Thursday, March 15, 2012

Federal Court Remands 33 Act Claims to State Court

The U.S. District Court for the Northern District of California remanded a case seeking recovery for Securities Act violations to state court. The case presented a conflict between Securities Act Sections 16(c), which provides for removal of state claims to federal court, and 22(a), which preserves state court jurisdiction.

The court noted that the interplay between the two provisions is not clear on the face of the statutes, and the lower and appellate courts that have faced the issue have reached different results. Under Section 22(a), cases brought under the Securities Act in state court may not, subject to the limitations of Section 16(c), be “removed to any court of the United States.” Section 16(c), however, added by the Securities Litigation Uniform Standards Act, provides that any “covered class action” brought in any state court involving a covered security is removable to federal district court and subject to dismissal.

The court cited a 2008 9th Circuit decision, Luther v. Countrywide Home Loans Servicing, LP (9th Cir 2008), Fed. Sec. L. Rep. ¶94,777, in support of its holding that Section 22 was a “statute of precise application not submerged by a statute of more general application.” Because the action asserted only Securities Act claims, it was properly brought in state court and subject to remand, concluded the district court. Young v. Pacific Biosciences of California, Inc. (ND Cal 2012, Case Nos. 5:11-Cv-05668 EJD;5:11-Cv-05669 EJD)