United States District Court, N.D. California
ORDER GRANTING MOTION TO REMAND Re: Dkt. No. 18
WILLIAM H. ORRICK, District Judge.
The issue I must decide on plaintiff's motion to remand is whether it was proper to remove this securities class action from the Superior Court of the State of California, County of San Mateo. Plaintiff Plymouth County Retirement System ("Plymouth") argues that the Securities Act of 1933 (the "Securities Act") prohibits removal of cases, like this one, that are filed in state court and that assert only Securities Act claims. Plymouth is correct. Contrary to defendants' contentions, the amendments to the Securities Act effected through the Securities Litigation Uniform Standards Act of 1998 ("SLUSA") do not provide a basis for remand. Plymouth's motion is GRANTED. Pursuant to Civil Local Rule 7-1(b), the hearing on the motion set for January 7, 2015 is VACATED.
Plymouth brings this securities class action on behalf of all persons who purchased or otherwise acquired the common stock of Model N, Inc. ("Model N") pursuant to the registration statement and prospectus issued in connection with Model N's March 20, 2013 initial public stock offering. The complaint asserts three causes of action, each for violations of the Securities Act, against Model N, certain Model N officers and directors, and the underwriters of the initial public stock offering (collectively, "defendants"). Plymouth initially filed the action in the Superior Court of the State of California for the County of San Mateo on September 5, 2014. On October 8, 2014, defendants removed the case to federal court under 28 U.S.C. § 1441(a), which authorizes the removal of any civil action over which the federal district courts have original jurisdiction "[e]xcept as otherwise provided by Act of Congress." 28 U.S.C. § 1441(a).
A defendant sued in state court may remove the action to federal court if the action could have been brought in federal court in the first instance. 28 U.S.C. § 1441(a). Removal is generally based on the existence of either federal question jurisdiction or diversity jurisdiction. Federal question jurisdiction exists where the action "aris[es] under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. Diversity jurisdiction exists where the amount in controversy exceeds $75, 000 and the case is between citizens of different states, or citizens of a state and citizens or subjects of a foreign state. 28 U.S.C. § 1332(a)(2). A defendant desiring removal must file in the appropriate United States district court a notice of removal "containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders" thus far served upon the defendant in the action. 28 U.S.C. § 1446.
If at any time following removal, it appears that removal was improper because of a lack of subject matter jurisdiction, the case must be remanded to state court. 28 U.S.C. § 1447(c). The Ninth Circuit "strictly construe[s] the removal statute against removal jurisdiction;" accordingly, "[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (internal quotation marks and citations omitted). This strong presumption against removal jurisdiction means that the defendant generally has the burden of proving, by a preponderance of the evidence, that removal was proper. Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 376 (9th Cir.1997); Gaus, 980 F.2d at 566. However, where a plaintiff seeks remand based on an express exception to removal jurisdiction, the plaintiff has the burden of proving that the express exception exists and applies to his case. Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008); Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1023-24 (9th Cir. 2007).
The dispute at the center of this motion has generated a significant split among district courts, with a growing majority ruling in favor of Plymouth's position. The issue arises from the amendments to the Securities Act effected through SLUSA. It is undisputed that before SLUSA, the Securities Act's jurisdictional and antiremoval provisions would have barred removal of this case. The jurisdictional provision placed unqualified concurrent jurisdiction over Securities Act claims in both state and federal courts, while the antiremoval provision stated, "No case arising under this subchapter and brought in any State court of competent jurisdiction shall be removed to any court of the United States."
SLUSA made the removal question less clear. SLUSA amended section 77v(a), which contains the Securities Act's jurisdictional and antiremoval provisions, by adding the following italicized language:
The district courts of the United States and the United States courts of any Territory shall have jurisdiction of offenses and violations under this subchapter and under the rules and regulations promulgated by the Commission in respect thereto, and, concurrent with State and Territorial courts, except as provided in section 77p of this title with respect to covered class actions, of all suits in equity and actions at law brought to enforce any liability or duty created by this subchapter... Except as provided in section 77p(c) of this title, no case arising under this subchapter and brought in any State court of competent jurisdiction shall be removed to any court of the United States.
15 U.S.C. § 77v(a).
Section 77p(c), which was also added by ...