Michael Vanbecelaere v. YayYo, Inc., et al
Filing
8
MINUTE ORDER IN CHAMBERS by Judge Percy Anderson. Because the Vanbecelaere Action and the Rung Action are class actions that "solely involv[e]" claims concerning "covered securities," they are excepted from CAFA's removal provisions by CAFA itself. Pursuant to 1332(d)(9)(A) and 1453(d)(1), these actions are not removable under CAFA and Section 22(a) otherwise bars removal. For these reasons, the Court lacks subject matter jurisdiction over the Vanbecelaere Action and the Rung Action. The Court hereby remands these actions to the Superior Court of California for the County of Los Angeles, Case Nos. 20STCV28066 and 20STCV27876, for lack of subject matter jurisdiction. See 28 U.S.C. 1447(c). (See document for details) Case Terminated. Made JS-6 (mrgo)
JS-6
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.
CV 20-7997 PA (AGRx)
CV 20-8019 PA (AGRx)
Title
Michael Vanbecelaere v. YayYo, Inc., et al.
Ivan Rung v. YayYo, Inc., et al.
Present: The Honorable
Date
September 8, 2020
PERCY ANDERSON, UNITED STATES DISTRICT JUDGE
T. Jackson
Not Reported
N/A
Deputy Clerk
Court Reporter
Tape No.
Attorneys Present for Plaintiff:
Attorneys Present for Defendants:
None
None
Proceedings:
IN CHAMBERS – COURT ORDER
The Court is in receipt of Notices of Removal filed by defendant WestPark Capital, Inc.
(“Removing Defendant”). The Notices of Removal seek to remove two putative class actions
filed in Los Angeles Superior Court, Case Nos. CV 20-7997 PA (AGRx) (the “Vanbecelaere
Action”) and CV 20-8019 PA (AGRx) (the “Rung Action”). Removing Defendant alleges in
both Notices of Removal that this Court possesses jurisdiction pursuant to the Class Action
Fairness Act (“CAFA”), 28 U.S.C. § 1332(d)(2).
Both the Vanbecelaere Action and the Rung Action allege claims under the Securities Act
of 1933 (the “1933 Act”) on behalf of putative classes of all purchases of the common stock of
YayYo, Inc. (“YayYo”) “pursuant to the Registration Statement and Prospectus issued in
connection with YayYo’s November 14, 2019 initial public stock offering (the ‘IPO’), seeking
to pursue strict liability remedies under the Securities Act of 1933 (the ‘1933 Act’).”
(Vanbecelaere Action at ¶ 1; Rung Action at ¶ 1.) Plaintiffs in both the Vanbecelaere Action
and the Rung Action allege that YayYo, its officers, and the underwriters of YayYo’s IPO are
liable under the 1933 Act for inaccurate and misleading statements in YayYo’s Registration
Statement and Prospectus filed with the Securities and Exchange Commission (the “SEC”). (Id.
at ¶¶ 15-30.) Just months after YayYo’s November 14, 2019 IPO, YayYo announced on
February 10, 2020, that YayYo’s Board of Directors had determined to voluntarily delist
YayYo’s common stock from the NASDAQ exchange. (Id. at ¶ 31.) According to a Form 25
filed with the SEC on February 20, 2020, of which the Court takes judicial notice, YayYo
voluntarily withdrew its common stock from listing and registration on NASDAQ.
The Vanbecelaere Action and Rung Action, which are nearly identical, allege claims
pursuant to Sections 11 and 15 of the 1933 Act. Both Complaints, relying on Section 22(a) of
the 1933 Act, allege that they are “not subject to removal to federal court.” (Id. at ¶ 11.) Section
22(a) contains an anti-removal provision, which states: “Except as provided in section 77p(c) of
this title, no case arising under this subchapter and brought in any State court of competent
CV-90 (06/04)
CIVIL MINUTES - GENERAL
Page 1 of 4
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.
CV 20-7997 PA (AGRx)
CV 20-8019 PA (AGRx)
Date
Title
September 8, 2020
Michael Vanbecelaere v. YayYo, Inc., et al.
Ivan Rung v. YayYo, Inc., et al.
jurisdiction shall be removed to any court of the United States.” 15 U.S.C. § 77v(a); see also
Cyan, Inc. v. Beaver Cty. Employees Retirement Fund, __ U.S. __, 138 S. Ct. 1061, 1075, 200
L. Ed. 2d 332 (2018) (“[F]ederal-law suits like this one—alleging only 1933 Act claims—are not
‘class action[s] . . . as set forth in subsection (b).’ So they remain subject to the 1933 Act’s
removal ban.”).
Despite Section 22(a)’s anti-removal provision, Removing Defendant asserts that
“[m]odern authority holds that CAFA’s removal provision trumps the 1933 Act’s bar to removal
in Section 22 of the 1933 Act.” (Notice of Removal at 2:9-11.) According to the Notice of
Removal:
While the Ninth Circuit held that Section 22 of the 1933 Act
overrode CAFA in Luther v. Countrywide Home Loans Servicing
LP, 533 F.3d 1031 (9th Cir. 2008), subsequent cases suggest that the
Supreme Court’s decision in Dart Cherokee Basin Operating Co. v.
Owens, 574 U.S. 81 (2014) means that Luther should now come out
the other way. The Northern District of California recognized this in
its 2018 decision Coffey v. Ripple Labs Inc., 333 F. Supp. 3d 952
(N.D. Cal. 2018).
(Notice of Removal at 2:16-22.) In addition to Coffey to support its contention that Dart
Cherokee and “modern” cases undermine the vitality of the Ninth Circuit’s decision in Luther
and that CAFA’s removal provision trumps Section 22(a)’s anti-removal provision, Removing
defendant relies on a decision from the Seventh Circuit, Katz v. Gerardi, 552 F.3d 558 (7th Cir.
2009), and two decisions from the Southern District of New York, Owen v. Elastos Found., 438
F. Supp. 3d 187 (S.D.N.Y. 2020), and New Jersey Carpenters Vacation Fund v. Harborview
Mortgage Loan Trust, 581 F. Supp. 2d 581 (S.D.N.Y. 2008).
Federal courts are courts of limited jurisdiction, having subject matter jurisdiction only
over matters authorized by Congress and the Constitution. Kokkonen v. Guardian Life Ins. Co.,
511 U.S. 375, 377 (1994). A suit filed in state court may be removed to federal court if the
federal court would have had original jurisdiction over the suit. 28 U.S.C. § 1441(a). A
removed action must be remanded to state court if the federal court lacks subject matter
jurisdiction. Id. § 1447(c). “The burden of establishing federal jurisdiction is on the party
seeking removal.” Prize Frize, Inc. v. Matrix (U.S.) Inc., 167 F.3d 1261, 1265 (9th Cir. 1999).
Federal subject matter jurisdiction may be based on diversity of citizenship pursuant to CAFA,
which extends the Court’s diversity jurisdiction to certain class actions where at least one
plaintiff and one defendant are citizens of different states and the aggregate amount in
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CIVIL MINUTES - GENERAL
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.
CV 20-7997 PA (AGRx)
CV 20-8019 PA (AGRx)
Date
Title
September 8, 2020
Michael Vanbecelaere v. YayYo, Inc., et al.
Ivan Rung v. YayYo, Inc., et al.
controversy exceeds $5,000,000.00, exclusive of interests and costs. See 28 U.S.C. §
1332(d)(2).
Even if the Court were not bound to follow the Ninth Circuit’s conclusion that “CAFA’s
general grant of the right of removal of high-dollar class actions does not trump § 22(a)’s
specific bar to removal of cases arising under the Securities Act of 1933,” Luther, 533 F.3d at
1034 (concluding that “by virtue of § 22(a) of the Securities Act of 1933, Luther’s state court
class action alleging only violations of the Securities Act of 1933 was not removable”), the
Court would nevertheless conclude that CAFA’s own provisions do not support removal of the
Vanbecelaere Action and the Rung Action. Specifically, CAFA specifically contains an
exception from § 1332(d)(2)’s general expansion of removal jurisdiction for class actions that
applies to “any class action that solely involves a claim . . . concerning a covered security” as
defined by the 1933 Act. 28 U.S.C. § 1332(d)(9)(A); see also 28 U.S.C. § 1453(d)(1) (creating
an identical exception for “any class action that solely involves a claim concerning a covered
security”). For purposes of both 28 U.S.C. §§ 1332(d)(9)(A) and 1453(d)(1), a “covered
security” is defined as a security that is “designated as qualified for trading in the national
market system pursuant to section 78k-1(a)(2) of this title that is listed, or authorized for listing,
on a national securities exchange.” 15 U.S.C. § 77r(b)(1)(A); see also 15 U.S.C. § 77p(f)(3).
Because the Complaints in the Vanbecelaere Action and the Rung Action that Removing
Defendant seeks to remove allege facts establishing that those actions are class actions that
“solely involv[e]” claims concerning a “covered security,” and the SEC filings of which the
Court takes judicial notice confirms that the Vanbecelaere Action and the Rung Action assert
only 1933 Act claims concerning covered securities, neither action is removable under CAFA.
Indeed, based on the fact that § 1453(d) exempts these actions from the remaining provisions of
§ 1453, § 1453(c)’s expansion of the jurisdiction of the appellate courts to review remand orders
does not apply to the remand of actions such as these that fall within the exceptions of §§
1332(d)(9)(A) and 1453(d)(1).
The Court’s conclusion that the Vanbecelaere Action and the Rung Action are not
removable under CAFA is supported by the Seventh Circuit’s Katz decision. In Katz, the
Seventh Circuit analyzed the interplay between Section 22(a) and CAFA, and explained:
The language of [CAFA], rather than a canon, tells us how the new
removal rule applies to corporate and securities actions. Section
1453(b) allows removal of any class action brought within federal
jurisdiction by § 1332(d), and § 1453(d) adds:
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.
CV 20-7997 PA (AGRx)
CV 20-8019 PA (AGRx)
Date
Title
September 8, 2020
Michael Vanbecelaere v. YayYo, Inc., et al.
Ivan Rung v. YayYo, Inc., et al.
(d) This section shall not apply to any class action that solely
involves—
(1) a claim concerning a covered security as defined under
section 16(f)(3) of the Securities Act of 1933 (15 U.S.C.
[77p(f)(3) ]) and section 28(f)(5)(E) of the Securities
Exchange Act of 1934 (15 U.S.C. 78bb(f)(5)(E)) . . .
Section 1332(d)(9) has a functionally identical list. This tells us all
we need to know. Claims listed in § 1453(d) are not removable.
Other securities class actions are removable if they meet the
requirements of [CAFA].
Katz, 552 F.3d at 562. In Katz, unlike here, remand was improper because the removed action
did not involve “covered securities” and therefore did not fall within CAFA’s exceptions to
removal provided in §§ 1332(d)(9)(A) and 1453(d)(1). See id. at 562-63 (explaining that the
investments in Katz “were not ‘covered securities’” under the applicable definition). Similarly,
none of the three district court cases upon which Removing Defendant relies to support the
propriety of its Notices of Removal are applicable because they did not “solely involv[e]”
“covered securities.” See Owen, 438 F. Supp. 3d at 188-89 (action involved unregistered
securities); Coffey, 333 F. Supp. 3d at 958 (action alleging claims under both California law and
the 1933 Act and therefore not a class action that “solely involves” 1933 Act claims); New
Jersey Carpenters Vacation Fund, 581 F. Supp. 2d at 583 (“Were I to simply rely on § 22(a) of
the Securities Act of 1933, this case could not have been removed to this Court, because it does
not involve ‘covered securities.’”); see also Greenwald v. Ripple Labs, Inc., CV 18-4790 PJH,
2018 WL 4961767, at *3 (N.D. Cal. Oct. 15, 2018) (distinguishing Coffey and following
Luther).
Because the Vanbecelaere Action and the Rung Action are class actions that “solely
involv[e]” claims concerning “covered securities,” they are excepted from CAFA’s removal
provisions by CAFA itself. Pursuant to § 1332(d)(9)(A) and § 1453(d)(1), these actions are not
removable under CAFA and Section 22(a) otherwise bars removal. For these reasons, the Court
lacks subject matter jurisdiction over the Vanbecelaere Action and the Rung Action. The Court
hereby remands these actions to the Superior Court of California for the County of Los Angeles,
Case Nos. 20STCV28066 and 20STCV27876, for lack of subject matter jurisdiction. See 28
U.S.C. § 1447(c).
IT IS SO ORDERED.
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