State of Idaho v. McGraw-Hill Companies, Inc. et al

Filing 41

ORDER granting 6 Motion to Stay. The Court will reserve ruling on the Motion to Remand (Dkt. 11 ). Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjm)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

STATE OF IDAHO, through ATTORNEY
GENERAL LAWRENCE WASDEN,
Plaintiff,

Case No. 1:13-cv-00108-BLW
ORDER

v.
THE MCGRAW-HILL COMPANIES,
INC., and STANDARD & POOR’S
FINANCIAL SERVICES LLC,
Defendants.

INTRODUCTION
The Court has before it Defendants’ Motion to Stay Proceedings Pending
Determination on Motion to Transfer Pursuant to 28 U.S.C. § 1407 (Dkt. 6), and State’s
Motion for Remand Pursuant to 28 U.S.C. § 1447 (c) (Dkt. 11). For the reasons stated
below, the Court will grant the defendants’ motion to stay these proceedings pending the
Judicial Panel on Multidistrict Litigation’s resolution of the defendant’s motion to
transfer.
ANALYSIS
Similar to lawsuits filed in approximately twenty other states, the Attorney
General for the State of Idaho filed suit against McGraw-Hill Companies, Inc. and
Standard & Poor’s Financial Services LLC (“S&P”). The Attorneys General in each of
the states make almost identical allegations – that the defendants’ representations that its

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ratings were objective and independent were false and constituted unfair and deceptive
practices. The Attorneys General allege that such practices violated consumer protection
laws – in this case, the Idaho Consumer Protection Act (“ICPA”).
This case was originally filed in state court, but defendants removed it to this
Court on the basis of federal question jurisdiction. Defendants have filed a motion to
transfer all of these actions for consolidated pretrial proceedings before the Judicial Panel
on Multidistrict Litigation (“JPML”), and the JPML has set a hearing on Defendants’
motion for May 30, 2013. Defendants ask the Court to stay these proceedings pending the
JPML’s resolution of the motion to transfer. The State suggests that the Court should
address the jurisdictional issue raised in its motion to remand before staying the case.
The motion to transfer “does not affect or suspend orders or pretrial proceedings . .
. or limit the jurisdiction” of this court. JPML Rule 2.1(d). However, the Court has
inherent power to stay its proceedings. “The power to stay proceedings is incidental to
the power inherent in every court to control the disposition of the causes on its docket
with economy of time and effort for itself, for counsel, and for litigants.” Landis v. North
Am. Co., 299 U.S. 248, 254 (1936). Courts apply a three-step process in determining
whether to rule on a motion to remand or stay a matter pending resolution of a motion to
transfer to the JPML. Conroy v. Fresh Del Monte Produce, Inc., 325 F. Supp. 2d 1049,
1053 (N.D. Cal. 2004).
“First, the court should give preliminary scrutiny to the merits of the motion to
remand. If this preliminary assessment suggests that removal was improper, the court
should promptly complete its consideration and remand the case to state court.” Conroy,
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325 F. Supp. 2d at 1053 (Internal citation omitted). Next, “[i]f the jurisdictional issue
appears factually or legally difficult, the court should determine whether identical or
similar jurisdictional issues have been raised in other cases that have been or may be
transferred to the MDL proceeding.” Id. Finally, “if the jurisdictional issue is both
difficult and similar or identical to those in cases transferred or likely to be transferred,
the court should stay the action.” Id.
This case is not unlike several of the related cases pending in states around the
country, including the one in Pennsylvania. See Commonw. of Pa. by Att’y Gen. Kane v.
The McGraw-Hill Companies, Inc. and Standard & Poor’s Fin. Serv., LLC (“Kane”),
No. 1:13-CV-605, 2013 WL 1397434, at *4-5 (M.D. Pa. April 5, 2013). In fact, this case
is almost identical to Kane. Applying the three-part test identified above, the Kane court
granted the defendants’ motion to stay.
With regard to the first step, the court explained that the legal issues surrounding
Pennsylvania’s motion to remand were novel and complex. Id. In that case, as in this
case, the defendants justified their removal based upon the Supreme Court’s reasoning in
in Grable & Sons Metal Prods.,Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005). Id.
Under Grable, federal question jurisdiction exists if a state law claim “necessarily state[s]
a federal issue, actually disputed and substantial, which a federal forum may entertain
without disturbing any congressionally approved balance of federal and state judicial
responsibilities.” Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S.
308, 314 (2005). 545 U.S. at 314. “A state law claim raises a federal issue when it

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involves a dispute over the validity, construction, or effect of a federal statute or law.”
Kane, 2013 WL 1397434, *3; (citing Grable, 545 U.S. at 313.
The Kane court went on to conclude that the jurisdictional inquiry therefore
necessarily demands an expansive review of case law governing the history and
application of the Grable holding as well as case law and legislative history governing
the scope and application of Credit Rating Agency Reform Act. It would need to
scrutinize the plaintiff’s factual and legal allegations in order to determine whether they
implicate the Act, and, thereafter, identify the presence of any federal issues. The same is
true in this case, and it will not be a simple process. Thus, the first step of the Conroy test
is satisfied.
The second step is also satisfied. Similar or identical jurisdictional issues have
been raised in approximately twenty other cases which may be transferred to the MDL
proceeding. The district courts in many of those cases have granted a stay.
Finally, the third step is also satisfied because the jurisdictional issue in this case is
both difficult and similar or identical to those in cases likely to be transferred. In fact, this
case is practically identical to the other cases pending throughout the country. Moreover,
although the analysis of a court’s subject matter jurisdiction does necessarily require an
individualized inquiry, as noted by the Kane court, “when the jurisdictional issues are
purely legal in nature and when the issues are virtually identical to those present in other
cases, district courts should defer to the possibility of consolidation and determination by
one judicial body to promote judicial economy and to avoid inconsistent judgments.”
Kane, 2013 WL 1397434, *4.
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Under these circumstances, the Court will grant the stay. Many of the other federal
district courts have already reached the same conclusion, and this Court agrees that the
stay serves the interests of judicial economy because the jurisdictional issues raised by
the motion to remand are both complex and almost certain to be raised by other cases
which may be transferred to the JPML. Additionally, the prejudice to the State will be
minor given the pending May 30, 2013 hearing date for the motion to transfer.
ORDER
IT IS ORDERED THAT:
1.

Defendants’ Motion to Stay (Dkt. 6) is GRANTED.

2.

The Court will reserve ruling on the Motion to Remand (Dkt. 11).

DATED: May 21, 2013

_________________________
B. Lynn Winmill
Chief Judge
United States District Court

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