Toth v. Envivio, Inc. et al

Filing 31

ORDER by Judge Claudia WilkenGRANTING 9 MOTION TO REMAND; DENYING 14 MOTION TO RELATE. (ndr, COURT STAFF) (Filed on 10/11/2013)

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1 2 3 4 IN THE UNITED STATES DISTRICT COURT 5 FOR THE NORTHERN DISTRICT OF CALIFORNIA 6 7 MICHAEL TOTH, et al., 8 Plaintiffs, 9 No. C 12-5636 CW ORDER GRANTING MOTION TO REMAND(Docket No. 9); DENYING MOTION TO RELATE (Docket No. 14). v. United States District Court For the Northern District of California 10 ENVIVO, INC., et al., 11 Defendants. ________________________________/ 12 13 Plaintiffs Michael Toth and Joseph Wiley brought these 14 actions in state court against Defendants, Envivo, Inc. and 15 several of its officers and directors, under the federal 1933 16 Securities Act (Securities Act), 15 U.S.C. §§ 77a et seq. 17 cases were subsequently removed and consolidated. 18 move to remand to state court. 19 Having considered the parties’ papers and oral argument, the Court 20 grants the motion to remand. The Plaintiffs now Defendants oppose the motion. 21 BACKGROUND 22 In October 2012, Plaintiffs filed separate putative class 23 actions in San Mateo County Superior Court charging Defendants 24 with securities fraud under §§ 11 and 15 of the Securities Act, 15 25 U.S.C. §§ 77k, 77o. 26 law. 27 the Court approved the parties’ stipulation to consolidate the 28 cases. Neither action alleged any claims under state On November 28, 2012, after Defendants removed both actions, Docket No. 8. Two days later, on November 30, 2012, 1 Plaintiffs filed the instant motion. 2 Securities Act’s “anti-removal provision,” 15 U.S.C. § 77v(a), 3 requires that this case be remanded to state court. 4 In it, they contend that the LEGAL STANDARD 5 A defendant may remove a civil action filed in state court to 6 federal district court so long as the district court could have 7 exercised original jurisdiction over the matter. 8 § 1441(a). 9 before judgment it appears that the district court lacks subject 28 U.S.C. Title 28 U.S.C. § 1447 provides that if at any time United States District Court For the Northern District of California 10 matter jurisdiction over a case previously removed from state 11 court, the case must be remanded. 12 motion to remand, the scope of the removal statute must be 13 strictly construed. 14 (9th Cir. 1992). 15 jurisdiction means that the defendant always has the burden of 16 establishing that removal is proper.” 17 doubts as to removability in favor of remanding the case to state 18 court. On a See Gaus v. Miles, Inc., 980 F.2d 564, 566 “The ‘strong presumption’ against removal Id. Courts should resolve Id. 19 20 28 U.S.C. § 1447(c). DISCUSSION I. 21 Motion to Remand The Securities Act contains an anti-removal provision which 22 states: “Except as provided in section 77p(c) of this title, no 23 case arising under this subchapter and brought in any State court 24 of competent jurisdiction shall be removed to any court of the 25 United States.” 26 the removal of any “covered class action brought in any State 27 court involving a covered security, as set forth in subsection 28 (b).” 15 U.S.C. § 77v(a). Section 77p(c) allows for Subsection (b), in turn, provides, “No covered class action 2 1 based upon the statutory or common law of any State or subdivision 2 thereof may be maintained in any State or Federal court” by any 3 private party alleging securities fraud. 4 (emphasis added). 5 15 U.S.C. § 77p(b) The parties here dispute whether these provisions, taken together, prohibit the removal of securities fraud class actions 7 like the present one that raise claims only under the federal 8 Securities Act and not under state law. 9 nor any of the federal courts of appeals has squarely addressed 10 United States District Court For the Northern District of California 6 this question and the roughly thirty district courts to confront 11 the issue are divided more or less evenly.1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 Neither the Supreme Court Within this district, Compare City of Birmingham Ret. & Relief Sys. v. MetLife, Inc., 2013 WL 5526621 (N.D. Ala.) (granting motion to remand); Reyes v. Zynga Inc., 2013 WL 5529754 (N.D. Cal.) (same); Niitsoo v. Alpha Natural Res., Inc., 2012 WL 5395812 (S.D.W. Va.) (same); Young v. Pac. Biosciences of Cal., 2012 WL 851509 (N.D. Cal.) (same); W. Va. Laborers’ Trust Fund v. STEC, Inc., 2011 WL 6156945 (C.D. Cal.) (same); W. Palm Beach Police Pension Fund v. Cardionet, Inc., 2011 WL 1099815, (S.D. Cal.) (same); Layne v. Countrywide Fin. Corp., 2008 WL 9476380 (C.D. Cal.) (same); Unschuld v. Tri–S Sec. Corp., 2007 WL 2729011 (N.D. Ga.) (same); Irra v. Lazard Ltd., 2006 WL 2375472 (E.D.N.Y.) (same); Higginbotham v. Baxter Int’l, Inc., 2005 WL 1272271 (N.D. Ill.) (same); In re Tyco Int’l, Ltd. Multidistrict Litig., 322 F. Supp. 2d 116 (D.N.H. 2004) (same); Zia v. Med. Staffing Network, Inc., 336 F. Supp. 2d 1306, 1310 (S.D. Fla. 2004) (same); Nauheim v. Interpublic Grp. of Cos., 2003 WL 1888843 (N.D. Ill.) (same); Haw. Structural Ironworkers Pension Trust Fund v. Calpine Corp., 2003 WL 23509312 (S.D. Cal.) (same); Williams v. AFC Enterprises, Inc., 2003 WL 24100302 (N.D. Ga.) (same); In re Waste Mgmt., Inc. Sec. Litig., 194 F. Supp. 2d 590 (S.D. Tex. 2002) (same); with Lapin v. Facebook, Inc., 2012 WL 3647409 (N.D. Cal.) (denying motion to remand); Northumberland County Ret. Sys. v. GMX Resources, Inc., 810 F. Supp. 2d 1282 (W.D. Okla. 2011) (same); In re Fannie Mae 2008 Sec. Litig., 2009 WL 4067266 (S.D.N.Y.) (same); Knox v. Agria Corp., 613 F. Supp. 2d 419 (S.D.N.Y. 2009) (same); Rubin v. Pixelplus Co., 2007 WL 778485 (E.D.N.Y.) (same); Rovner v. Vonage Holdings Corp., 2007 WL 446658 (D.N.J.) (same); Pinto v. Vonage Holdings Corp., 2007 WL 1381746 (D.N.J.) (same); Lowinger v. Johnston, 2005 WL 2592229 (W.D.N.C.) (same); Purowitz v. DreamWorks Animation SKG, Inc., 2005 WL 6794770 (C.D. Cal.) (same); In re King Pharm., Inc., 230 F.R.D. 503 (E.D. Tenn. 2004) (same); Brody v. Homestore, Inc., 240 F. Supp. 2d 1122 (C.D. Cal. 2003) (same); Kulinski v. Am. Elec. Power Co., 2003 WL 24032299 (S.D. Ohio) (same); Alkow v. TXU Corp., 2003 WL 21056750 (N.D. Tex.) (same). 3 1 two courts have held that the Securities Act precludes removal 2 under the present circumstances while one court has held that 3 removal is proper. 4 (granting motion to remand), Young, 2012 WL 851509, at *4 (same), 5 with Lapin, 2012 WL 3647409, at *3 (denying motion to remand). 6 Compare Reyes, 2013 WL 5529754, at *4 This Court is persuaded by the majority approach in this 7 district and grants Plaintiffs’ motion to remand. 8 district courts have recognized that neither the plain language of 9 the Securities Act, quoted above, nor existing judicial Numerous United States District Court For the Northern District of California 10 interpretations of that language offers a clear answer to the 11 question presented in this case. 12 2d at 807 (“No matter what Congress intended § 77p(c) to 13 accomplish, there is no perfect way to read that section in 14 conjunction with the plain meaning of the amendments in 15 § 77v(a).”); Williams, 2003 WL 24100302, at *3 (“To me, it seems 16 murky at best and another example of the sort of careless 17 legislative draftsmanship that has generated so much litigation 18 under the [Securities Act, as amended by the Private Securities 19 Litigation Reform Act].”); Unschuld, 2007 WL 2729011, at *2 (“This 20 Court has now joined the parade of other district courts that have 21 tried to make sense of the removal provision governed by § 77p and 22 § 77v. 23 nine-year running dispute.”). 24 that, in situations such as this one where there are doubts as to 25 whether federal jurisdiction exists, those doubts must be 26 “resolved against removability.” 27 Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008). 28 the lack of clear authority from the Supreme Court or the Ninth See, e.g., Niitsoo, 902 F. Supp. There is nothing very original left to say about this The Ninth Circuit has cautioned Luther v. Countrywide Home Loans 4 Thus, “given 1 Circuit on this issue, and given the split in authority among 2 district courts,” remand is the appropriate course of action here. 3 See Reyes, 2013 WL 5529754, at *3. 4 II. 5 Motion to Relate In January 2013, Plaintiffs filed an administrative motion to 6 relate to this case another putative class action, Thomas v. 7 Envivo, Inc., Case No. 12-6464 (CRB), which was filed against 8 Defendants in this district on December 20, 2012. 9 Rule 3-12(a) provides that two actions may be related when both Civil Local United States District Court For the Northern District of California 10 “actions concern substantially the same parties, property, 11 transaction or event” and it “appears likely that there will be an 12 unduly burdensome duplication of labor and expense or conflicting 13 results if the cases are conducted before different Judges.” 14 Because the instant case will be remanded to state court and this 15 Court has not considered the merits of the underlying dispute, 16 relating these cases will not avoid any “duplication of labor and 17 expense or conflicting results.” 18 addressed in this remand order are unlikely to arise in Thomas 19 because that case was filed originally in federal court. 20 Accordingly, the motion to relate is denied. 21 Civil L.R. 3-12(a). The issues CONCLUSION 22 For the reasons set forth above, Plaintiffs’ motion to remand 23 (Docket No. 9) is GRANTED and Plaintiffs’ motion to relate (Docket 24 // 25 // 26 // 27 // 28 // 5 1 No. 14) is DENIED. 2 Mateo County Superior Court and close the file. 3 The clerk shall remand this action to San IT IS SO ORDERED. 4 5 6 Dated: 10/11/2013 CLAUDIA WILKEN United States District Judge 7 8 9 United States District Court For the Northern District of California 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6

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