Opinion ID: 2618
Heading Depth: 1
Heading Rank: 2

Heading: The Majority's Failed Effort to Deny the Applicability of Section 1332(d)(9)(C).

Text: An odd feature of the majority's opinion is that it explicitly acknowledges the initial premise of the argument just made. That is, the majority writes that the Certificates certainly create `obligations,' and therefore corresponding `rights' in the holders.... [T]he Certificates create rights in the holders to a rate of interest and to principal repayment at certain dates. Opinion at 31. But then the majority takes an idiosyncratic turn: But the present suit does not relate [] to those rights; rather, it is a state-law consumer fraud action alleging that Agway fraudulently concealed its insolvency when it peddled the Certificates. Claims that relate [] to the rights ... and obligations created by or pursuant to a security must be claims ground in the terms of the security itself, the kind of claims that might arise where the interest rate was pegged to a rate set by a bank that later merges into another bank, or where a bond series is discontinued, or where a failure to negotiate replacement credit results in a default on principal. The present claim  that a debt security was fraudulently marketed by an insolvent enterprise  does not enforce the right of the Certificate holders as holders, and therefore it does not fall within § 1332(d)(9)(C).... Id. at 32. Now there are a host of comments that could be made about this passage. For example, the phrase Certificate holders as holders seems to be without sense. Further, one wonders why a suit involving a failure to negotiate replacement credit [which] results in a default on principal would fall within the purview of Section 1332(d)(9)(C), but a suit, such as the present one, involving the fraudulent marketing of debt securities which results in a default on principal, does not. But the most important thing to be said about the passage is that it constitutes a wholly inexplicable departure from the plain text of Section 1332(d)(9)(C). Thus, the majority's recitation of what claims must be in order to fall within the Section 1332(d)(9)(C) is purely its own invention. The terms of the Section itself merely say, without qualification, that claims which relate [] to the rights  another term which is unqualified  of securities holders are exempted from CAFA's scope. I can only conclude that the majority's specifications as to what claims must be in order to qualify for exemption is an act of judicial re-drafting of CAFA. We frequently hear, however, that legislating from the bench is a cardinal sin of the judicial profession. Further, the majority's assertion that this suit is a state-law consumer fraud action is of no moment. If the plaintiffs were challenging a bank merger, or the discontinuance of a bond series, or a failure to negotiate replacement credit, such actions would presumably be brought under state corporate law. But the terms of CAFA simply do not contain any indication that this distinction has any import whatsoever. Under those terms, all that matters is that the suit is one in which securities holders are seeking the enforcement of rights created by, or relating to, the securities they hold. If this condition is met, our inquiry is finished. The majority's attempt to justify its eccentric reading of Section 1332(d)(9)(C) is left to rest upon dubious legislative intent. Specifically, it is noted that the Senate Report relating to the passage of CAFA demonstrate[s] that Congress intended that § 1332(d)(9)(C) ... should be reserved for `disputes over the meaning of the terms of a security,' such as how interest rates are to be calculated, and so on. Opinion at 33 (quoting S. Rep. 109-14, at 45 (2005)). But the majority acknowledges that [t]his Circuit has expressed some skepticism as to the `probative value' of [this] Senate Report because it was issued after CAFA's enactment.... Id. at 32 (quoting Blockbuster, Inc. v. Galeno, 472 F.3d 53, 58 (2d Cir.2006)). The majority appears to believe this skepticism is cured by the views of the Eleventh Circuit. Id. For my part, I believe that the Seventh Circuit fully justifies our skepticism with its observation that the report in question has no more force [as a source of legislative intent] than an opinion poll of legislators  less really, as it speaks for fewer. Thirteen Senators signed this report and five voted not to send the proposal to the floor. Another 82 Senators did not express themselves on the question; likewise 435 Members of the House and one President kept their silence. Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 448 (7th Cir.2005). Far more importantly, the Senate Report's assertion that the scope of Section 1332(d)(9)(C) is limited to suits involving disputes over the terms of securities simply has no relation to the enacted text. As already noted, that text unambiguously exempts from CAFA's reach suits involving claims of rights ... and obligations created by or pursuant to a security and contains not a word suggesting that these terms are limited in the manner asserted by the majority. In such circumstances, the Supreme Court has instructed us that it would be improper for us to consult legislative history as to the meaning of the statutory provision at issue: We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there. When the words of a statute are unambiguous, then, this first canon is also the last: the judicial inquiry is complete. Connecticut Nat. Bank v. Germain, 503 U.S. 249, 253-254, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992) (internal quotation marks omitted). [3]