VERA v. MIDDLESEX WATER COMPANY

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

VERA et al., Civ. No. 22-04446 (KM) (ESK)

Plaintiff,

OPINION

v.

MIDDLESEX WATER COMPANY et

al.,

Defendants.

KEVIN MCNULTY, U.S.D.J.:

This matter comes before the Court on the plaintiffs’ motion to remand

this removed class action to state court. (DE 6.)1 At issue primarily is whether

a defendant may remove a class action on the basis of diversity jurisdiction

where the sole diverse party was brought into the case by way of a third-party

claim filed by the defendant. Although the issue is not quite settled, existing

precedent all but requires me to answer that question in the negative. For that

reason, and because the defendant’s notice of removal was untimely, the

motion to remand is GRANTED.

I. Background

The original class action complaint in this matter was filed in the

Superior Court of New Jersey, Middlesex County in October 2021. (Not. ¶1.)

The lead plaintiffs filed a first amended complaint in November 2021, followed

1 Certain citations to the record are abbreviated as follows:

DE = Docket entry

Not. = MWC’s notice of removal (DE 1)

Mot. = Plaintiffs’ motion to remand (DE 6)

Opp. = MWC’s brief in opposition to the motion to remand (DE 9)

by a second amended complaint in April 2022. (Id. ¶¶2-3.) For ease of

reference, I will refer to the second amended complaint, which is the currently

operative complaint, as “the SAC”.

The SAC, like the two earlier versions of the complaint, was brought by

plaintiffs who are New Jersey citizens, on behalf of several proposed -- now

certified -- classes and sub-classes of New Jersey citizens who are customers of

the Middlesex Water Company (“MWC”). (Mot., Ex. A.; Not., Ex. A, B, C.) The

sole defendant named in the SAC and the earlier versions is MWC. (Id.) MWC is

a New Jersey corporation with a principal place of business in New Jersey.

(Not. ¶15.)

The claims in the SAC arise out of two uniformly worded notices that

MWC sent to its customers in October and November 2021. (SAC ¶5.) The

notices informed customers that MWC’s water contained levels of

Perfluorooctanoic Acid (PFOA) that exceeded New Jersey drinking water

standards. (Id. ¶6.) In addition, the notices explained the health risks involved

in exposure to elevated PFOA levels and directed customers to take certain

steps to limit those risks. (Id. ¶¶10-13.) Customers were advised to consider

using bottled water for drinking and cooking to reduce exposure to PFOA, or to

install a home water filter. (Id.) Customers who were severely

immunocompromised, elderly, pregnant, or who had an infant were directed to

seek advice from a health care provider. (Id.)

The SAC alleges that the plaintiffs and class members followed MWC’s

written directives to consult with their doctors, buy bottled water, and/or

install a home water filter to protect themselves against their contaminated

water tap water. (Id. ¶16.) In following those directives, the plaintiffs and class

members incurred out-of-pocket expenses. (Id. ¶17.) The SAC seeks

indemnification and reimbursement under New Jersey equitable and common

law principles for the expenses they incurred. (Id. ¶24.) It also seeks future

medical monitoring for the class who have been directly exposed to PFOAs, as

well as injunctive relief to remedy the fact that MWC has failed to provide

reasonable notice about the dangerous conditions to all persons who receive

their domestic drinking water from MWC. (Id. ¶¶27-28.) Plaintiffs allege that

the only customers that received the two notices were those whose name

appears as the billed party on a MWC bill. (Id. ¶29.)

On May 4, 2022, MWC filed an answer to the SAC and also filed a third-

party complaint against 3M Company (“3M”). (Not. ¶¶4-5.) The third-party

complaint alleges that 3M is responsible for the contamination of MWC’s public

drinking water supplies, as 3M sold PFOAs or products containing PFOAs to

customers in New Jersey. (Not., Ex. D.)

On July 6, 2022, MWC removed the matter to federal court. (Not.) The

notice of removal alleges that 3M is a Delaware corporation with a principal

place of business in Minnesota. (Id. ¶16.) On July 12, 2022, the plaintiffs

moved to remand the action to state court. (DE 6.) MWC opposed the motion.

(DE 9.)

II. Legal standards

The general removal statute, 28 U.S.C. § 1441(a), permits a defendant to

remove a state court action over which a federal court would have original

jurisdiction. Under the Class Action Fairness Act of 2005 (CAFA), a district

court has original jurisdiction over a class action where the class has more

than 100 members, the amount in controversy exceeds $5,000,000, and the

parties are minimally diverse. Standard Fire Ins. Co. v. Knowles, 568 U.S. 588,

592 (2013) (citing 28 U.S.C. § 1332(d)(2), (d)(5)(B)). CAFA’s minimal diversity

requirement is satisfied if “any member of a class of plaintiffs is a citizen of a

State different from any defendant.” 28 U.S.C. § 1332(d)(2)(A).

The burden to show the existence of federal jurisdiction falls on the party

asserting such jurisdiction. See Hertz Corp. v. Friend, 559 U.S. 77, 96 (2010).

Once jurisdiction has been established, the burden shifts to the party seeking

remand to show that an exception requiring remand applies. Kaufman v.

Allstate New Jersey Ins. Co., 561 F.3d 144, 154 (3d Cir. 2009); see also Breuer

v. Jim's Concrete of Brevard, Inc., 538 U.S. 691, 698 (2003) (“[W]henever the

subject matter of an action qualifies it for removal, the burden is on a plaintiff

to find an express exception.”).

Although the removal statute must generally be strictly construed, with

any doubt to be resolved in favor of remand, see, e.g., Brown v. Jevic, 575 F.3d

322, 326 (3d Cir. 2009), this presumption does not apply to class actions

invoking jurisdiction under CAFA. Dart Cherokee Basin Operating Co., LLC v.

Owens, 574 U.S. 81, 89 (2014). Because Congress enacted CAFA “to facilitate

adjudication of certain class actions in federal court,” its “provisions should be

read broadly, with a strong preference that interstate class actions should be

heard in a federal court if properly removed by any defendant.” Id. (quoting S.

Rep. No. 109-14, p. 43 (2005)).

III. Discussion

The plaintiffs argue that remand is required because the Court lacks

subject matter jurisdiction. In the plaintiffs’ view, this is a case brought by New

Jersey citizens against MWC, which is a New Jersey citizen, and all of the

claims arise under New Jersey law. Consequently, there is no federal question

presented and there is not even the minimal diversity of citizenship sufficient to

create diversity jurisdiction under CAFA. (Mot. 9-10.) Even assuming arguendo

that CAFA’s diversity requirement was met, plaintiffs argue, remand is

nevertheless required because MWC’s notice of removal was not timely. (Id. 11-

12.) Alternatively, even if the Court finds that diversity jurisdiction exists and

the removal was timely, plaintiffs insist that remand is still appropriate

because the “local controversy” exception applies. See 28 U.S.C. § 1332(d)(4)(A).

(Id. 12-13.)

A. Diversity jurisdiction under CAFA

MWC asserts that minimal diversity exists because 3M is a diverse party.

For purposes of diversity jurisdiction, a corporation is deemed to be a citizen

both of the state where it is incorporated and of the state where it has its

principal place of business. See 28 U.S.C. § 1332(c)(1). 3M is thus a citizen of

both Minnesota and Delaware. According to MWC, because members of the

class of plaintiffs are New Jersey citizens, CAFA’s requirement that “any

member of a class of plaintiffs is a citizen of a State different from any

defendant” is satisfied. 28 U.S.C. § 1332(d)(2)(A).

The plaintiffs respond that a defendant cannot create its own diversity

jurisdiction by filing a third-party claim against an out-of-state entity. They

maintain that under the Supreme Court’s decision in Home Depot U.S.A. v.

Jackson, 139 S. Ct. 1743, 1748 (2019), diversity jurisdiction is to be

determined based on the parties named in the complaint filed by the plaintiffs,

and any third-party defendant not named in the plaintiff’s complaint does not

create diversity for purposes of federal jurisdiction. (Mot. 15-16.)

The precise holding of Home Depot is not quite on point, as the parties in

that case were in a somewhat different posture from those here. In Home

Depot, the Court addressed whether a third-party defendant brought into a

lawsuit by a claim filed by the original defendant could remove the claim

against it. The Court concluded that the third-party defendant could not do so

either under the general removal statute or under CAFA because both

provisions limit removal authority to the original defendant sued by the

plaintiff. Home Depot, 139 S. Ct. at 1745.

In this case, the removing party is the original defendant -- not the third-

party defendant -- and thus the holding of Home Depot, construed as narrowly

as possible, would not bar removal. Nonetheless, the Supreme Court’s

reasoning in Home Depot implies that an original defendant also may not

remove where the sole diverse party is a third-party defendant.

That reasoning is as follows. The Court explained in Home Depot that the

“civil action” over which the district court must have “original jurisdiction” is

“the action as defined by the plaintiff’s complaint.” 139 S. Ct. at 1748. Thus the

Court “has long held that a district court, when determining whether it has

original jurisdiction over a civil action, should evaluate whether that action

could have been brought originally in federal court.” Id. This is done by

“evaluat[ing] whether the plaintiff could have filed its operative complaint in

federal court, either because it raises federal claims arising under federal law

or because it falls within the court’s diversity jurisdiction.” Id. Against this

backdrop, the Court concluded that removal was not permitted “based on

counterclaims at all, as a counterclaim is irrelevant to whether the district

court had ‘original jurisdiction’ over the civil action.” Home Depot, 139 S. Ct.

1748.

A recent decision from the Northern District of California applied the

reasoning of Home Depot to disallow removal in circumstances similar to those

here. See Cowan v. LifeLong Med. Care, No. 21-CV-10062-VC, 2022 WL

1025146 (N.D. Cal. Apr. 6, 2022). In Cowan, two individuals sued a California

healthcare provider in state court on behalf of a class of California residents

whose confidential patient information was exposed as a result of a data

breach. Id. at *1. The provider filed a third-party complaint against a

Minnesota-based data vendor, alleging that the vendor was responsible for any

damages arising out of the breach. Id. The defendant provider then filed a

notice of removal, alleging that because the third-party defendant (the vendor)

was diverse from the plaintiffs, the action met the minimal diversity

requirements of CAFA. Id.

The Cowan Court reasoned that Home Depot “all but answers the

question” of whether removal was proper: “Although Home Depot addressed

removal by third-party defendants, the logic applies even more strongly to

removal by original defendants.” Id. Because the plaintiffs in Cowan could not

have brought the case originally in federal court, the Court held that the

defendant’s decision to file a third-party claim against a diverse third-party

could not create jurisdiction. Id.

The Cowan Court explained:

It would be odd if the answer were otherwise. Federal jurisdiction

over diversity cases exists “to provide a neutral forum” in which to

settle disputes. Exxon Mobil Corp. v. Allapattah Services, Inc., 545

U.S. 546, 552 (2005). But the original defendant has no greater or

lesser interest in a neutral forum whether a third-party defendant

is brought into an action or not. If a diverse third-party

defendant—the only defendant with an interest in a neutral

forum—cannot remove after Home Depot, it would be strange to

allow the original defendant to remove anyway.

2022 WL 1025146, at *1.

I find the reasoning of Cowan and its application of Home Depot highly

persuasive. Consider the SAC in this case. The plaintiffs could not have filed

the SAC in federal court because it asserts neither federal claims nor claims

against a party diverse from any of the class members. MWC’s unilateral

decision to file a third-party complaint against a diverse party does not create

federal jurisdiction. Nor is MWC, a New Jersey citizen, the sort of party for

whom the diversity and removal statutes guarantee a neutral forum.

Accordingly, the action may not be removed to federal court.2

2 I deal here with some of MWC’s miscellaneous arguments, none of them

meritorious.

MWC argues that CAFA’s minimal diversity requirement is also satisfied

because hundreds of MWC customers have moved out of New Jersey since the

inception of the lawsuit and are thus now citizens of other States, making them

diverse from MWC. (Opp. 12.) This argument is without merit. It has long been the

rule that “[w]hether diversity exists is determined by the citizenship of the parties at

the time the action is filed.” Lincoln Ben. Life Co. v. AEI Life, LLC, 800 F.3d 99, 104 n.9

(3d Cir. 2015) (citing Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 570–71

(2004)). A party’s citizenship change after the time of filing—as is asserted here—does

not cure a jurisdictional defect that existed at that time. Grupo Dataflux, supra at 575.

MWC accuses the plaintiffs of purposefully engineering their complaint to avoid

federal jurisdiction. (Opp. 19.) That argument is wholly vapid, because it is plaintiff’s

option, in the first instance, to make such strategic choices. “The Supreme Court has

long held that plaintiffs may limit their claims to avoid federal subject matter

jurisdiction.” Morgan v. Gay, 471 F.3d 469, 474 (3d Cir. 2006) (citing St. Paul Mercury

Indem. Co. v. Red Cab Co., 303 U.S. 283, 294 (1938)). The plaintiff is the master of his

or her own claims, and CAFA does not change that proposition. Morgan, supra. See

Cowan, 2022 WL 1025146, at *2 (rejecting defendant’s argument that plaintiffs

“deliberately engineered their complaint to avoid CAFA jurisdiction by neglecting to

sue [a third party] in the original complaint”).

To the extent that MWC may be claiming that 3M is an indispensable party that

plaintiffs have failed to name, MWC has cited no evidence or authority to support such

a conclusion. “As a general proposition, ... a party is not truly indispensable unless he

has an interest inevitably involved in the subject matter before the court and a

judgment cannot justly be made between the litigants without either adjudging or

necessarily affecting the absentee's interests.” Int'l Bhd. of Elec. Workers Loc. 400 v.

Borough of Tinton Falls, 468 N.J. Super. 214, 225 (App. Div. 2021) (citing Toll Bros.,

B. Timeliness of removal

There is an alternative basis for remand. Plaintiffs assert that MWC’s

notice of removal was untimely, because it was not filed within the 30-day

deadline imposed by 28 U.S.C. § 1446. The argument has a straightforward,

facial appeal. The notice of removal recites that the third-party claim was filed

on May 4, 2022, and the notice itself was filed on July 6, 2022—well out of

time. I write, however, to address a few procedural details.

CAFA provides that a class action may be removed in accordance with

the procedures set forth in 28 U.S.C. § 1446. See 28 U.S.C. § 1453(b). Section

1446, in turn, provides that a notice of removal “shall be filed within 30 days

after the receipt by the defendant, through service or otherwise, of a copy of the

initial pleading setting forth the claim for relief upon which such action or

proceeding is based, or within 30 days after the service of summons upon the

defendant if such initial pleading has then been filed in court and is not

required to be served on the defendant, whichever period is shorter.” 28 U.S.C.

§ 1446(b)(1).

I pause to observe that to even entertain arguments about timeliness

requires us to enter a world in which MWC’s filing of a third-party claim could,

as a matter of law, create grounds for removal. For the reasons expressed

above, that is not the case. Not surprisingly, then, the statute’s deadline is not

phrased in terms of such a situation, and can be applied only by means of

some judicial prestidigitation. As noted above, the statute provides that it is the

Inc. v. Twp. of W. Windsor, 334 N.J. Super. 77, 90-91 (App. Div. 2000)). This is a “fact

sensitive” conclusion that this Court cannot make. See Tinton Falls, supra. Moreover,

in its Order and Opinion on MWC’s motion to dismiss, the Superior Court has already

found that 3M was not an indispensable party both because it was not even settled

whether 3M was solely responsible for the contamination of MWC’s water and because

the plaintiffs’ claims focus on the buyer/seller relationship. (DE 6-5 at 13.) Both

conclusions would apply, whether in state or federal court.

Finally, that there is another class action lawsuit pending in this District

related to the contamination of MWC’s water and that the plaintiffs in that action sued

3M in addition to MWC is irrelevant. See Lonsk v. Middlesex Water Company, et al.,

No. 2:21-cv-19808(EP)(ESK). As masters of their complaint, the plaintiffs here were

well within their rights to sue MWC only.

“initial pleading,” not a subsequent third-party complaint, that triggers the

removal inquiry. But even if one replaced the phrase “initial pleading” with

“third-party complaint,” and likewise replaced “defendant” with “third-party

defendant,” it would remain clear that MWC had to file its notice of removal

within 30 days after 3M’s receipt, by service or otherwise, of the third-party

complaint or summons. That did not occur.

An inconsequential issue arises as to the date that the 30-day clock

began to run. The notice of removal states, and the exhibits confirm, that MWC

filed the third-party complaint on May 4, 2022. The notice of removal filed by

MWC, which has the burden to establish timeliness, says nothing about the

date of service or other receipt by 3M. Nor did MWC’s briefing in response to

the motion to remand suggest any such date. In an abundance of caution,

however, I have examined the state court docket, which contains an affidavit of

service by hand on 3M’s managing agent as of May 10, 2022. (MID-L-006306-

21, Trans ID: LCV20221886317.) I will therefore adopt May 10, 2022, as the

date of 3M’s actual receipt of the third-party complaint.3 The notice of removal,

however, was not filed until July 6, 2022. (Not. ¶5.)

From May 10, 2022, until July 6, 2022, is a period of 57 days. The notice

of removal was therefore filed some 27 days after the 30-day deadline had run.

MWC argues that it could not remove the matter until 3M’s counsel filed

a notice of appearance on June 13, 2022. (Opp. 21.) That argument is both

illogical and unsupported by any authority. The statutory deadline runs from

service or receipt of the claim; the statute says nothing about a notice of

appearance by a party’s attorney. See 28 U.S.C. § 1446(b)(1). As of May 10,

2022, the out-of-state party was named because MWC itself had named it. The

out-of-state party was served because MWC itself had served it. There is

3 The absurdities multiply. The “actual receipt” rule is clearly designed to prevent

a diverse party from losing its right to remove because the 30-day deadline began

running before it knew it was being sued. MWC, which filed the supposed diversity-

creating claim, obviously knew of its existence, and it makes little sense to afford it the

benefit of the “actual receipt” rule.

nothing about counsel’s notice of appearance that altered the jurisdictional

picture or stood in the way of MWC’s filing a timely notice of removal.

The statutory deadline is clear, and MWC failed to comply with it.

C. “Local controversy” exception

A district court will decline to exercise jurisdiction where a class action

involves a “uniquely local controversy.” Walsh v. Defenders, Inc., 894 F.3d 583,

586 (3d Cir. 2018). See 28 U.S.C. § 1332(d)(4). Having determined both that

MWC’s filing of a third-party complaint did not create federal subject matter

jurisdiction and that MWC’s notice of removal was untimely, I need not address

whether the “local controversy” exception applies here. Because the Court does

not otherwise have jurisdiction over the case, the “local controversy” exception

does not come into play.

D. Fees and costs

The plaintiffs have moved for an award of fees and costs under 28 U.S.C.

§ 1447(c). Pursuant to that section, “[w]hen a case is remanded to state court,

the removing defendant may be liable for expenses associated with the

unsuccessful removal.” League of Women Voters of Pennsylvania v.

Commonwealth of Pennsylvania, 921 F.3d 378, 383 (3d Cir. 2019). See 28

U.S.C. § 1447(c) (“[a]n order remanding the case may require payment of just

costs and any actual expenses, including attorney's fees, incurred as a result of

the removal”). Although an award of fees and costs is discretionary, “[a]bsent

unusual circumstances, courts may award attorney's fees under § 1447(c) only

where the removing party lacked an objectively reasonable basis for seeking

removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005).

By itself, MWC’s argument that its filing of a third-party complaint

against a diverse party creates federal jurisdiction seems incompatible with the

statute’s plain meaning, although there was not a controlling judicial

interpretation precisely on point. See Cowan, 2022 WL 1025146, at *2. If this

were the only problem with removal, an award of fees and costs might be

unwarranted, as the issue would appear to have been—barely—unsettled. See

Roxbury Condo. Ass'n, Inc. v. Anthony S. Cupo Agency, 316 F.3d 224, 228 (3d

Cir. 2003) (reversing District Court’s award of attorneys’ fees where removal

was based on an “area of unsettled law”). Added to that flaw, however, is

MWC’s delay in removing the action and its persistence in the wholly

unsupported argument that the 30-day removal period began to run when 3M’s

attorney filed a notice of appearance. I conclude that removal was objectively

unreasonable. See League of Women Voters of Pennsylvania v. Commonwealth

of Pennsylvania, 921 F.3d 378, 384 (3d Cir. 2019) (affirming District Court’s

award of fees and costs where defendant lacked an objectively reasonable basis

for contending that removal was timely).

The motion for fees and costs is granted.

IV. Conclusion

For the reasons set forth above, the motion to remand is GRANTED. The

Court further finds that removal in this matter was without a reasonable basis

and therefore the defendant shall pay a reasonable award of attorney’s fees and

costs to the plaintiffs to cover the expenses of the remand motion.

An appropriate order will issue.

Dated: March 21, 2023

/s/ Kevin McNulty

______________________________

KEVIN MCNULTY

United States District Judge