Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_10-cv-00711/USCOURTS-casd-3_10-cv-00711-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:77 Securities Fraud

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10cv711

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

WEST PALM BEACH POLICE

PENSION FUND,

Plaintiff,

v.

CARDIONET, INC., et al.,

Defendants. _________________________________

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Civil No. 10cv711-L(NLS)

ORDER GRANTING PLAINTIFF’S

MOTION TO REMAND

Defendants removed this securities class action from State court. The notice of removal

is based on 28 U.S.C. Section 1441 and the Securities Litigation Uniform Standards Act of 1998

(“SLUSA”), 15 U.S.C. Sections 77v(a) and 77p(c). Plaintiff filed a motion to remand. Because

SLUSA expressly prohibits removal, Plaintiff’s motion is GRANTED. 

“Federal courts are courts of limited jurisdiction. They possess only that power

authorized by Constitution or a statute, which is not to be expanded by judicial decree. It is to be

presumed that a cause lies outside this limited jurisdiction and the burden of establishing the

contrary rests upon the party asserting jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am.,

511 U.S. 375, 377 (1994); see also Abrego Abrego v. The Dow Chem. Co., 443 F.3d 676, 684

(9th Cir. 2006). 

Plaintiff filed a putative class action complaint in State court alleging that it and others

similarly situated purchased or otherwise acquired common stock of Defendant CardioNet, Inc.

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1 Defendants removed the first amended complaint. The court looks to the

complaint as of the time of removal. Abada v. Chares Schwab & Co., 300 F.3d 1112, 1117 (9th

Cir. 2002).

2 10cv711

pursuant to or traceable to the company’s initial stock offering and/or its subsequent secondary

stock offering. In the operative first amended complaint,1

 Plaintiff alleged that the registration

statements and prospectuses for the offerings contained false and misleading statements and

omissions in violation of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, 15 U.S.C.

§§ 77(k), 77l(a)(2) & 77o. Defendants removed based on the SLUSA and Plaintiff moved to

remand based on a different interpretation of the same statute.

The Securities Act of 1933 provides concurrent jurisdiction in state and federal courts

over alleged violations of the Act. 15 U.S.C. § 77v(a); Luther v. Countrywide Home Loans Serv.

LP, 533 F.3d 1031, 1033 (2008). However, it also includes two provisions regarding removal,

which are the subject of Plaintiff’s motion. Plaintiff’s motion is based on SLUSA’s

jurisdictional provision, which prohibits removal of federal securities actions from State to

federal court:

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). Defendants argue that removal is proper when section 77v(a) is read

together with section 77p(c), which includes a removal provision:

Any covered class action brought in any State court involving a covered security,

as set forth in subsection (b), shall be removable to the Federal district court for the

district in which the action is pending, and shall be subject to subsection (b).

Subsection (b) in turn provides for preclusion of certain class actions as follows:

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–

(1) an untrue statement or omission of a material fact in connection with the

purchase or sale of a covered security; or 

(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. 

15 U.S.C. § 77p(b).

Subsections (b) and (c) have been referred to as the “preclusion provision” and the

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3 10cv711

“removal provision,” respectively. Kircher v. Putnam Funds Trust, 547 U.S. 633, 636 (2006). 

Together they operate so that “[a]ny suit removable under SLUSA’s removal provision, 

§ 77p(c), is precluded under SLUSA’s preclusion provision, § 77p(b), and any suit not precluded

is not removable.” Madden v. Cowen & Co., 576 F.3d 957, 965 (9th Cir. 2009). Specifically,

If the action is precluded, neither the district court nor the state court may entertain

it, and the proper course is to dismiss. If the action is not precluded, the federal

court likewise has no jurisdiction to touch the case on the merits, and the proper

course is to remand to the state court that can deal with it. 

Kircher, 547 U.S. at 644. Accordingly, “removal and jurisdiction to deal with removed cases is

limited to those precluded by the terms of subsection (b).” Id. at 643 (emphasis added); see also

Madden, 576 F.3d at 965 (breadth of preclusion provision limited). Arguments such as

Defendants’, that the removal provision is broader than the preclusion provision, have been

rejected. See Kircher, 547 U.S. at 643.

To be precluded under section 77p(b), the class action must be brought under State law,

among other requirements. 15 U.S.C. § 77p(b); see also Madden, 576 F.3d at 965 (itemizing

requirements for preclusion). The removal provision, section 77p(c), does not apply to actions

which are not precluded under section 77p(b). In such cases, particularly when the case is

brought only under the Securities Act of 1933, the applicable removal provision is included in

section 77v(a). Luther, 533 F.3d at 1033, 1034. It “strictly forbids the removal of cases brought

in state court and asserting claims under the Act.” Id. (footnote omitted). This counterintuitive

outcome, where certain State law claims are removable, albeit only to be dismissed as precluded,

while federal claims are not removable, is due to the convoluted history of the Securities Act of

1933, including the Private Securities Litigation Reform Act of 1995, its unintended

consequences, and the SLUSA’s purpose of counteracting them. See Kircher, 547 U.S. at 636;

Madden, 576 F.3d at 963-64. Consistent with this history, far from being a broad removal

provision, the purpose and scope of section 77p(c) is limited to “ensuring that federal courts will

have the opportunity to determine whether a state action is precluded.” Madden, 576 F.3d at

965. 

Because Plaintiff’s action was brought in State court and asserted claims only under the

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Securities Act of 1933 rather than under State law, it is neither precluded nor removable. See 15

U.S.C. § 77v(a); Luther, 533 F.3d at 1034. Therefore this court has no jurisdiction and the

proper course is to remand. Kircher, 547 U.S. at 643-44; Madden, 576 F.3d at 965. 

The action was removed improvidently and without jurisdiction. Plaintiff’s motion for

remand is therefore GRANTED and this action is REMANDED to the Superior Court of the

State of California, County of San Diego. 

IT IS SO ORDERED.

DATED: March 24, 2011

M. James Lorenz

United States District Court Judge

COPY TO: 

HON. NITA L. STORMES

UNITED STATES MAGISTRATE JUDGE

ALL PARTIES/COUNSEL

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