Gallas v. ProNai Therapeutics, Inc. et al

Filing 38

ORDER GRANTING 20 PLAINTIFF'S MOTION TO REMAND AND DENYING 25 DEFENDANTS' MOTION TO STAY. Signed by Judge Edward J. Davila on 6/12/2017. The Clerk shall close this file. (ejdlc2S, COURT STAFF) (Filed on 6/12/2017)

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1 2 UNITED STATES DISTRICT COURT 3 NORTHERN DISTRICT OF CALIFORNIA 4 SAN JOSE DIVISION 5 CHRISTOPHER BOOK, 6 Case No. 5:16-cv-07408-EJD Plaintiff, 7 v. 8 PRONAI THERAPEUTICS, INC., et al., 9 Defendants. ORDER GRANTING PLAINTIFF’S MOTIONS TO REMAND AND DENYING DEFENDANTS’ MOTIONS TO STAY Re: Dkt. Nos. 15, 18 10 United States District Court Northern District of California 11 TIMOTHY GALLAS, Plaintiff, 12 Case No. 5:17-cv-01740-EJD Re: Dkt. Nos. 20, 25 v. 13 14 PRONAI THERAPEUTICS, INC., et al., Defendants. 15 16 In these two related actions, Plaintiffs Christopher Book and Timothy Gallas bring 17 18 securities claims against Defendant ProNAi Therapeutics, Inc. and its officers, its directors, and 19 the underwriters of its initial public offering (“IPO”). Defendants removed these actions from state 20 court in California. Plaintiffs move to remand.1 Defendants move to stay until the U.S. Supreme 21 Court decides whether to resolve questions about how to interpret jurisdictional provisions of the 22 1933 Securities Act. Plaintiffs’ motions to remand will be GRANTED and Defendants’ motions to 23 stay will be DENIED. 24 25 26 27 28 1 Since the parties agree that the Gallas and Book actions are “substantively identical” (Dkt. No. 36 at 2), this order resolves the pending motions in both cases. Docket citations refer to the Book action (16-cv-7408). 1 Case Nos.: 5:16-cv-07408-EJD and 5:17-cv-01740-EJD ORDER GRANTING PLAINTIFFS’ MOTIONS TO REMAND AND DENYING DEFENDANTS’ MOTIONS TO STAY 1 I. BACKGROUND 2 Plaintiffs filed these securities class actions in California Superior Court. They allege 3 violations of §§ 11 and 15 of the federal Securities Act of 1933 arising from their purchase of 4 shares during ProNAi’s IPO in 2015. Defendants removed to this Court. 5 II. LEGAL STANDARD 6 A case may be removed to federal court if it (1) raises a federal question or (2) is between citizens of different states and the amount in controversy exceeds $75,000. 28 U.S.C. §§ 1441, 8 1332. Defendants have the burden of showing that removal was proper. Gaus v. Miles, Inc., 980 9 F.2d 564, 566 (9th Cir. 1992). Courts must strictly construe the removal statute against removal. 10 Ethridge v. Harbor House Rest., 861 F.2d 1389, 1393 (9th Cir. 1988). Cases should be remanded 11 United States District Court Northern District of California 7 if there is any doubt about the existence of federal jurisdiction. Gaus, 980 F.2d at 566. 12 III. DISCUSSION 13 A. 14 Removal to a federal court is allowed “[e]xcept as otherwise expressly provided by Act of Motion to Remand 15 Congress.” 28 U.S.C. § 1441(a). Here, Plaintiffs argue that removal is barred under § 77v(a) of the 16 Securities Act, which states that the 17 21 district courts of the United States and the United States courts of any Territory shall have jurisdiction of offenses and violations under [the 1933 Act] . . . 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 [the 1933 Act]. . . . Except as provided in section 77p(c) of this title, no case arising under [the 1933 Act] and brought in any State court of competent jurisdiction shall be removed to any court of the United States. 22 15 U.S.C. § 77v(a); Pls.’ Mot. to Remand (“Mot.”) 3, Dkt. No. 18. Because the “sole claims in this 23 case are for violations of the Securities Act,” Plaintiffs argue, “Section 77v(a) bars removal.” 24 Mot. 5. 18 19 20 25 26 27 28 Defendants respond that removal is proper because § 77v(a) should be interpreted to mean that federal courts have exclusive jurisdiction to hear “covered class actions” that raise claims 2 Case Nos.: 5:16-cv-07408-EJD and 5:17-cv-01740-EJD ORDER GRANTING PLAINTIFFS’ MOTIONS TO REMAND AND DENYING DEFENDANTS’ MOTIONS TO STAY 1 under the 1933 Securities Act. Notice of Removal 4–8, Dkt. No. 1. This Court addressed this very question of statutory interpretation in Young v. Pac. 3 Biosciences of Cal., Inc., Nos. 5:11-cv-05668-EJD, 5:11-cv-05669-EJD, 2012 WL 851509 (N.D. 4 Cal. Mar. 13, 2012). This Court held that class actions that allege claims only under the 1993 Act 5 cannot be removed from state court. Id. at *4. Most courts in this district have adopted the same 6 interpretation. See, e.g., Rivera v. Fitbit, Inc., No. 16-CV-02890-SI, 2016 WL 4013504, at *2 7 (N.D. Cal. July 27, 2016) (“nearly every court within this district that has addressed this issue 8 since 2012 has remanded this type of case back to state court, ruling that the Securities Act 9 explicitly bars removal of securities class actions asserting only federal claims”); Rajasekaran v. 10 CytRx Corp., No. CV 14-3406-GHK PJWX, 2014 WL 4330787, at *2 (C.D. Cal. Aug. 21, 2014) 11 United States District Court Northern District of California 2 (“The Securities Act of 1933 contains an express removal bar that falls within the exception to 12 § 1441(a).”); Mot. 2 n.3 (collecting a dozen cases from this district that have reached the same 13 conclusion). 14 Defendants point out that some courts read the statute differently. See, e.g., Hung v. 15 iDreamSky Tech. Ltd., No. 15-CV-2514 (JPO), 2016 WL 299034, at *4 (S.D.N.Y. Jan. 25, 2016) 16 (“[T]he Court adopts Defendants’ interpretation of § 77v(a), and New York state courts lack 17 jurisdiction over this covered class action. Because the New York court is not a court of competent 18 jurisdiction under § 77v(a), the bar on removal does not apply, and the case is removable.”); Lapin 19 v. Facebook, Inc., No. C-12-3195 MMC, 2012 WL 3647409, at *2 (N.D. Cal. Aug. 23, 2012) 20 (“federal courts alone have jurisdiction to hear covered class actions raising 1933 Act claims” 21 (quoting Knox v. Agria Corp., 613 F.Supp. 419, 425 (S.D.N.Y. 2009))). Defendants “respectfully 22 disagree with the Court’s decision in [Young] and with the other decisions granting remand of 23 Securities Act class actions.” Defs.’ Opp’n to Pls.’ Mot. to Remand 2, Dkt. No. 25. 24 25 This Court finds no compelling reason to depart from its reading of § 77v(a) in Young. Accordingly, Book’s and Gallas’s claims will be remanded. 26 27 28 3 Case Nos.: 5:16-cv-07408-EJD and 5:17-cv-01740-EJD ORDER GRANTING PLAINTIFFS’ MOTIONS TO REMAND AND DENYING DEFENDANTS’ MOTIONS TO STAY 1 B. 2 The U.S. Supreme Court is considering two petitions for writs of certiorari addressing Motion to Stay whether state courts have concurrent jurisdiction over class actions under the 1933 Securities Act. 4 Petition for Writ of Certiorari, Cyan, Inc. v. Beaver Cty. Emps. Ret. Fund (No. 15-1439), 2016 5 WL 3040512 (filed May 24, 2016); Petition for Writ of Certiorari, FireEye, Inc. v. Sup. Ct. of Cal. 6 (No. 16-744), 2016 WL 7174592 (filed Dec. 5, 2016). Because a Supreme Court decision might 7 resolve the issue of whether Book and Gallas’s actions are removable, Defendants argue that these 8 cases should be stayed until the Supreme Court decides whether to grant the petitions. Dkt. No. 9 15. However, as discussed above, this Court interprets § 77v(a) to mean that the Book and Gallas 10 actions are not removable. As such, this Court lacks jurisdiction to adjudicate Plaintiffs’ claims, 11 United States District Court Northern District of California 3 and Defendants’ motions to stay must be denied. 12 IV. 13 CONCLUSION Plaintiffs’ motions to remand (Book Dkt. No. 18, Gallas Dkt. No. 20) are GRANTED. 14 Defendants’ motions to stay (Book Dkt. No. 15, Gallas Dkt. No. 25) are DENIED. The Clerk shall 15 close this file. 16 17 18 19 20 IT IS SO ORDERED. Dated: June 12, 2017 ______________________________________ EDWARD J. DAVILA United States District Judge 21 22 23 24 25 26 27 28 4 Case Nos.: 5:16-cv-07408-EJD and 5:17-cv-01740-EJD ORDER GRANTING PLAINTIFFS’ MOTIONS TO REMAND AND DENYING DEFENDANTS’ MOTIONS TO STAY

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