Robert Brockway v. Evergreen International Trust , 496 F. App'x 357 ( 2012 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 11-1547
ROBERT BROCKWAY, individually and on behalf of all others
similarly situated,
Plaintiff - Appellant,
and
CARL KIRCHER, individually and on behalf of all others
similarly situated,
Plaintiff,
v.
EVERGREEN INTERNATIONAL TRUST, a business trust; EVERGREEN
INVESTMENT MANAGEMENT COMPANY, LLC,
Defendants – Appellees,
and
PUTNAM FUNDS TRUST, a business trust; PUTNAM INVESTMENT
MANAGEMENT, LLC,
Defendants.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. J. Frederick Motz, Senior District
Judge. (1:10-cv-01887-JFM; 1:04-md-15863-JFM)
Argued: September 20, 2012 Decided: November 9, 2012
Before SHEDD and DUNCAN, Circuit Judges, and Timothy M. CAIN,
United States District Judge for the District of South Carolina
sitting by designation.
Affirmed by unpublished opinion. Judge Cain wrote the opinion,
in which Judge Shedd and Judge Duncan joined.
ARGUED: Klint Bruno, KOREIN TILLERY LLC, Chicago, Illinois, for
Appellant. Nicholas George Terris, K&L GATES, LLP, Washington,
D.C., for Appellees. ON BRIEF: Robert L. King, KOREIN TILLERY
LLC, St. Louis, Missouri, for Appellant. Jeffrey B. Maletta,
Amy J. Eldridge, K&L GATES, LLP, Washington, D.C., for Appellee
Evergreen Investment Management Company, LLC; Laura Steinberg,
SULLIVAN & WORCESTER LLP, Boston, Massachusetts, for Appellee
Evergreen International Trust.
Unpublished opinions are not binding precedent in this circuit.
2
CAIN, District Judge:
Plaintiff-Appellant Robert Brockway (“Appellant”) appeals
the district court’s order administratively closing and
terminating with prejudice this action. For the reasons below,
we affirm the district court’s order.
I.
As the district court aptly stated, “The procedural history
of this case, which has been pending for over seven years, is a
long and tortured one.” In September 2003, Appellant and former
co-Plaintiff Carl Kircher filed this action in Illinois state
court against former defendants Putnam Funds Trust and Putnam
Investment Management, LLC, (“Putnam Defendants”) and
Defendants-Appellees Evergreen International Trust and Evergreen
Investment Management Company, LLC (“Evergreen Defendants”), a
mutual fund and the fund’s investment adviser, for their failure
to prevent other investors from engaging in a short-term trading
strategy known as “market timing.” 1
Market timing is a trading strategy that exploits time
delay in mutual funds' daily valuation system. The
price for buying or selling shares of a mutual fund is
ordinarily determined by the next net asset value
1
Kircher brought claims only against the Putnam Defendants
and Appellant brought claims against only the Evergreen
Defendants. The Putnam Defendants and Evergreen Defendants are
collectively referred to as “Defendants” in the procedural
history of this case.
3
(NAV) calculation after the order is placed. The NAV
calculation usually happens once a day, at the close
of the major U.S. markets. Because of certain time
delays, however, the values used in these calculations
do not always accurately reflect the true value of the
underlying assets. For example, a fund may value its
foreign securities based on the price at the close of
the foreign market, which may have occurred several
hours before the calculation. But events might have
taken place after the close of the foreign market that
could be expected to affect their price. If the event
were expected to increase the price of the foreign
securities, a market-timing investor could buy shares
of a mutual fund at the artificially low NAV and sell
the next day when the NAV corrects itself upward.
Janus Capital Group, Inc. v. First Derivative Traders,
131 S.Ct. 2296, 2300 n.1 (2011).
Defendants timely removed the case to federal court on the
ground that the Securities Litigation Uniform Standards Act
(“SLUSA”) precluded the claims alleged in the complaint, but the
district court remanded the action to state court. 2 Defendants
appealed and the Seventh Circuit Court of Appeals reversed the
remand order. Kircher v. Putnam Funds Trust, 403 F.3d 478 (7th
Cir. 2005). The Supreme Court granted certiorari, and in June
2006, vacated the Seventh Circuit’s decision, holding that the
appellate court lacked jurisdiction over the appeal, and
2
The SLUSA preclusion provision, codified at 15 U.S.C. §
78bb(f)(1)(A), states: “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 a misrepresentation or omission of a material fact in
connection with the purchase or sale of a covered security.” 15
U.S.C. § 78bb(f)(1)(A).
4
remanded with instructions to dismiss the appeal. Kircher v.
Putnam Funds Trust, 547 U.S. 633 (2006). On October 16, 2006,
the Seventh Circuit dismissed the appeal and remanded the case
back to state court. In re Mut. Fund Market-Timing Litigation,
468 F.3d 439 (7th Cir. 2006).
On November 14, 2006, Defendants removed the case for a
second time under the same SLUSA provision. While the mandate by
the Seventh Circuit Court of Appeals was issued on November 14,
2006, an order remanding the case to state court was not filed
until November 30, 2006. Therefore, on December 6, 2006, “to
ensure that there is no doubt” that this action was removed,
Defendants filed a third notice of removal, asserting the same
removal grounds as the one filed on November 14, 2006.
Defendants argued that the Supreme Court’s decision in Merrill
Lynch, Pierce, Fenner, & Smith, Inc., v. Dabit, 574 U.S. 71(2006), had changed the law, making removal permissible. In
July 2007, the district court disagreed and found the removal
untimely and remanded the case to state court. Kircher v. Putnam
Funds Trust, Nos. 06-cv-939 and 06-cv-1001 (S.D. Ill. July 17,
2007).
Defendants then moved for judgment on the pleadings on the
ground that SLUSA precluded Appellant’s claims. On December 20,
2007, the state court denied this motion and Defendants
appealed. On January 6, 2010, the Illinois Court of Appeals
5
reversed, finding that SLUSA precluded Appellant’s claims, and
directing the state circuit court to dismiss the action. Kircher
v. Putnam Funds Trust, 922 N.E.2d 1164 (Ill. App. Ct. 2010). The
appellate court issued the mandate on March 30, 2010, and on
April 5, 2010, the state circuit court dismissed the action with
prejudice.
On April 15, 2010, Appellant moved to modify the order to
provide that the dismissal was without prejudice and also
requested leave to file an amended complaint. On April 29, 2010,
prior to the state circuit court ruling on these motions,
Defendants removed the action to the United States District
Court for the Southern District of Illinois pursuant to 42
U.S.C. § 1446. 3 On May 17, 2010, Appellant filed a motion to
remand on the ground that the removal was untimely.
On July 14, 2010, before the district court ruled on the
remand motion, the Judicial Panel on Multidistrict Litigation
transferred the case to the United States District Court for the
3
Section 1446(c) provides that
if the case stated by the initial pleading is not
removable, a notice of removal may be filed within 30
days after receipt by the defendant, through service
or otherwise, of a copy of an amended pleading,
motion, order or other paper from which it may first
be ascertained that the case is one which is or has
become removable.
28 U.S.C. § 1446.
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District of Maryland. On November 15, 2010, the district court
approved a class settlement which settled Kircher’s claims
against the Putnam Defendants. Evergreen Defendants then filed a
motion to administratively close the case. Appellant opposed the
motion on the ground that it was premature because his motions
to remand the case to state court, to modify the state court’s
dismissal order, and for leave to file an amended complaint were
still pending.
On April 20, 2011, the district court denied Appellant’s
motions to remand to state court and for leave to file an
amended complaint and then granted Evergreen Defendants’ motion
to administratively close and terminate with prejudice the case.
In regard to the remand, the district court found that the
removal was timely, based upon Defendants’ removal of the action
within thirty days of the mandate being issued. Further, the
district court found that Appellant had waived his right to seek
remand by participating in the multidistrict litigation.
Finally, the district court denied Appellant’s motion to file an
amended complaint, finding it futile.
II.
On appeal, Appellant contends that the district court erred
in denying his motion to remand to state court. Specifically,
Appellant contends that the district court erred in finding the
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removal timely and that he had waived his right to seek a
remand.
III.
A.
We review de novo the denial of a motion to remand to state
court. Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 815-16 (4th
Cir. 2004) (en banc). Furthermore, we may affirm on any grounds
apparent on the record. United States v. Smith, 395 F.3d 516,
519 (4th Cir. 2005).
B.
While Appellant contends that the removal was untimely, in
this case, we need not decide whether the removal was improper.
“[E]ven if remand would have been proper, once an improperly
removed case has proceeded to final judgment in federal court
that judgment should not be disturbed so long as the federal
court had jurisdiction over the claim at the time it rendered
its decision.” Aqualon Co. v. Mac Equip. Inc., 149 F.3d 262, 264
(4th Cir. 1998); see also Caterpillar Inc. v. Lewis, 519 U.S.
61, 77 (1996) (“To wipe out the adjudication postjudgment, and
return to state court a case now satisfying all federal
jurisdictional requirements, would impose an exorbitant cost on
our dual court system, a cost incompatible with the fair and
unprotracted administration of justice.”).
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Here, while Appellant specifically acknowledges that SLUSA
bars the original complaint in state court, he contends that the
original complaint was no longer operative based upon the state
court’s order of dismissal and, therefore, the district court
lacked subject matter jurisdiction. 4 Although the state court had
dismissed the case prior to removal, the state court still had
the authority to modify, amend, or vacate the dismissal order
and, in fact, prior to removal, Appellant had filed motions to
modify the dismissal order and amend the original complaint. At
the time of removal, therefore, the original complaint remained
the operative complaint and the case was removable based upon
Appellant’s claims set forth in the original complaint, which
were precluded by SLUSA. 5 Further, because the district court
possessed subject matter jurisdiction pursuant to SLUSA at the
4
Appellant did not cite to any authority to support this
proposition.
5
SLUSA precludes class action claims based upon state law
in any state or federal court by any private party alleging “a
misrepresentation or omission of a material fact in connection
with the purchase or sale of a covered security.” 15 U.S.C. §
78bb(f)(1)(A). In Dabit, the Supreme Court held that SLUSA's
operative language must be read broadly and includes not only
purchasers and sellers of securities, but also holders of
securities. 547 U.S. at 85. Accordingly, under Dabit, the
market timing claims of Appellant, who is a holder of
securities, are included in those class actions claims precluded
by SLUSA. Moreover, as noted above, Appellant does not contest
that the claims he raises in the operative complaint are
precluded by SLUSA. (Appellee’s Reply Br. at 1).
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time final judgment was entered, we will not disturb the
district court’s order denying Appellant’s motion to remand.
Aqualon, 149 F.3d 262. 6
IV.
For the foregoing reasons, the district court’s order is
AFFIRMED.
6
In light of the disposition of this case, we deny
Appellees’ motion to file a supplemental brief.
10