Except as otherwise expressly provided by Act of Congress, any civil action brought in

a State court of which the district courts of the United States have original jurisdiction,

may be removed by the defendant or the defendants, to the district court of the United

States for the district and division embracing the place where such action is pending.

(emphasis added).
In the case presently before us, the Complaint alleges violations of sections 11 and 15 of the Securities
Act, 15 U.S.C. §§77k and 770. Plaintiff brought the Complaint in the Circuit Court of Cook County,
Illinois pursuant to the concurrent jurisdiction provision of the Securities Act, 15 U.S.C. §77v(a), which

provides:

The district courts of the United States and United States courts of any Territory shall

have jurisdiction of offenses and violations under this title and under the rules and

regulations promulgated by the Commission in respect thereto, and concurrent with state

and territorial courts, except as provided in section 16 with respect to covered class

actions, of all suits in equity and actions at law brought to enforce any liability or duty

created by [15 U.S.C. §§77a, et seq.].

Until 1998, section 77v of the Securities Act prohibited the removal of any claim brought in state
court, See Piambino v. Bailey, 610 F.2d 1306, 1333 (Sth Cir. 1980). In 1998, Congress enacted SLUSA,
which, in part, amended section 77v of the Securities Act to read as follows: “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 should be removed to any court of the United States.” 15 U.S.C. §77v(a)
(emphasis added). Section 77p(c) of the Securities Act permits removal of ' “[a}ny class action brought
in any State court involving a covered security, as set forth in subsection (b).” Subsection (b) of section
77p provides:

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


H.R. Conf. Rep. 105-803 (1998). To that end, SLUSA prohibits a private party from bringing a
“covered class action” that is “based upon the statutory or common law of any State or subdivision
thereof” alleging fraud or manipulation involving the “purchase or sale ofa covered security.” 15 U.S.C.
§77p(b). Any such claim filed in state court is removable to federal court. See 15 U.S.C. §§77v(a),
77p(c). SLUSA thereby makes federal court the exclusive venue for securities class actions that meet
its definitions, ensuring that they will be governed by federal law. See 15 U.S.C. §§77p(b)-(c); see also
Riley, 292 F.3d at 1341; see also In re Waste Management, 194 F.Supp.2d at 592. SLUSA did not
change the prohibition on removing those actions filed in state court which are based entirely on federal
securities law. See id.

In this case, Plaintiff's Complain is based entirely on federal securities law. Under the clear and
unambiguous language of the statute, as amended by SLUSA, such an action cannot be removed from
state court. See 15 U.S.C. §§77(a), 77p(c). Defendants have failed to show that Plaintiffs claims are
based on state law and thus have not met their burden to demonstrate the propriety of the removal of the
Complaint to this Court. See Wilson, 257 U.S. 97-98, 42 S.Ct. at 37; see also Riley, 292 F.3d at 1342
(setting forth factors under SLUSA that removing party must prove to succeed in removing action). We

find that Defendants' removal of the Complaint was improper under 15 U.S.C. §§77v(a), 77p(C), ‘and

“Defendants ask us to deny Plaintiff's motion for remand on the ground that Plaintiff: filed the
Complaint in the Circuit Court of Cook County, Illinois as a “hollow procedural maneuver” to avoid
the heightened pleading requirement of the PSLRA and removal under SLUSA and thereby separate
the case from the consolidated class action currently pending in the Southern District of New York.
Even if we were to agree with Defendants’ characterization of Plaintiff's motive for filing the
Complaint in state court, the plain language of the statute requires us to find that Defendants'
removal of the action was improper. See 15 U.S.C. §§77v(a), 77p(c)-

9



the purpose of the overall statutory scheme.” United States v. 916 Douglas Ave., 903 F.2d 490, 492 (7th
Cir. 1990).

The plain language of the Securities Act, 15 U.S.C. §77v(a), as amended by SLUSA, states
Congress’ intent to prohibit removal of any “case arising under this subchapter and brought in any State
court... [e]xcept as provided in section 77p(c) of this title.” Section 77p(c) permits removal of “[aJny
covered class action brought in any State Court involving a covered security as set forth in subsection
{b).” Subsection (b) in turn preempts any “covered class action” brought in “any State or Federal court”
that is “based upon the statutory or common law of any State or subdivision thereof’ alleging fraud or
manipulation “in connection with the purchase or sale of a covered security.” 15 U.S.C. 77p(b)
(emphasis added). Thus, the plain language of the Securities Act, as amended by SLUSA, clearly and
unambiguously permits the removal of only those covered class action complaints that are based on State
statutory or common law. .

Although the matter before this Court is one of first impression in this jurisdiction, the Southern
District of Texas has found that “[w]ith respect to removal, the plain language of SLUSA, 15 U.S.C.
§77p(c), evidences Congress’ intent to preempt a specifically defined category of state-law class
actions.” Jn re Waste Management, Inc. Securities Litig., 194 F.Supp.2d 590, 593 (S.D. Tex. 2002).
Indeed, federal courts in various jurisdictions have concluded that “in order to remove an action to
federal court under SLUSA, the removing party must show that (1) the suit is a covered class action, (2)
the plaintiffs' claims are based on state law, (3) one or more covered securities has been purchased or
sold, and (4) the defendant misrepresented or omitted a material fact in connection with the purchase
or sale of such security.” Riley v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 292 F.3d 1334, 1342
(11th Cir. 2002) (internal quotations omitted) (emphasis added); see also In re Waste Management, Inc.

194 F.Supp.2d at 594 (S.D. Tex. 2002) (setting forth the same test for removal under SLUSA); Korsinsky



(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,

In enacting removal legislation, Congress intended to “restrict the jurisdiction of federal courts
on removal,” thereby requiring district courts to strictly construe such statutes. Shamrock Oil & Gas
Corp. v. Sheets, 313 U.S. 100, 108, 61 S.Ct. 868, 872, 85 L.Ed. 1214 (1941). The party that removes
an action to federal court bears the burden of demonstrating the propriety of removal. See Wilson v.
Republic Iron & Steel Co., 257 U.S. 92, 97-98, 42 S.Ct. 35, 37, 66 L.Ed. 144 (1921). Defendants
contend that section 77p(c) permits removal of any covered class action alleging fraud or manipulation
involving the purchase or sale of covered securities, including those actions which are based on federal
securities laws. It is in accordance with that contention that Defendants removed the Complaint to this
Court. Plaintiffasserts that section 77p(c) permits removal of only those covered class action complaints
based on State statutory or common law that allege fraud or manipulation involving the purchase or sale
of covered securities. Consequently, Plaintiff argues that Defendants’ removal was improper because
the Complaint only alleges violations of federal law. We agree with Plaintiffs interpretation of the
statute.

To determine Congress’ intention in enacting the legislation at issue, we look first to the plain
language of the statute. See Reves v. Ernst & Young, 507 U.S. 170, 177, 113 S.Ct. 1163, 1169, 122
L.Bd.2d 525 (1993); see also O'Kane v. Apfel, 224 F.3d 686, 688-89 (7th Cir. 2000). When statutory
language “is clear and unambiguous, no need exists for the court to examine the legislative history, and
the court must give effect to the plain meaning of the statute.” United States v. Hayward, 6 F.3d 1241,
1245 (7th Cir. 1993). In contrast, a court may look beyond “the express language of a statute only where

that statutory language is ambiguous or a literal interpretation would lead to an absurd result or thwart



covered class actions alleging fraud or manipulation involving the sale or purchase of covered securities,
regardless of whether they arise under state or federal law.

We disagree with Defendants’ interpretation of the statute, as amended by SLUSA, as well as
the analysis of the Brody court. Their collective examination of the statute disregards established
Supreme Court precedent regarding statutory interpretation. Instead, Defendants and the Brody court
advocate adding to the plain language of a statute they believe to be “inartfully (or even inaccurately)
worded.” Brody, 240 F.Supp.2d at 1123. Indeed, we believe our role is to apply the statute's text, not

to improve upon it. See Pavelic & LeFlore v. Marvel Entertainment Group, 493 U.S. 120, 126, 110

S.Ct. 456, 460, 107 L.Ed.2d 438 (1989). Section 77v(a), as amended by SLUSA, is made meaningful
by section 77p(c)'s preemption of an expressly delineated category of state law class actions as set forth
under subsection (b). See In re Waste Management, 194 F.Supp.2d. at 593. To otherwise interpret the
statute would be to ignore its plain meaning.

Defendants suggest that Congress’ stated intent in enacting SLUSA and the legislative history
of the statute's passage supports the interpretation they advance above. The first sentence of SLUSA
indicates otherwise, providing that the act's purpose is “to limit the conduct of securities class actions
under State law.” Securities Litigation Uniform Standards Act of 1998, Pub. L. No. 105-353, 112 Stat.
3227 (1998) (emphasis added). The number of state-law securities class actions had increased since
Congress' passage of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), codified in part
at 15 U.S.C. §§77z-1, 78u. See SLUSA, Pub. L. No. 105-353 §2(2); see also Riley, 292 F.3d at 1341.
Congress enacted SLUSA in 1998 to “prevent plaintiffs from seeking to evade the protections that

federal law provides against abusive litigation by filing suit in State court, rather than Federal court.”



Mite Onder orm (05577)

OS Ao United States District Court, Northern District of Mlinois

Name of Assigned Jud i Sitting Judge If Ot
noe Magistrate Judge Marvin Aspen than Asigned Judge
CASE NUMBER 02 C 9212 DATE 4/15/2003
CASE Jack Nauheim vs. The Interpublic Group of Companies, et al
TITLE
{in the fotlowing box (a) indicate the party fiting the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented.)
MOTION:
DOCKET ENTRY:
qd) o Filed motion of [ use listing in “Motion” box above.]
(2) im) Brief in support of motion due
(3) oO Answer brief to motion due. ~ Reply to answer brief due. .
@ a Ruling/Hearing on set for at
(5) Oo Status hearing[held/continued to] [set for/re-set for] on set for at -
(6) a Pretrial conference[held/continued to} (set for/re-set for] on set for at .
” a Trial[set for/re-set for] on at .
(8) Oo [Bench/Jury trial) [Hearing] held/continued to at
(9) 0 This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) CLocal Rule 41.1 COFRCP41(aX1) OC FRCP41(a\(2).
qo [Other docket entry) Enter Memorandum Opinion and Order: We find that defendants’ removal
of the Complaintwas improper under 15 USC §§77v(a), 77p(c), and therefore remand the case pursuant
to 28 U.S.C. §1447(c) to the Circuit Court of Cook County, Illinois. Plaintiff's motion to remand (12-1)
the Complaint to the Circuit Court of Cook County, Illinois is granted. The Clerk of the Court is directed
to remand the above cause of action to the Circuit Court of Cook County, Illinois. The status hearing set
for 4/24/03 is stricken Any other pending motions are moot.
(11) =F {For further detail see order attached to the original minute order.)
No notices required, advised in open court. see =
No notices required. ovices
oS | Notices mailed by judge's staff. 6
Notified counsel by telephone. PR 2003
Docketing to mail notices,
Mail AO 450 form. docket initia | 4
Copy to judge/magistrate judge.
ansra003
con date mailed notice
GL deputy’s a
initials
Date/time received in
central Clerk's Office ~' rmaiing deputy ‘nine



therefore remand the case pursuant to 28 U.S.C. §1447(c) to the Circuit Court of Cook County, Illinois.$
Il. CONCLUSION

For the foregoing reasons, Plaintiff's motion to remapd the Complaint to the Circuit Court of

LL

MARVIN E. ASPEN “=~
United States District Judge

Cook County, Illinois is granted. It is so ordered.

Dated dpc L o3

‘Plaintiff asks us to award attomeys' fees and costs incurred in litigating the improper
removal of the Complaint. Although we may award such fees and costs under 28 U.S.C. §1447(c),
we decline to do in this case.

Defendants contend that we still have the subject matter jurisdiction necessary to transfer the
action because Plaintiff could have initially filed the Complaint in federal court, thereby making
Defendants’ improper removal a procedural, not a jurisdictional defect. We disagree. The plain
language of the Securities Act, as amended by SLUSA, makes clear that once a Plaintiff files suit in
state court under the statute alleging violations of federal securities law only, that action cannot be
removed to federal court. See 15 U.S.C. §§77v(a), 77p(c). In the context of this case, we never had
jurisdiction over Plaintiff's Complaint because he chose to file in state court, consequently making
Defendants' improper removal is therefore a jurisdictional defect. In light of our decision remanding
the case, we deny Defendants' motion to transfer for lack of subject matter jurisdiction.

10


v. Salomon Smith Barney Inc., 2002 WL 27775 *3 (S.D.N.Y. Jan. 10, 2002) (same); Hardy v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 189 F.Supp.2d 14, 17 (S.D.N.Y. 2001) (same); Shaev v. Claflin,
2001 WL 548567 *3-4 (N.D. Cal. May 17, 2001) (same).

Where, as here, the words ofa statute are clear and unambiguous, our inquiry is complete. See
Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 254, 112 S.Ct. 1146, 1149, 117 L.Ed.2d 391 (1992).
Defendants, however, assert that the language of the statute demands a different interpretation of the
removal provision. In support of their assertion, Defendants cite to the recent case of Brody v.

Homestore, Inc., 240 F.Supp.2d 1122 (C.D. Cal. 2003) in which the court construed SLUSA, to permit

the removal of any action regardless of whether it is based on state or federal law.> Defendants follow
the analysis employed by the Brody court in contending that the reference in section 77v(a) prohibiting
removal “[e]xcept as provided in section 77p(c)” dictates that section 77p(b) does not restrict removal
to those covered class actions based upon state statutory or common law. They conclude that section
77p(c) permits removal of both federal and state law claims, while subsection (b) merely incorporates
subsection (b)'s description of the types of state law claims that may be removed.

Defendants further utilize the analysis in Brody by arguing that if section 77p(c) limits removal
to actions “based upon state statutory or common law of any state or subdivision thereof,” it renders
meaningless the separate anti-removal provision in section 77v(a) which states that “no case arising
under this subchapter and brought in any State court” may be removed “[e]xcept as provided in section
77c) of this title.” Defendants state that because no state law case can ever “arise under” the Securities

Act, the only way to give meaning to section 77v(a) is to construe it as permitting the removal of all

In our review of the relevant federal case law, the Brody court appears to be the first court to
have reached such a conclusion with regard to removal under the Securities Act, as amended by
SLUSA.



complaints allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the
“Exchange Act”). After Plaintiff filed the Complaint at issue, the court-appointed lead plaintiff in the
New York consolidated action filed an amended complaint that additionally alleged violations of
Sections 1! and 15 of the Securities Act. Plaintiff moved on January 17, 2003 to remand the Complaint
to the Circuit Court of Cook County, Illinois under 28 U.S.C. §1447 and SLUSA, 15 U.S.C. §§77v,
TIp(c).
I. ANALYSIS

Defendants urge this Court to first decide the motion to transfer. We decline to do so, and
instead turn our attention to Plaintiff's motion to remand. See Meyers v. Bayer AG, 143 F.Supp.2d 1044,
1048-49 (E.D. Wisc. 2001) (finding in the context of a motion to stay and a motion to remand that “a
court should first give preliminary scrutiny to the merits of the motion to remand.”). As we discuss
infra, our determination of Plaintiff's motion to remand implicates the issue of whether we have
jurisdiction over the matter. The Supreme Court has long held that “[w]ithout jurisdiction the court
cannot proceed at all in any cause.” Ex parte McCardle, 74 U.S. 506, 514, 19 L.Ed. 264 (1868). Indeed,
28 U.S.C. §1447(c) dictates that “[i]f at any time before judgment it appears that the district court lacks
subject matter jurisdiction, the case shall be remanded.” Judicial economy similarly drives our decision
to first examine Plaintiffs motion to remand because that examination may, as Plaintiff suggests, be
dispositive as to both motions. Finally, we address the motion to remand first because it undeniably
effects Plaintiff's ability to draft the Complaint so as to choose the forum in which to litigate the matter.
See Garbie v. DaimlerChrysler Corp., 211 F.3d 407, 410 (7th Cir. 2000).

Plaintiff claims that the Complaint was improperly removed under 28 U.S.C. §1441(a) and

SLUSA, 15 U.S.C. §§77v, 77p(c). Title 28 U.S.C. §1441(a) states:



L BACKGROUND

On November 22, 2002, Plaintiff filed a putative shareholder class action complaint against
Defendants in the Circuit Court of Cook County, Illinois. Defendant IPG is a global advertising and
marketing communications and services company. Defendant PwC is a firm of certified public
accountants that provides independent auditing of IPG's financial statements. Individual Defendants are
all current or former officers and directors of PG, The Complaint relates to Plaintiff's acquisition of PG
securities in connection with IPG's acquisition of True North Communications, Inc. (“True North”) in
a stock-for-stock transaction. Plaintiff and other former True North shareholders exchanged their True
North shares for newly-issued IPG shares in a June 2001 offering. The Complaint alleges that the
Registration Statement and Prospectus filed with the Securities Exchange Commission contained
materially false statements and material omissions regarding the true nature of IPG's financial condition,
including its net income and expenses. IPG has stated that it will restate its earnings for a five-year
period beginning in 1997.

The Complaint alleges violations of sections 11 and 15 of the Securities Act of 1933 (the
“Securities Act”), 15 U.S.C. §§77k and 770. While alleging violations of federal securities law only,
Plaintiff brought the Complaint in state court pursuant to the concurrent jurisdiction provided by 15
U.S.C. §77v(a). On December 18, 2002, Defendants timely removed the action to this Court under the
Securities Litigation Uniform Standards Act of 1998 (“SLUSA”), 15 U.S.C. §§77p(c), 78bb(f(2). On
January 10, 2003, Defendants moved under 28 U.S.C. §1404(a) to transfer venue to the United States
District Court for the Southern District of New York where thirteen other securities class actions, each

arising out of similar events as those alleged in the present case, have been filed and consolidated.” The

*Plaintiff and his counsel filed one of the actions and unsuccessfully sought to be appointed
as lead plaintiff and lead counsel.



UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

JACK NAUHEIM, on behalf of )
himself and all others similarly situated, )
)

Plaintiff, )

)

v. ) Case No. 02-C-9211

)

THE INTERPUBLIC GROUP OF COMPANIES, =)
INC., JOHN J: DOONER, JR., SEAN F. ORR, )
FREDERICK MOLZ, FRANK J. BORELLI, )
REGINALD K. BRACK, JIM M. CONSIDINE, )
JAMES R. HEEKIN, FRANK B. LOWE, )
MICHAEL A. MILES, LEIF H. OLSEN, )
J. PHILLIP SAMPER, and PRICE )
WATERHOUSECOOPERS, LLP, )
)

Defendants. )

MEMORANDUM OPINION AND ORDER
MARVIN E. ASPEN, District Judge:

Lon
4p "Eley

Sams

Presently before us is the motion of Defendants, The Interpublic Group of Companies, Inc.
(“IPG”), PricewaterhouseCoopers, LLP (“PwC”), John J. Dooner, Jr., Sean F. Orr, Frederick Molz,
Frank J. Borelli, Reginald K. Brack, Jim M. Considine, James R. Heekin, Frank B. Lowe, Michael A.
Miles, Leif H. Olson, and J. Phillip Samper (collectively the Defendants”) to transfer venue to the
United States District Court for the Southem District of New York. Also before us is Plaintiff Jack
Nauheim's motion to remand the putative shareholder class action complaint (the “Complaint”) to the
Circuit Court of Cook County, Illinois. For the reasons set forth below, we grant Plaintiffs motion to

remand,'

"In an order dated Friday, March 11, 2003, we consolidated the present action with Bejma v.
The Interpublic Group of Companies, Inc., Case No. 02-C-9212, pursuant to Federal Rule of Civil
Procedure 42(a).

4