In Craig v City of Richmond, Ind., No. 26-1864 (7th Cir. June 18, 2026), in an issue of first impression, the panel holds that a district court may sua sponte remand a removed case to state court under the “local event or occurrence” exception, 28 U.S.C. § 1332(d)(11)(B)(ii)(I), even if the plaintiff did not seek a remand under that exception.
“An industrial facility caught fire in Richmond, Indiana and burned for at least seven days. Seeking relief for related injuries and damages, 150 plaintiffs sued in Indiana state court. The defendants that owned the properties on which the facility stood removed the case to federal court as a ‘mass action’ under the Class Action Fairness Act [CAFA] of 2005. See 28 U.S.C. §§ 1332(d)(11), 1453(b).”
While the plaintiffs did not cite the local event or occurrence exception of CAFA in its motion for remand, “the magistrate judge sua sponte ordered the parties to show cause why one of the exceptions to mass actions—the local event or occurrence exception—did or did not apply. Id. § 1332(d)(11)(B)(ii)(I). That exception excludes from the term ‘mass action’ any civil action in which ‘all of the claims in the action arise from an event or occurrence in the State in which the action was filed, and that allegedly resulted in injuries in that State or in States contiguous to that State.’ Id.”
Because the judge found that the underlying claim fell within the exception, it “ordered the case remanded for lack of subject matter jurisdiction.” Defendants appealed under 28 U.S.C. § 1453(c).
The Seventh Circuit affirms.
“The first question we consider is whether the local event or occurrence exception, § 1332(d)(11)(B)(ii)(I), is jurisdictional.” The panel notes that other circuits had assumed that to be the case, but the issue had never before been faced (in a precedential opinion, at any rate) in the context of a sua sponte order. Because plaintiffs had failed to timely raise it in its motion to remand, 28 U.S.C. § 1447(c), entertaining the exception “could run afoul of the party presentation principle and rules of waiver” unless it goes to subject-matter jurisdiction.
The panel holds that the exception affects federal jurisdiction.
“Only civil actions that fall within the definition of a mass action are deemed to be class actions. And only class actions are granted original jurisdiction under § 1332(d)(2). So, any action that does not meet the definition of a mass action is not a removable class action and must meet the requirements of § 1332(a)(1). Because the exceptions are part of the definition of mass action, they affect subject matter jurisdiction through their link back to the requirements in §§ 1332(d)(2) and 1332(a)(1).” (Practice note: as a consequence, the reasoning of this opinion applies to all four statutory exceptions.)
“Because the local event or occurrence exception, § 1332(d)(11)(B)(ii)(I), affects the definition of a removable ‘mass action,’ we hold that it is jurisdictional. As with all issues of subject matter jurisdiction, the magistrate judge was free to raise it at any point.”
The panel then goes on to affirm the district court’s determination that this case fell within the exception.
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