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David H. Luther et al v. Countrywide Financial Corporation et al

May 18, 2011

DAVID H. LUTHER ET AL., PLAINTIFFS AND APPELLANTS,
v.
COUNTRYWIDE FINANCIAL CORPORATION ET AL., DEFENDANTS AND RESPONDENTS.



APPEAL from a judgment of the Superior Court of Los Angeles County. Emilie H. Elias, Judge. (Los Angeles County Super. Ct. No. BC380698)

The opinion of the court was delivered by: Armstrong, Acting P. J.

CERTIFIED FOR PUBLICATION

Reversed.

This case presents a single issue of statutory interpretation. The federal Securities Act of 1933 ("the 1933 Act"), as amended by the Securities Litigation Uniform Standards Act ("SLUSA"), provides for concurrent jurisdiction for cases asserting claims under the 1933 Act, except as specifically provided with regard to certain class actions.

Defendants contend, and the trial court found, that the exception includes this case, which is, in the parlance of the statute, a "covered class action" bringing causes of action under federal law in connection with "non-covered" securities. Plaintiffs argue to the contrary. We agree with plaintiffs, and thus reverse the judgment.

Factual and Procedural Summary

The case, and its procedural history, can be briefly described. Plaintiffs and appellants are David Luther and a number of pension funds and other institutional investors. Defendants are Countrywide Financial Corporation and several of its subsidiaries, several individuals, and several financial institutions.*fn1 The complaint alleged that defendants issued, and plaintiffs bought, mortgage-backed securities, between 2005 and 2007. These securities were subject to the rules and regulations promulgated under the 1933 Act, but were not listed on a national exchange.

The complaint brought causes of action under the Securities Act of 1933, and importantly, included no state law causes of action. Factual allegations included allegations of false and misleading registration statements and prospectus supplements.

The action was brought on behalf of all persons and entities who bought those securities from defendant in that time period.

Defendants demurred on the ground that the state court had no jurisdiction under the 1933 Act, as amended by the SLUSA. Those demurrers were sustained, and the case dismissed.

Discussion

Our review is de novo, both because this is an appeal from judgment after a demurrer was sustained (McCall v. PacifiCare of California, Inc. (2001) 25 Cal.4th 412, 415) and because the sole issue is one of statutory interpretation. (Regents of University of Cal. v. Superior Court (1999) 20 Cal.4th 509, 531.)

The rules governing our review are well established. When reviewing a demurrer, we assume that all facts pleaded in the complaint are true. (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 877.)

The rules of federal statutory interpretation are much the same as those used when construing California statutes. (Black v. Department of Mental Health (2000) 83 Cal.App.4th 739.) "[I]n interpreting a statute a court should always turn first to one, cardinal canon before all others. . . . courts must presume that a legislature says in a statute what it means and means in a statute what it says there. [Citations.] When the words of a statute are unambiguous, then, this first canon is also the last: 'judicial inquiry is complete.'" (Connecticut National Bank v. Germain (1992) 503 U.S. 249, 253-254, 112 S.Ct. ...


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