STARK, U.S. District Judge:
Pending before the Court is the Motion to Remand to the Superior Court of Delaware filed by Plaintiff Iron Workers District Council of New England ("Plaintiff"). (D.I. 8) ("Motion to Remand") Briefing on the motion was completed on July 16, 2015. (D.I. 9, 12, 19)
On April 15, 2015, Plaintiff filed a civil action in the Superior Court for the State of Delaware against MoneyGram International, Inc. ("MoneyGram"), Thomas H. Lee Partners, L.P. ("THL"), Pamela H. Patsley, W. Alexander Holmes, J. Coley Clark, Victor W. Dahir, Antonio O. Garza, Thomas H. Hagerty, Seth W. Lawry, Peggy Vaughan, Ganesh Rao, W. Bruce Turner, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities, LLC, Goldman Sachs & Co., Inc., J.P. Morgan Securities, LLC, Macquarie Capital (USA) Inc., and William Blair & Company, L.L.C. (collectively, "Defendants"). (See D.I. 9 at 2) In its Complaint, Plaintiff alleges claims, on behalf of itself and a putative class, based on allegedly materially false statements in a prospectus supplement associated with an offering for sale of MoneyGram stock, pursuant to Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. §§ 77k, 771(a)(2), and 77o. (See D.I. 1, Ex. C)
On May 19, 2015, Defendants filed a notice of removal, contending this Court has subject matter jurisdiction under 28 U.S.C. § 1331 because Plaintiffs claims arise under federal law, and further that removal is proper under 28 U.S.C. § 1441. (D.I. 1 at ¶¶ 8, 11) Defendants assert that removal is proper because the Securities Litigation Uniform Standards Act's ("SLUSA") amendments to Sections 16 and 22(a) of the Securities Act
On June 18, 2015, Plaintiff filed its Motion to Remand (D.I. 8), arguing that federal courts do not have exclusive jurisdiction over "covered class actions." (D.I. 12 at 1-2) Instead, in Plaintiff's view, Sections 16(b) and (c) of the Securities Act only provide for the removal of covered class actions arising under state law. (See id.)
For the reasons below, the Court finds that neither Section 22(a) nor Section 16 of the Securities Act (as amended) — bars removal of class actions arising under the Securities Act. Accordingly, the Court will deny Plaintiff's motion.
II. LEGAL STANDARDS
Whether an action was properly removed to federal court involves an analysis
In this case, the existence of this Court's removal jurisdiction and whether state courts have concurrent jurisdiction both turn on interpretation of Sections 16 and 22(a), 15 U.S.C. §§ 77v and 77p, as amended.
Section 22(a) provides:
15 U.S.C. § 77v(a) (emphasis added to reflect SLUSA amendments). In other words, Section 22(a) provides for concurrent federal and state court jurisdiction over violations of the Securities Act, (i) except for "covered class actions" "as provided in section 77p," and (ii) except that, "as provided in section 77p(c)," there can be no removal to federal court of a Securities Act case brought "in any State court of competent jurisdiction." Understanding the meaning of Section 22(a), then, requires turning to section 77p and 77p(c).
Section 77p — that is. Section 16 of the Securities Act, including Section 77p(c) (i.e., Section 16(c)) — provides:
15 U.S.C. § 77p (emphasis added). Resolution of the pending motion turns on the parties' competing interpretations of these provisions of Section 16(c).
The parties offer sharply contrasting positions as to how the applicable statutes should be understood. Plaintiff's argument proceeds as follows: (i) Section 22(a) is a bar to removal of Securities Act cases "[e]xcept as provided in section 77p(c) [i.e., Section 16(c)] of this title;" (ii) Section 16(c), which does permit removal, applies only to "covered class action[s] ... as set forth in section (b) [i.e., Section 16(b)];" and (iii) section (b), permitting removal, only applies to "covered class action[s] [alleging fraud that are] based upon the statutory or common law of any State." That is, the opportunity to remove a securities fraud-based class action is limited to such actions that are based on state law, and does not apply to those that are based on violations of the federal Securities Act.
In support of this view, Plaintiff relies on dicta in the Supreme Court's decision in Kircher v. Putnam Funds Trust, 547 U.S. 633, 636, 126 S.Ct. 2145, 165 L.Ed.2d 92 (2006). In Kircher, in the course of considering jurisdiction over covered class actions arising under
Plaintiff additionally points to Kircher's description of state courts as "equally competent bod[ies]" to federal courts. See id. at 646 ("A covered action is removable it if is precluded, and a defendant can enlist the Federal Judiciary to decide preclusion, but a defendant can elect to leave a case where the plaintiff filed it and trust
Plaintiff cites several district court cases (from outside the Third Circuit) adopting the position it advocates here. See, e.g., Iron Workers Mid-South Pension Fund v. Terraform Global, Inc., 2016 WL 827374 (N.D.Cal. Mar. 3, 2016); Patel v. Terraform Global, Inc., 2016 WL 827375 (N.D.Cal. Mar. 3, 2016); Badri v. Terraform Global, Inc., 2016 WL 827372 (N.D.Cal. Mar. 3, 2016); Fraser v. Wuebbels, 2016 WL 827373 (N.D.Cal. Mar. 3, 2016); Rajasekaran v. CytRx Corp., 2014 WL 4330787, at *3 (C.D.Cal. Aug. 21, 2014); Niitsoo v. Alpha Natural Res., Inc., 902 F.Supp.2d 797, 805 (S.D.W.Va.2012); W. Va. Laborers Trust Fund v. STEC, Inc., 2011 WL 6156945 (C.D.Cal. Oct. 7, 2011); see also Fortunato v. Akebia Therapeutics, Inc., 183 F.Supp.3d 326, 331, 2016 WL 1734073, at *4 (D.Mass. Apr. 29, 2016) ("Courts across the nation have come out both ways on this difficult, close question.").
Defendants counter with two alternative arguments for why the Court has removal jurisdiction over this case. First, Defendants argue that SLUSA — by amending Section 22(a) to add "except as provided in section 77p of this title with respect to covered class actions" — divested state courts of concurrent jurisdiction over covered class actions under the Securities Act, thereby giving federal courts exclusive jurisdiction over such suits. See 15 U.S.C. § 77v(a). On this view, because state courts are divested of jurisdiction over covered class actions arising under the Securities Act, it follows that state courts are not "courts of competent jurisdiction" for these actions. Therefore, Section 22(a)'s removal bar (and exception to it) do not apply to Securities Act actions. Instead, according to Defendants, the removal bar and its exception prohibit removal of actions involving only
Alternatively, Defendants contend that even if state courts somehow remain "courts of competent jurisdiction" over covered class actions arising under the Securities Act, such actions come within Section 16(c) and are, therefore, exempted from the removal bar. On this view, Section 16(c) — as limited by its reference to Section 16(b) — authorizes removal of any covered class action that alleges misstatements or omissions in connection with a covered security. See 15 U.S.C. § 77(p)(b)-(c).
Like Plaintiff, Defendants cite multiple district court decisions which have adopted
Having considered the parties' arguments, and the cases each side cites which have adopted their competing positions, the Court agrees with Defendants' primary argument. The Court concludes that Defendant's principal position is consistent with the pertinent statutory language and is further supported by the legislative history. Given the Court's conclusions, it is unnecessary to consider Defendants' alternative basis for the Court to deny the Motion to Remand.
Congress expressly eliminated state courts' concurrent jurisdiction over covered class actions arising under the Securities Act when it referred to the
This interpretation is consistent with the statutory text. It is also the only conclusion that comports with the legislative history and stated purpose of the SLUSA. See generally King v. Burwell, ___ U.S. ___, 135 S.Ct. 2480, 2496, 192 L.Ed.2d 483 (2015) ("[I]n every case we must respect the role of the Legislature, and take care not to undo what it has done. A fair reading of legislation demands a fair understanding of the legislative plan.").
Underlying SLUSA's passage in 1998 was Congress's finding that
P.L. 105-353 § 2, Nov. 3, 1998, 112 Stat. 3227. The PSLRA, which had been enacted three years earlier than SLUSA, had sought "to prevent the filing of `strike suits' — abusive class actions" brought under the Securities Act. In re Lord Abbett Mut. Funds Fee Litig., 553 F.3d 248, 250 (3d Cir.2009). But the PSLRA had the "unintended consequence" of incentivizing "members of the plaintiffs' bar to avoid the federal forum altogether." Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547 U.S. 71, 81-82, 126 S.Ct. 1503, 164 L.Ed.2d 179 (2006). To address this situation, SLUSA added Sections 16(b) and (c) to the Securities Act, providing for the removal of covered class actions alleging "an untrue statement or omission of a material fact" or "any manipulative or deceptive device or contrivance ... in connection with the purchase or sale of a covered security," and amending Section 22(a) of the Securities
Thus, when the Third Circuit considered the purpose of SLUSA in a case concerning covered class actions arising under state law, it explained:
Rowinski v. Salomon Smith Barney Inc., 398 F.3d 294, 298 (3d Cir.2005) (emphasis added; internal citation omitted). Barring removal of covered class actions arising under the Securities Act, as Plaintiff argues is required, would not promote uniform application of federal fraud standards.
To the Court's knowledge, only one district court in this Circuit has considered the issue now before the Court, and it reached the same conclusion as the Court does here. In Rovner v. Vonage Holdings Corp, Judge Wolfson of the District of New Jersey undertook a thorough analysis of the statutory language and legislative history of SLUSA, concluding "the plain language of the statute, coupled with the legislative history and a healthy dose of common sense compel the conclusion that this class action, which alleges only federal Securities Act claims, was removable." 2007 WL 446658, at *5 (D.N.J.2007). With respect to the statutory language, Judge Wolfson explained:
Id. at *4; see also Pinto v. Vonage Holdings Corp., 2007 WL 1381746, at *2 (D.N.J.2007) (same district court agreeing with Rovner's analysis).
Turning to legislative history, Rovner emphasizes that "[b]ecause the PSLRA failed to achieve Congress's goal in curtailing meritless class actions alleging fraud, Congress enacted the SLUSA to `make Federal court the exclusive venue for securities class actions.'" 2007 WL 446658, at *5 (citing Securities Litigation Uniform Standards Act: Hearing of the Finance and Hazardous Materials Subcommittee of the House Commerce Committee, 105th Cong.); see also Pinto, 2007 WL 1381746,
A case from the Southern District of New York, Knox v. Agria Corp., also found that SLUSA authorizes removal of covered class actions arising under the Securities Act:
613 F.Supp.2d 419, 424 (S.D.N.Y.2009). Knox explained that its conclusion was "consistent with SLUSA's addition to the anti-removal provision. After SLUSA, covered class actions asserting either 1933 Act claims or certain state law claims or both are removable, but individual 1933 Act claims are not subject to removal." Id. at 425.
Moreover, like Rovner, Knox emphasized that its interpretation was
Id. (internal citations omitted).
Contrary to Plaintiffs' view, the Court's interpretation of SLUSA is not inconsistent with the Supreme Court's dicta in Kircher v. Putnam Funds Trust, 547 U.S. 633, 126 S.Ct. 2145, 165 L.Ed.2d 92 (2006), which involved state law securities class actions removed from state court. See generally Knox, 613 F.Supp.2d at 425 ("The Supreme Court's dicta in Kircher ... is not to the contrary. In Kircher, the Supreme Court was previewing the scope of Section 16(c) removal of covered class actions raising state law claims, not the question of removal of covered class actions raising 1933 Act claims."). Because Kircher did not involve "covered class actions" raising Securities Act claims, its statements cannot be read broadly as governing such actions, which are the type of actions Plaintiff asserts here. See id.
Additionally, Kircher's explanation that state courts are courts of competent jurisdiction over preclusion decisions regarding covered class actions brought under state law is irrelevant to the Court's inquiry here.
In the end, the Court finds no reason to deviate from the thorough and well-reasoned analyses in Rovner and Knox, which find that "covered class actions" arising under the Securities Act are properly removed to federal court. SLUSA divested state courts of jurisdiction over "covered class actions" under the Securities Act, thereby giving federal courts exclusive jurisdiction over such suits. Therefore, state courts are divested of jurisdiction over "covered class actions" under the Securities Act and, hence, are not "courts of competent jurisdiction" for these actions. Thus, Section 22(a)'s removal bar thus does not apply to them. Accordingly, the Court will deny Plaintiff's Motion to Remand.
An appropriate order will be entered.
At Wilmington this
For the reasons set forth in the Memorandum Opinion issued this same date,
1. Plaintiff Iron Workers District Council of New England Pension Fund's Motion to Remand (D.I. 8) is
2. The parties shall meet and confer and shall, no later than