Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_10-cv-02111/USCOURTS-casd-3_10-cv-02111-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 28:1441 Petition for Removal

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

GEORGE SHARP,

Plaintiff,

Case No. 10cv2111 BTM(BLM)

ORDER DENYING WITHOUT

v. PREJUDICE MOTION TO REMAND

ARENA PHARMACEUTICALS, INC., et

al.,

Defendants.

Plaintiff George Sharp, proceeding pro se, has filed a motion to remand this case back

to state court, or, in the alternative, to sever the federal securities fraud cause of action from

the remaining state causes of action and remand the state causes of action only. For the

reasons discussed below, Plaintiff’s motion is DENIED.

I. BACKGROUND

On September 27, 2010, Plaintiff filed a pro per complaint in state court against

Defendant Arena Pharmaceuticals, Inc. (“Arena”), and individual officers of Arena. Plaintiff

alleges that he was induced into purchasing common stock of Arena by way of misleading

statements made by Defendants regarding Lorcaserin, a drug intended to help weight

management and treat obesity. On December 22, 2009, Arena submitted a New Drug

Application to the FDA seeking regulatory approval for Lorcaserin. (Compl. ¶ 19.) On July

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30, 2010, Arena’s common stock traded at an all time high of $7.95 per share. (Compl. ¶

23.) On September 14, 2010, the FDA released a briefing document in advance of its

advisory panel meeting, expressing concern regarding the safety and efficacy of Lorcaserin.

(Compl. ¶ 25.) Upon release of the briefing document, Arena’s common stock suffered a

one-day decline of 39.7%. (Compl. ¶ 26.) On September 16, 2010, the FDA advisory panel

voted 9 to 5 against the approval of Lorcaserin. (Compl. ¶ 27.) On September 17, 2010,

Arena’s common stock suffered a one-day decline of 46.8%. (Compl. ¶ 29.)

Plaintiff’s Complaint asserts causes of action for: (1) fraud; (2) negligent

misrepresentation; (3) securities fraud; (4) violation of Cal. Bus. & Prof. Code § 17200; and

(5) violation of Cal. Bus. & Prof. Code § 17500. Plaintiff seeks injunctive relief as well as

monetary damages.

On October 8, 2010, Defendants removed this action. Defendants based the removal

on federal question jurisdiction, 28 U.S.C. §§ 1331 and 1441.

II. DISCUSSION

Plaintiff moves the Court to remand this action back to state court, or, in the

alternative, to sever the state claims from the federal claims and remand the state claims.

As discussed below, the Court concludes that remand is not appropriate at this time.

This action was properly removed based on the existence of a federal question. In

Plaintiff’s third cause of action for “securities fraud,” Plaintiff cited to Rule 10b-5 as well as

to Cal. Corp. Code § 25401. (Compl. ¶¶ 50-60). Furthermore, Plaintiff’s fourth cause of

action under Cal. Bus. & Prof. Code § 17200 is premised on the violation of Rule 10b-5: “The

aforementioned conduct . . . constitute a violation of SEC Rule 10b-5, and as such, each

constitute an unfair business practice in violation of Bus. & Prof. Conduct Code section

17200, et seq.” (Compl. ¶ 73.)

The Court has supplemental jurisdiction over the remaining state claims. As provided

under 28 U.S.C. § 1367: “[I]n any civil action of which the district courts have original

jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that

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 The Court is not persuaded by Defendants’ argument that Plaintiff’s state claims

qualify as a “covered class action” within the meaning of the SLUSA, 15 U.S.C. § 78bb(f)(1)-

(2). Plaintiff does not assert that he is bringing claims or seeking damages on behalf of

others. In the cases cited by Defendants, the UCL claims were specifically brought as a

class action or “on behalf of others.” See Arias v. Superior Court, 46 Cal. 4th 969, 976

(2009); Feitelberg v. Merilly Lynch & Co., Inc., 234 F. Supp. 2d 1043 (N.D. Cal. 2002).

These cases do not hold that when an individual alleging securities fraud brings a UCL claim

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are so related to claims in the action within such original jurisdiction that they form part of the

same case or controversy under Article III of the United States Constitution.” A state law

claim is part of the same “case or controversy” when it shares a “common nucleus of

operative fact” with the federal claims and the state and federal claims would normally be

tried together. Bahrampour v. Lampert, 356 F.3d 969, 978 (9th Cir. 2004). Here, the state

claims concern the same operative facts – i.e., misrepresentations regarding the safety and

efficacy of Lorcaserin – and are part of the same case or controversy.

In his moving papers, Plaintiff argues that his claims are based on violations of

Section 12(a)(2) of the Securities Act of 1933 and that, therefore, Plaintiff’s claims were not

removable. See 15 U.S.C. § 77v(a). However, Plaintiff’s Complaint does not reference

Section 12(a)(2) at all. Moreover, Plaintiff does not allege that Defendants offered or sold

securities “by means of a prospectus or oral communication, which includes an untrue

statement of a material fact or omits to state a material fact,” as required by the statute. 

Plaintiff argues that even if some of his claims qualify as federal claims, the Court

should remand the state claims. The Court disagrees. Under 28 U.S.C. § 1367(a), a court

may decline to exercise jurisdiction over a supplemental state law claim if: (1) the claim

raises a novel or complex issue of state law; (2) the claim substantially predominates over

the claim or claims over which the district court has original jurisdiction; (3) the district court

has dismissed all claims over which it has original jurisdiction; or (4) in exceptional

circumstances, there are other compelling reasons for declining jurisdiction. None of these

conditions is satisfied here.

Plaintiff asks for leave to amend his Complaint to eliminate all reliance on federal law.

The Court will allow Plaintiff to amend his Complaint to eliminate his federal claims and will

reconsider Plaintiff’s request to remand upon the filing of the amended complaint.1

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on behalf of himself alone, such claim constitutes a “covered class action.” 

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III. CONCLUSION

For the reasons discussed above, Plaintiff’s motion to remand is DENIED without

prejudice. Within 15 days of the entry of this Order, Plaintiff may file an amended complaint

eliminating the federal claims. Within 10 days of the filing of the amended complaint,

Defendants shall file a brief (not to exceed 10 pages) showing cause why the Court should

not exercise its discretion to remand the case. Plaintiff may file a response brief (not to

exceed 10 pages) on the issue of remand within 10 days of the filing of Defendants’ brief.

IT IS SO ORDERED.

 DATED: December 29, 2010

Honorable Barry Ted Moskowitz

United States District Judge

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