Luther v. Countrywide Home Loans ( 2008 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DAVID H. LUTHER, Individually and 
On Behalf of All Others Similarly
Situated,
Plaintiff-Appellee,
v.
COUNTRYWIDE HOME LOANS
SERVICING LP; COUNTRYWIDE HOME
LOANS, INC.; COUNTRYWIDE
SECURITIES CORPORATION; MORGAN
STANLEY & CO., INC.; UBS
SECURITIES LLC; DEUTSCHE BANK No. 08-55865
SECURITIES, INC.; CITIGROUP GLOBAL
D.C. No.
MARKETS INC.; LEHMAN BROTHERS,
INC.; GREENWICH CAPITAL MARKETS,  2:07-cv-08165-
INC.; EDWARD D. JONES & CO., MRP-MAN
L.P.; J.P. MORGAN SECURITIES, INC.; OPINION
CREDIT SUISSE FIRST BOSTON;
GOLDMAN SACHS & CO.; BANC OF
AMERICA SECURITIES, LLC;
BARCLAYS CAPITAL INC.; BEAR
STEARNS AND COMPANY, INC.;
STANFORD L. KURLAND; ERIC P.
SIERACKI; DAVID A SPECTOR; N.
JOSHUA ADLER; JENNIFER S.
SANDEFUR; RANJIT KRIPALANI;
CWALT, INC.,
Defendants-Appellants.

Appeal from the United States District Court
for the Central District of California
Mariana R. Pfaelzer, District Judge, Presiding
9115
9116 LUTHER v. COUNTRYWIDE HOME LOANS
Argued and Submitted
July 14, 2008—Pasadena, California
Filed July 16, 2008
Before: Barry G. Silverman, Johnnie B. Rawlinson, and
Milan D. Smith, Jr., Circuit Judges.
Opinion by Judge Silverman
LUTHER v. COUNTRYWIDE HOME LOANS 9117
COUNSEL
Dean J. Kitchens, Gibson Dunn & Crutcher LLP, Los Ange-
les, California; Brian E. Pastuszenski, Goodwin Procter LLP,
Boston, Massachusetts, for the defendants-appellants.
Joseph D. Daley, Coughlin Stoia Geller Rudman & Robbins
LLP, San Diego, California, for the plaintiff-appellee.
OPINION
SILVERMAN, Circuit Judge:
Section 22(a) of the Securities Act of 1933 creates concur-
rent jurisdiction in state and federal courts over claims arising
9118 LUTHER v. COUNTRYWIDE HOME LOANS
under the Act. It also specifically provides that such claims
brought in state court are not subject to removal to federal
court. We hold today that the Class Action Fairness Act of
2005, which permits in general the removal to federal court
of high-dollar class actions involving diverse parties, does not
supersede § 22(a)’s specific bar against removal of cases aris-
ing under the ’33 Act.
I. Facts
Alleging various violations of the Securities Act of 1933,
David H. Luther filed a class action in Los Angeles County
Superior Court against Countrywide Home Loans Servicing
LP, CWALT, Inc., several of Countrywide’s subsidiaries and
affiliated individuals, multiple alternative loan trusts, and var-
ious underwriters. The action was brought on behalf of all
persons and entities who acquired hundreds of billions of dol-
lars worth of mortgage pass-through certificates from
CWALT, Inc. between January 2005 and June 2007.
Luther alleges that the defendants violated sections 11,
12(a)(2), and 15 of the Securities Act of 1933, 15 U.S.C.
§§ 77k, 77l(a)(2) and 77o, by issuing false and misleading
registration statements and prospectus supplements for the
mortgage pass-through certificates. In particular, Luther
alleges that the risk of the investments was much greater than
represented by the registration statements and prospectus sup-
plements, which omitted and misstated the credit worthiness
of the underlying mortgage borrowers. Luther alleges that the
value of the certificates has substantially declined since many
of the underlying mortgage loans became uncollectible and he
now seeks compensatory damages. The complaint expressly
“excludes and disclaims” allegations of fraud or intentional or
reckless misconduct.
The Countrywide defendants removed the action to federal
court under the Class Action Fairness Act of 2005, Pub. L.
No. 109-2, §§ 4(a) & 5(a), 119 Stat. 4, 9-13 (codified at 28
LUTHER v. COUNTRYWIDE HOME LOANS 9119
U.S.C. §§ 1332(d) & 1453(b)). Once in federal court, Luther
brought a motion to remand the case back to state court under
§ 22(a) of the Securities Act of 1933, 15 U.S.C. § 77v(a),
which prohibits removal of claims filed in state court and aris-
ing under the Act. In opposition to that motion, the Country-
wide defendants argued that the § 22(a) removal bar does not
prevent removal under CAFA and that none of CAFA’s
exceptions applies. The district court granted Luther’s motion
to remand the case to state court, holding that CAFA and
§ 22(a) cannot mutually coexist and that the specific bar
against removal in the Securities Act of 1933 trumps CAFA’s
general grant of diversity and removal jurisdiction.
Generally, a district court’s order remanding a removed
case back to state court is not appealable. See 28 U.S.C.
§ 1447(d). However, permission to appeal can be sought and
granted in certain class action cases. See 28 U.S.C.
§ 1453(c)(2). We granted the Countrywide defendants’ peti-
tion to appeal the district court’s order remanding the case to
state court, and we review de novo. See Lowdermilk v. U.S.
Bank Nat’l Ass’n, 479 F.3d 994, 997 n.3 (9th Cir. 2007).
II. Discussion
[1] The Securities Act of 1933, which imposes liability for
omissions and misstatements in various securities-related
communications, provides concurrent jurisdiction in state and
federal courts over alleged violations of the Act. Pub. L. No.
73-22, ch. 38, § 22(a), 48 Stat. 74, 86-87 (codified at 15
U.S.C. § 77v(a)). However, § 22(a) strictly forbids the
removal of cases brought in state court and asserting claims
under the Act.1 Luther’s class action falls within § 22(a)’s
1
15 U.S.C. § 77v(a) provides in relevant part:
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.
Section 77p(c)’s exception to the removal bar does not apply because it
is limited to cases involving “covered securities.” The parties agree that
the pass-through certificates are not of that type.
9120 LUTHER v. COUNTRYWIDE HOME LOANS
removal bar because it was brought in state court and asserts
only claims arising under the Securities Act of 1933. How-
ever, Countrywide argues that this long-standing bar to
removal was superseded in 2005 by CAFA.
The Class Action Fairness Act of 2005 § 4(a), 28 U.S.C.
§ 1332(d)(2),2 amended the requirements for diversity juris-
diction by granting district courts original jurisdiction over
class actions exceeding $5,000,000 in controversy where at
least one plaintiff is diverse from at least one defendant. In
other words, complete diversity is not required. CAFA also
provided for such class actions to be removable to federal
court. See 28 U.S.C. § 1453(b). CAFA was enacted, in part,
to “restore the intent of the framers of the United States Con-
stitution by providing for Federal court consideration of inter-
state cases of national importance under diversity
jurisdiction.” Pub. L. No. 109-2, § 2(b)(2), 119 Stat. 4, 5 (cod-
ified as a note to 28 U.S.C. § 1711).
In general, removal statutes are strictly construed against
removal. See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S.
100, 108-09 (1941); Gaus v. Miles, Inc., 980 F.2d 564, 566
(9th Cir. 1992). A defendant seeking removal has the burden
to establish that removal is proper and any doubt is resolved
2
28 U.S.C. § 1332(d)(2) provides:
The district courts shall have original jurisdiction of any civil
action in which the matter in controversy exceeds the sum or
value of $5,000,000, exclusive of interest and costs, and is a class
action in which—
(A) any member of a class of plaintiffs is a citizen of a
State different from any defendant;
(B) any member of a class of plaintiffs is a foreign state or
a citizen or subject of a foreign state and any defendant is a
citizen of a State; or
(C) any member of a class of plaintiffs is a citizen of a
State and any defendant is a foreign state or a citizen or sub-
ject of a foreign state.
LUTHER v. COUNTRYWIDE HOME LOANS 9121
against removability. Gaus, 980 F.2d at 566. However, a
plaintiff seeking remand has the burden to prove that an
express exception to removal exists. See Breuer v. Jim’s Con-
crete of Brevard, Inc., 538 U.S. 691, 698 (2003); Serrano v.
180 Connect, Inc., 478 F.3d 1018, 1023-24 (9th Cir. 2007).
[2] Section 22(a) of the Securities Act of 1933 provides
such an express exception to removal: “Except as provided in
section 77p(c) of this title, no case arising under this subchap-
ter 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). CAFA’s general grant of the right of removal of
high-dollar class actions does not trump § 22(a)’s specific bar
to removal of cases arising under the Securities Act of 1933.
“It is a basic principle of statutory construction that a statute
dealing with a narrow, precise, and specific subject is not sub-
merged by a later enacted statute covering a more generalized
spectrum.” Radzanower v. Touche Ross & Co., 426 U.S. 148,
153 (1976). Here, the Securities Act of 1933 is the more spe-
cific statute; it applies to the narrow subject of securities cases
and § 22(a) more precisely applies only to claims arising
under the Securities Act of 1933. CAFA, on the other hand,
applies to a “generalized spectrum” of class actions. Id.
The defendants put much reliance on Estate of Pew v. Car-
darelli, 527 F.3d 25 (2d Cir. 2008), which held that 28 U.S.C.
§ 1332(d)(9)(C)’s exception to original diversity jurisdiction
under CAFA did not cover an action alleging violations of a
state consumer-fraud statute. We do not find the case to be
controlling. The Pew court did not address the interplay
between CAFA and § 22(a). Because the claim proceeded
under state law rather than the 1933 Act, § 22(a) did not apply
on its terms.
[3] In summary, by virtue of § 22(a) of the Securities Act
of 1933, Luther’s state court class action alleging only viola-
tions of the Securities Act of 1933 was not removable. The
9122 LUTHER v. COUNTRYWIDE HOME LOANS
motion to remand was properly granted.
AFFIRMED.