City of Warren Police and Fire Retirement System v. Revance Therapeutics, Inc. et al

Filing 25

ORDER by Judge Haywood S. Gilliam, Jr. GRANTING 8 MOTION TO REMAND. (ndrS, COURT STAFF) (Filed on 8/31/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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CITY OF WARREN POLICE AND FIRE
RETIREMENT SYSTEM,
Plaintiff,

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v.

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Case No. 15-cv-02512-HSG
ORDER GRANTING MOTION TO
REMAND
Re: Dkt. No. 8

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REVANCE THERAPEUTICS, INC., et al.,
Defendants.

United States District Court
Northern District of California

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Pending before the Court is Plaintiff City of Warren Police and Fire Retirement System’s

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motion to remand. For the reasons articulated below, the Motion is GRANTED.
I.

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BACKGROUND
On May 1, 2015, Plaintiff City of Warren Police and Fire Retirement System filed this

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securities class action in the San Mateo County Superior Court. Dkt. No. 1-2. In its complaint,

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Plaintiff asserts only federal Securities Act claims against Defendant Revance Therapeutics, Inc.,

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certain officers and directors thereof, and certain venture capitalists and underwriters associated

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with a public offering of Revance securities. Id. On June 5, 2015, Defendant removed this case to

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federal court pursuant to 28 U.S.C. § 1441(a). Dkt. No. 1. In the present motion, Plaintiff argues

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that Defendant’s removal of the case is expressly barred by the Securities Act of 1933.

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II.

DISCUSSION

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A.

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“Except as otherwise expressly provided by Act of Congress, any civil action brought in a

Legal Standard

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State court of which the district courts of the United States have original jurisdiction, may be

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removed” to federal court. 28 U.S.C. § 1441(a). The Ninth Circuit has held that “[f]ederal

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jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance.”

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Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). Because of this “strong presumption

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against removal jurisdiction,” a defendant “always has the burden of establishing that removal is

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proper.” Id. (internal quotation marks omitted). But “a plaintiff seeking remand [on the basis of

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an express exception to removal jurisdiction] has the burden to prove that an express exception to

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removal exists.” Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031, 1034 (9th Cir.

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2008).

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B.

The Securities Act Of 1933 And The Securities Litigation Uniform Standards
Act

In 1998, Congress enacted the Securities Litigation Uniform Standards Act (“SLUSA”),

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which amended, in relevant part, the jurisdictional and antiremoval provisions of the Securities
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Act of 1933. Before 1998, the jurisdictional provision of the Securities Act granted concurrent

United States District Court
Northern District of California

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jurisdiction over Securities Act claims to both state and federal courts as follows: “The district

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courts of the United States . . . shall have jurisdiction of offenses and violations under this
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subchapter . . . concurrent with State and Territorial courts, of all suits in equity and actions at law
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brought to enforce any liability or duty created by this subchapter.” 15 U.S.C. § 77v(a) (1997).
The Securities Act also contained an antiremoval provision that stated: “No case arising under this

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subchapter and brought in any State court of competent jurisdiction shall be removed to any court
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of the United States.” Id.

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SLUSA amended § 77v(a) by adding the following italicized language:
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The district courts of the United States . . . shall have jurisdiction of
offenses and violations under this subchapter . . . 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) (emphases added).

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Section 77p(c), which was also added by SLUSA, is titled “Removal of covered class
actions,” and states:

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Any covered class action brought in any State court involving a
covered security, as set forth in subsection (b), shall be removable to
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the Federal district court for the district in which the action is
pending, and shall be subject to subsection (b).

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15 U.S.C. § 77p(c). Section 77p(b) (another SLUSA addition), in turn, is titled “Class action

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limitations” and describes certain securities class actions that are now completely precluded under

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the Securities Act:

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No covered class action based upon the statutory or common law of
any State or subdivision thereof may be maintained in any State or
Federal court by any private party alleging—

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(1) an untrue statement or omission of a material fact in connection
with the purchase or sale of a covered security; or

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(2) that the defendant used or employed any manipulative or
deceptive device or contrivance in connection with the purchase
or sale of a covered security.

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United States District Court
Northern District of California

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15 U.S.C. § 77p(b).

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Finally, SLUSA also added a definitions provision that defines “covered class action” to

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include “any single lawsuit in which[] damages are sought on behalf of more than 50 persons or

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prospective class members, . . . [or] one or more named parties seek to recover damages on a

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representative basis on behalf of themselves and other unnamed parties similarly situated.” 15

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U.S.C. § 77p(f)(2)(A)(i).

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C.

Statutory Interpretation

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The parties dispute whether the above provisions, taken together, prohibit the removal of

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securities fraud class actions like the present one that bring claims only under the federal

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Securities Act and not under state law.

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1. Plain Language
“As with any question of statutory interpretation,” the Court’s “analysis begins with the

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plain language of the statute.” Jimenez v. Quarterman, 555 U.S. 113, 118 (2009). Plaintiff’s

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position is that “the language that was inserted into the first sentence of the jurisdictional provision

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. . . references the entirety of 77p, a section that is exclusively concerned with state law class

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actions.” Rajasekaran v. CytRx Corp., No. 14-cv-03406-GHK, 2014 WL 4330787, at *5 (C.D.

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Cal. Aug. 21, 2014). According to Plaintiff, the Rajasekaran court concluded,

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The SLUSA amendment to § 77v(a) does not go so far as to take all
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securities class actions out of state court. The better view is that the
amendment to the jurisdictional provision was meant to simply
acknowledge that there is now a subset of class actions that are no
longer cognizable in either state or federal court—those state law
class actions that are precluded by § 77p(b). Had Congress intended
to make federal district courts the exclusive forum for securities
class actions, we presume it would have said as much. It is dubious
that Congress would have instead evinced its intent by making an
oblique reference to a section that is exclusively concerned with
state law class actions and never directly addresses 1933 Act claims.

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Id.
Turning to the antiremoval provision, Plaintiff’s position is that the plain language of the

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exception to that provision applies only to “covered class action[s] . . . as set forth in subsection

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(b).” 15 U.S.C. § 77p(c). And subsection (b) applies only to “class action[s] based upon the

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statutory or common law of any State.” Id. § 77p(b). Since Plaintiff’s complaint alleged only

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United States District Court
Northern District of California

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federal Securities Act claims, and no claims under state law, the exception permitting removal

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does not apply, and Defendants are barred from removing the instant lawsuit to federal court.

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Defendants counter that the Court need not even consider the antiremoval provision

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because the jurisdictional provision of the Securities Act, as amended by SLUSA, strips state

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courts of jurisdiction of covered class actions—including those asserting only federal securities

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claims. In other words, Defendants read the “except as provided in section 77p of this title with

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respect to covered class actions” clause of the jurisdictional provision as referring only to

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§ 77p(f)’s broad definition of covered class actions. Id. § 77v(a). Because state courts lack

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jurisdiction of federal securities class actions, according to Defendants’ interpretation, the

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antiremoval provision would not bar removal here since that provision is relevant only to suits

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brought in state courts “of competent jurisdiction.” Id.

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The Court finds that Plaintiff’s interpretation of the provisions at issue better reflects the

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plain language of the statute. Defendants’ interpretation relies on an overly constricted reading of

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the jurisdictional provision’s reference to § 77p. Additionally, Plaintiff’s position is supported by

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dicta from both the Supreme Court and the Ninth Circuit. See Kircher v. Putnam Funds Trust,

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547 U.S. 633, 643-44 (2006) (noting that “[i]f the action is precluded [under § 77p(b)], neither the

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district court nor the state court may entertain it, and the proper course is to dismiss,” but that “[i]f

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the action is not precluded, . . . the proper course is to remand to the state court that can deal with
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it”); Madden v. Cowen & Co., 576 F.3d 957, 965 (9th Cir. 2009) (“As the Supreme Court has

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explained, any suit removable under SLUSA’s removal provision, § 77p(c), is precluded under

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SLUSA’s preclusion provision, § 77p(b), and any suit not precluded is not removable.”); Luther,

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533 F.3d at 1033 (noting that § 77v(a)’s antiremoval provision “strictly forbids the removal of

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cases brought in state court and asserting claims under the [Securities] Act” and that the plaintiff’s

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“class action falls within [§ 77v(a)’s] removal bar because it was brought in state court and asserts

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only claims arising under the Securities Act of 1933”).

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Finally, Plaintiff’s position “appears to be emerging as the dominant view around the
country” and has almost uniformly been upheld by district courts since 2012. Plymouth Cnty. Ret.

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Sys. v. Model N, Inc., No. 14-cv-04516-WHO, 2015 WL 65110, at *3 (N.D. Cal. Jan. 5, 2015). To

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United States District Court
Northern District of California

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the Court’s knowledge, only a single district court in any district has denied remand since August

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2012—and that denial took the form of a summary two-paragraph order. See Wunsch v. Am.

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Realty Cap. Props., No. 14-cv-04007-JFM, 2015 WL 2183035, at *1 (D. Md. Apr. 14, 2015). The

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Northern District of California has “soundly rejected” Defendants’ position in recent years. Liu v.

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Xoom Corp., No. 15-cv-00602-LHK, at 6 (N.D. Cal. June 25, 2015) (granting remand); see

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Plymouth Cnty, 2015 WL 65110, at *4 (same); Desmarais v. Johnson, No. 13-cv-03666-WHA,

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2013 WL 5735154, at *5 (N.D. Cal. Oct. 22, 2013) (same); Toth v. Envivo, Inc., No. 12-cv-05636-

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CW, 2013 WL 5596965, at *2 (N.D. Cal. Oct. 11, 2013) (same); Reyes v. Zynga, Inc., No. 12-cv-

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05065-JSW, 2013 WL 5529754, at *4 (N.D. Cal. Jan. 23, 2013) (same).

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2. Legislative History
Defendants also assert that their interpretation is more consistent with the stated purpose of

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SLUSA. In Defendants’ view, that purpose is “to curtail the proliferation in state courts of

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securities fraud class actions (federal or state) beyond the reach of the [Private Securities

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Litigation Reform Act of 1995]’s heightened pleading standards.” Knox v. Agria Corp., 613 F.

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Supp. 2d 419, 421 (S.D.N.Y. 2009); see also H.R. Conf. Rep. No. 105-803, at 13 (stating goal of

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making “Federal court the exclusive venue for most securities class action lawsuits[] [and] . . . to

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prevent plaintiffs from seeking to evade the protections that Federal law provides against abusive

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litigation by filing suit in State, rather than Federal, court”).
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But the legislative history is simply too “murky” to be of any “help in answering the

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question that is before us.” Rajasekaran, 2014 WL 4330787, at *7. For example, the very first

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sentence of SLUSA states that the purpose of the amendments is “to amend the Securities Act of

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1933 . . . to limit the conduct of securities class actions under State law.” Pub. L. No. 105-353,

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112 Stat. 3227 (1998). And a May 1998 Senate Report reads: “[SLUSA] makes clear the

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Committee’s intention to enact this legislation in order to prevent state laws from being used to

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frustrate the operation and goals of the 1995 Reform Act.” S. Rep. 105-182 at 1 (1998).
In the end, Defendants have not carried their burden to establish that removal is proper.

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The Court grants the motion to remand in the face of this inconsistent legislative history because
“[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal.” Gaus, 980

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United States District Court
Northern District of California

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F.2d at 566.

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III.

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CONCLUSION
For the foregoing reasons, Plaintiff’s motion to remand is GRANTED. This action is

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remanded to the Superior Court of the State of California for the County of San Mateo. The Clerk

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of this Court shall transmit forthwith a certified copy of this order to the Clerk of the Superior

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Court and close this case displaying all pending motions as resolved.

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IT IS SO ORDERED.
Dated: August 31, 2015
______________________________________
HAYWOOD S. GILLIAM, JR.
United States District Judge

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