006. Id. at 1. The district court found that
Blue Ridge had not established that it was “more likely than not the plaintiff’s claims
meet the amount in controversy requirement.” Id. at 6. The district court remanded the
case to state court. Id. at 7.
On remand, the plaintiffs took steps to divide the suit into five separate suits,
each covering a successive six-month time period. On September 13, 2007, plaintiffs
sought to amend the complaint in the remanded case so as to seek damages only for the
period August 17, 2005 to February 17, 2006. Freeman v. Blue Ridge Paper Products,
Inc., No. 2:08-CV-35, at 2 n.2 (E.D. Tenn. Aug. 19, 2008). The district court orally
granted the motion on December 11, 2007, but did not enter the operative written order
until February 1, 2008. Id. On February 4, 2008, Blue Ridge again removed this case
to federal court, alleging that the amendment made the case removable under 28 U.S.C.
§ 1446(b). Id.
After the amendment was granted, on December 19, 2007 plaintiffs filed in
Tennessee Circuit Court the four additional suits at issue in this appeal. Each suit
covered a six-month time period: February 18, 2006–August 18, 2006 (No. 31,005),
August 19, 2006–February 19, 2007 (No. 31,004), February 20, 2007–August 20, 2007
(No. 31,003), and August 21, 2007–February 21, 2008 (No. 31,002). Each complaint,
in terms nearly identical to the quoted language above, capped damages at $74,000 for
each plaintiff and $4.9 million overall. Id. at 2. On February 4, 2008, Blue Ridge also
removed these four suits to federal court. Id. at 1.
The district court consolidated all five cases and then remanded each to the
Tennessee court. Id. at 1, 7, 9. With respect to the first suit, the court reasoned that the
No. 08-6321 Freeman v. Blue Ridge Paper Products, Inc. Page 4
case was untimely removed under § 1446(b). Id. at 6-7. According to the court, Blue
Ridge should have removed the case within thirty days of September 13, 2007, when
plaintiffs filed their motion to amend their complaint. Id. With respect to the other four
cases, the court again stated that Blue Ridge had failed to show that it was “more likely
than not the plaintiff’s claims meet the amount in controversy requirement” for each
individual suit. Id. at 8.
On October 30, 2008, a panel of this court granted Blue Ridge’s petition to
appeal the remand order pursuant to 28 U.S.C. § 1453(c)(1).
The $5 million CAFA threshold appears to be met in this case because the $4.9
million sought in each of the five suits must be aggregated. The complaints are identical
in all respects except for the artificially broken up time periods. Plaintiffs put forth no
colorable reason for breaking up the lawsuits in this fashion, other than to avoid federal
jurisdiction. In fact, plaintiffs’ counsel admitted at oral argument that avoiding CAFA
was the only reason for this structuring. If such pure structuring permits class plaintiffs
to avoid CAFA, then Congress’s obvious purpose in passing the statute—to allow
defendants to defend large interstate class actions in federal court—can be avoided
almost at will, as long as state law permits suits to be broken up on some basis.
CAFA was clearly designed to prevent plaintiffs from artificially structuring their
suits to avoid federal jurisdiction. The statutory language notes that “[c]lass action
lawsuits are an important and valuable part of the legal system” because they allow
aggregation of claims so that a defendant faces only a single action. CAFA § 2(a)(1),
28 U.S.C. § 1711 note. Furthermore, CAFA states that “there have been abuses of the
class action device,” including that “[s]tate and local courts are . . . keeping cases of
national importance out of Federal court.” Id. § 2(a)(4)(A). According to the relevant
Senate Report, CAFA was necessary because the previous law “enable[d] lawyers to
‘game’ the procedural rules and keep nationwide or multi-state class actions in state
courts whose judges have reputations for readily certifying classes and approving
settlements without regard to class member interests.” S. Rep. No. 109-14, at 4 (2005).
CAFA provides defendants with access to the federal courts,
No. 08-6321 Freeman v. Blue Ridge Paper Products, Inc. Page 5
mak[ing] it harder for plaintiffs’ counsel to “game the system” by trying
to defeat diversity jurisdiction, creat[ing] efficiencies in the judicial
system by allowing overlapping and “copycat” cases to be consolidated
in a single federal court, [and] plac[ing] the determination of more
interstate class action lawsuits in the proper forum—the federal courts.
Id. at 5. These purposes support reading CAFA not to permit the splintering of lawsuits
solely to avoid federal jurisdiction in the fashion done in this case.
Our analysis is supported by a recent district court case from the same district.
In Proffitt v. Abbott Labs, No. 2:08-CV-148, 2008 U.S. Dist. LEXIS 72467 (E.D. Tenn.
Sept. 23, 2008), the plaintiffs brought eleven class actions, each for a one-year period,
alleging that defendants were involved in an antitrust conspiracy. Id. at *5-*6. Each
complaint pointed to defendant’s actions taken throughout the whole eleven-year period
as evidence of the conspiracy. Id. The court found that “[o]ther than the difficulty of
making a damages disclaimer to avoid the CAFA, there appears no reason for selecting
the one-year divisions and creating eleven lawsuits to litigate one conspiracy that
involves one defendant and one drug.” Id. at *6. Finding that such an attempt to evade
federal jurisdiction was at odds “with the Congressional intent and purpose of the
CAFA,” the district court treated the cases as one lawsuit and found that the amount in
controversy was therefore met. Id. at *7-*12.
While plaintiffs seek to distinguish that case on the ground that a conspiracy
claim could not be broken up in the same way that a nuisance claim can be, it is not clear
that the cases are very different. Conspiracies can be broken up into time periods just
like nuisances. Damages can be divided up accordingly. We recognize that state law
appears to provide that every day starts a new statute of limitations for nuisance, and that
a previous suit for nuisance does not preclude a nuisance suit for a period after the time
of the previous suit. Whiteside Estates, Inc. v. Highlands Cove, L.L.C., 553 S.E.2d 431
(N.C. Ct. App. 2001), for instance held that future damages in nuisance suits must be
recovered in successive actions, and stated that “[t]he continued migration of
contaminants remains a nuisance and when each contaminant crosses onto an adjoining
No. 08-6321 Freeman v. Blue Ridge Paper Products, Inc. Page 6
property, there is a new trespass and injury.” Id. at 462 (citation omitted).1 But these
principles of state law do not mean that pre-suit periods of time may be artificially
divided up for no reason other than to affect jurisdiction. And if indeed North Carolina
law permits such a retroactive dividing up, there is nothing in federal law to prevent state
law from similarly permitting the dividing up of a conspiracy claim.
Because plaintiffs’ suits in the aggregate seek up to $24.5 million, we need not
decide the proper standard of proof under CAFA when a plaintiff limits his damages to
less than the jurisdictional amount and there is a factual dispute as to the amount of
damages for purposes of removal. Instead, this case must be treated as if plaintiffs filed
a claim worth up to $24.5 million in state court. In “a suit instituted in a state court and
thence removed,” plaintiffs’ claim of damages exceeding the federal amount in
controversy is presumed correct unless shown to a legal certainty that the amount is
actually less than the federal standard. St. Paul Mercury Indem. Co. v. Red Cab Co., 303
U.S. 283, 290-92 (1938); Gafford v. General Electric Co., 997 F.2d 150, 157 (6th Cir.
1993). “Thus, once the defendant has pointed to an adequate jurisdictional amount, the
situation becomes analogous to the ‘typical’ circumstances in which the St. Paul
Mercury ‘legal certainty’ test is applicable . . . .” De Aguilar v. Boeing Co., 47 F.3d
1404, 1412 (5th Cir. 1995). Therefore, on remand, if the district court determines to a
legal certainty that plaintiffs’ claim, as aggregated, does not meet the $5 million amount
in controversy requirement, the cases should be remanded.
Our holding is limited to the situation where there is no colorable basis for
dividing up the sought-for retrospective relief into separate time periods, other than to
frustrate CAFA. We recognize that plaintiffs can avoid removal under CAFA by
limiting the damages they seek to amounts less than the CAFA thresholds. Generally,
if a plaintiff “does not desire to try his case in the federal court he may resort to the
expedient of suing for less than the jurisdictional amount, and though he would be justly
entitled to more, the defendant cannot remove.” St. Paul Mercury, 303 U.S. at 294. But
1
North Carolina substantive law applies to this cause of action. See Freeman, 229 S.W.3d at 703
n.4 (“Tennessee is a proper forum for this case, but North Carolina substantive law must be applied.”).
No. 08-6321 Freeman v. Blue Ridge Paper Products, Inc. Page 7
where recovery is expanded, rather than limited, by virtue of splintering of lawsuits for
no colorable reason, the total of such identical splintered lawsuits may be aggregated.
We do not rely, however, on Blue Ridge’s argument that the jurisdictional
amount is exceeded in each one of the separate cases by virtue of the number of class
members (300) and the amount that each class member claimed ($74,000). The
argument is not persuasive because each of the five complaints caps individual damages
at $74,000 and overall damages at $4.9 million. Presumably that overall limit for each
time period is binding on the plaintiffs, regardless of how much each class member may
genuinely think he or she should be compensated. In oral argument, counsel for
plaintiffs explicitly so conceded.
Blue Ridge’s removal of the first of the five claims before us was, moreover,
timely. The removal of that case was untimely only if the thirty-day statutory time limit
started before the complaint was actually amended. 28 U.S.C. § 1446(b). The motion
to amend, and the oral order by the court that the complaint be amended, both occurred
more than 30 days before removal. While some district court cases would hold the
removal untimely in these circumstances, e.g., Williams v. Heritage Operating, L.P., No.
8:07-cv-977-T-24-MSS, 2007 WL 2729652, at *2 (M.D. Fla. Sept. 18, 2007) (stating
that the removal clock begins to run on filing of motion); Webster v. Sunnyside Corp.,
836 F. Supp. 629, 630 (S.D. Iowa 1993), the better view in a case like this one is that the
time limit begins to run from the actual and effective amendment of the complaint, e.g.
May v. J.D. Candler Roofing Co., No. 04-CV-74690, 2005 WL 1349110, at *4 (E.D.
Mich. May 12, 2005) (“[M]ost courts have . . . held that § 1446(b)’s thirty-day
limitations’ period ‘commences upon either the granting of the motion to amend or the
actual filing of the amended complaint.’” (citing Douklias v. Teachers’ Ins. & Annuity
Assoc., 35 F. Supp. 2d 612, 615 (W.D. Tenn. 1999))). This reading is supported by the
fact that removal automatically places the case into federal court. § 1446(d). Therefore,
removal before the state court actually amends the complaint may have the anomalous
effect that the removed case lacks federal jurisdiction at the time that it is removed. As
the Seventh Circuit reasoned in Sullivan v. Conway, 157 F.3d 1092 (7th Cir. 1998),
No. 08-6321 Freeman v. Blue Ridge Paper Products, Inc. Page 8
“[u]ntil the state judge granted the motion to amend, there was no basis for removal.”
Id. at 1094.
The complaint was amended only upon issuance of the written order. The oral
order to amend the complaint was not effective under Tennessee law until entered as a
written order: “[t]he action of a court is not complete nor effective for any purpose until
a record thereof has been spread upon the minutes of the court, and the minutes duly
signed or authenticated.” Mass. Mut. Life Ins. Co. v. Taylor Implement & Vehicle Co.,
195 S.W. 762, 765 (Tenn. 1917); see also Sparkle Laundry & Cleaners, Inc. v. Kelton,
595 S.W.2d 88, 93 (Tenn. Ct. App. 1979) (“[N]o oral pronouncement is of any effect
unless and until made a part of a written judgment duly entered.”). Thus the oral order
in this case did not start § 1446(b)’s 30-day time period. Cases cited by plaintiffs for
using the date of an oral order as the start time, are particularly unpersuasive, given that
oral orders may be effective in other states. See, e.g., McMahon v. Advance Stores Co.,
No. 5:07CV123, 2008 WL 183715, at *5-*6 (N.D. W. Va. Jan 18, 2008) (finding that
under West Virginia Supreme Court precedent, the court record which gives notice of
removal need not be a written judicial order). Tennessee procedure mandates the clock
begin only upon the entry of a written order and because Blue Ridge removed within
thirty days of that entry, removal was timely under § 1446(b).
The remand order is reversed and the case remanded for the district court to
consider whether the aggregated cases satisfy the amount in controversy requirement
under § 1332(d). The attorney fee order is also reversed.
No. 08-6321 Freeman v. Blue Ridge Paper Products, Inc. Page 9
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DISSENT
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MARTHA CRAIG DAUGHTREY, Circuit Judge, dissenting. There is no
gainsaying the point emphasized by the majority that CAFA was intended to prevent
local courts from “keeping [class action] cases of national importance out of Federal
court.” Class Action Fairness Act (CAFA) of 2005 § 2(a)(1), 28 U.S.C. § 1711 note.
The aspect of this case that the majority overlooks, however, is the fact that this class
action is not a “case of national importance” but is, instead, a matter of local concern.
The named plaintiff, Beth Freeman, represents a class composed entirely of property
owners in Cocke County, Tennessee. The property in question abuts the Pigeon River
along its 25.5-mile course in Tennessee, from the point where it crosses into the state
near Waterville, North Carolina, to the point where it flows into the French Broad River
just northwest of Newport, Tennessee, the county seat of Cocke County. Indeed, the
Tennessee portion of the river is located entirely within Cocke County. Only the fact
that the defendant, Blue Ridge Paper Products, operates a paper mill that is located in
nearby Canton, North Carolina, and is incorporated in Delaware gives this case an
interstate connection sufficient to subject it to possible diversity jurisdiction in federal
court.
The Blue Ridge paper mill, formerly operated by Champion International Paper
Corporation and now a subsidiary of Evergreen Packaging Group, is located upstream
from the Cocke County stretch of the Pigeon River. Blue Ridge uses the water from the
river in its paper-making process, then discharges it back into the river on a continuous
basis and thereby introduces certain chemicals and other contaminants into the water.
Equally as continuous over the past two decades have been the legal efforts to force the
defendant to abate the pollution, as reflected in repeated litigation against Champion and
now Blue Ridge. In the current complaint, Freeman alleges that the defendant’s
pollution of the Pigeon River has had various deleterious effects upon those individuals
who own real property that adjoins the river as it flows into Tennessee, including
No. 08-6321 Freeman v. Blue Ridge Paper Products, Inc. Page 10
limitations on the enjoyment of their property, impaired water quality, personal
discomfort, loss of recreational use of the river, annoyance, and loss of rental value of
their property.
Because, at least theoretically, a new cause of action arises each time pollutants
are discharged into the river, I conclude that the multiple actions filed in state court with
firm limits on the amount of damages in controversy should not have been subject to
removal under CAFA and, as a result, that the district court’s order remanding them to
state court should be affirmed. Moreover, given the multiplicity of events giving rise to
potential liability, the majority’s comparison between this case and that of conspiracy
simply does not hold up as a valid analogy. A conspiracy has a beginning point, arising
from an agreement between or among the co-conspirators, it is established by the
occasion of one or more overt acts, and it continues until all but the last member of the
conspiracy have withdrawn or otherwise have brought the conspiracy to a close. It may,
of course, be possible to establish the existence of multiple, discrete conspiracies, but in
the absence of such proof, there is no basis for segmenting the conspiracy into separate
actions of some kind, as the majority seems to suggest.
The majority is willing to recognize that "[i]n determining the amount in
controversy, the plaintiff is the ‘master of his complaint.'" Smith v. Nationwide Prop.
and Cas. Ins. Co., 505 F.3d 401, 407 (6th Cir. 2007). If there were a single complaint
in this case, alleging the existence of a single, one-time nuisance, the majority would
apparently condone an action structured so that it avoided CAFA (“We do not rely,
however, on plaintiffs’ argument that the jurisdictional amount is exceeded in each one
of the separate cases by virtue of the number of class members (300) and the amount that
each class member claimed ($74,000) . . . because each of the five complaints caps
individual damages at $74,000 and overall damages at $4.9 million. Presumably that
overall limit for each time period is binding on the plaintiffs . . . .”), and would allow the
plaintiffs intentionally to avoid removal to federal court. If the plaintiff files separate
actions alleging multiple instances of conduct giving rise to liability, what reason would
there be to charge, as the majority does here, that there is no “colorable basis” for
No. 08-6321 Freeman v. Blue Ridge Paper Products, Inc. Page 11
structuring those actions so as to avoid CAFA? I would argue that there is none, and no
authority to support the majority’s adoption of a “colorable basis” requirement,
especially where, as here, the filing of multiple actions is legal under state law.
For this reason, I respectfully dissent.