DocketNumber: Case No. 18-cv-03286-PJH
Citation Numbers: 333 F. Supp. 3d 952
Judges: Hamilton
Filed Date: 8/10/2018
Status: Precedential
Modified Date: 7/25/2022
This is a putative securities class action brought by plaintiff Ryan Coffey against defendants Ripple Labs, Inc. ("Ripple"), XRP II, LLC, a subsidiary of Ripple, and Bradley Garlinghouse, CEO of Ripple. Compl. at 1, ¶ 13. Plaintiff filed this action in the San Francisco Superior Court on May 3, 2018. On June 1, 2018, defendants removed this action pursuant to the Class Action Fairness Act ("CAFA"), under
Plaintiff's motion to remand came on for hearing before this court on August 1, 2018. Plaintiff appeared through his counsel, James Taylor-Copeland. Defendants appeared through their counsel, Peter Morrison. Having read the papers filed by the parties and carefully considered their arguments and the relevant legal authority, and good cause appearing, the court hereby DENIES plaintiff's motion, for the following reasons.
BACKGROUND
In 2013, Ripple created a digital currency called XRP. Compl. ¶ 20. According to the complaint, unlike other cryptocurrencies, such as Bitcoin and Etherium, Ripple fully generated 100 billion XRP prior to its distribution. Compl. ¶¶ 2, 20. As of June *95530, 2015, Ripple held approximately 67.51 billion XRP and all individuals-including Ripple's founders-held 32.49 billion XRP. Compl. ¶ 24.
Plaintiff alleges that in 2013, defendants began selling XRP to the general public and wholesale to larger investors in a "never ending ICO"-initial coin offering. Compl. ¶¶ 22, 26. In an ICO, digital assets are sold to consumers in exchange for legal tender or other cryptocurrencies. Compl. ¶ 3. Plaintiff alleges that "the XRP offered and sold by defendants have all the traditional hallmarks of a security" and in fact is a security within the meaning of Securities Act of 1933 (the "Securities Act") and/or the California Corporations Code. Compl. ¶¶ 100-111, 133, 136, 139, 143. Accordingly, plaintiff contends that defendants "never ending ICO" constituted an unregistered sale of securities in violation of the Securities Act and the California Corporations Code.
On behalf of "all persons or entities who purchased XRP from January 1, 2013 through the present," Compl. ¶ 122, plaintiff asserts four causes of action for: (1) violation of §§ 5 & 12(a)(1) of the Securities Act for the unregistered offer and sale of securities; (2) violation of
DISCUSSION
That said, the present motion and this order address a narrow issue: Whether the presence of Securities Act claims bars a defendant from removing an action pursuant to § 1453 based on state law claims that independently satisfy CAFA's jurisdictional requirements. The court believes that this is an issue of first impression. The parties candidly admit that their research failed to turn up any case directly addressing this question and the court's own research fared no better.
The parties agree that absent plaintiff's Securities Act claims, defendants could properly remove this action under CAFA based on plaintiff's state law claims.
A. Legal Standard
1. Removal, Remand, and the Class Action Fairness Act
The right to remove a case to federal court is entirely a creature of statute. See Libhart v. Santa Monica Dairy Co.,
Under § 1441(a), sometimes referred to the general removal statute, "a defendant generally may invoke federal removal jurisdiction if the case could have been filed in federal court." 16 James Wm. Moore et al., Moore's Federal Practice-Civil § 107.03 (2018). Such removal is usually grounded in either federal question jurisdiction or diversity jurisdiction-an action between citizens of different states that involves an amount in controversy that exceeds $75,000. See id.; see also
Generally. -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.
CAFA "relaxed" the diversity requirements for putative class actions. See Dart Cherokee Basin Operating Co., LLC v. Owens, --- U.S. ----,
In general. -A class action may be removed to a district court of the United States in accordance with section 1446 (except that the 1-year limitation under section 1446(c)(1) shall not apply), without regard to whether any defendant is a citizen of the State in which the action is brought, except that such action may be removed by any defendant without the consent of all defendants.
2. The Securities Act of 1933
The Securities Act's "jurisdictional provision" is codified at Section 22(a). See Cyan, Inc. v. Beaver County Employees Retirement Fund, --- U.S. ----,
(a) 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 77p [§ 16] of this title with respect to covered class actions, of all suits in equity and actions at law brought to enforce any liability or duty created by this subchapter.... Except as provided in 77p(c) [§ 16(c) ], 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.
15 U.S.C. § 77v(a). The first clause states that both state and federal courts have concurrent jurisdiction over non-§ 16 Securities Act claims. See Cyan,
Though the § 16 exceptions factor into the analysis below, the parties agree that § 16 does not apply to this section. Rightly so. Section 16(b) "completely disallows (in both state and federal courts) sizable class actions that are founded on state law and allege dishonest practices respecting" the purchase or sale of a nationally traded security listed on a national stock exchange. Cyan,
B. Analysis
1. Cyan, Kircher, and Luther Do Not Require Remand
Though plaintiff concedes that he could find no case on all fours with the present situation, plaintiff argues that two Supreme Court cases and the Ninth Circuit's decision in Luther v. Countrywide Home Loans Servicing LP,
As an initial matter, the two Supreme Court cases, Kircher v. Putnam Funds Trust,
Luther, on the other hand, addressed both CAFA and § 22(a), and is a closer question. In Luther, the Ninth Circuit considered whether an action that solely alleged Securities Act claims could be removed under CAFA. Luther,
The present situation is dissimilar. Here, plaintiff alleges claims under both California law and the Securities Act. More importantly, defendants did not remove this action based on the Securities Act claim satisfying CAFA's requirements-likely a losing proposition under Luther. Instead, defendants removed this action based on plaintiff's California claims, which independently satisfy CAFA's requirements. Luther says nothing about that situation.
In addition, part of Luther's reasoning has been undermined by the Supreme Court's decision in Dart Cherokee. The Luther court relied on the Ninth Circuit's general rule that "removal statutes are strictly construed against removal," and that "any doubt is resolved against removability." Luther,
2. The Role of Removal Provisions
With no directly applicable authority, the court first turns to reviewing how removal provisions operate generally, outside the context of the disputed statutes. As noted, "[t]he right to remove a case from state to federal court is purely statutory, being dependent on the will of Congress." Wright and Miller, 20 Fed. Prac. & Proc. Deskbook § 40, Scope of the Removal Jurisdiction (2018). That is, a defendant must point to some statute that allows the defendant to deprive the plaintiff of her choice of forum. See
If a defendant is, for example, faced with a claim under the federal Fair Labor Standards Act, the defendant may remove the action under § 1441(a). That is because § 1441(a), subject to its except clause, allows for removal of "any civil action" that the U.S. district courts have original jurisdiction over-such as a claim asserting a violation of a federal statute. See
It is also uncontroversial that the defendants in the above situations may successfully remove the action without satisfying the requirements of other inapplicable removal provisions. That is, a defendant *959removing an action under § 1441(a) based on federal question jurisdiction, defined by § 1331, need not show that diversity jurisdiction, defined by § 1332, also exists. Or, put another way, the federal question plaintiff cannot defeat removal by arguing that the defendant has not complied with § 1441(b) or met § 1332's diversity jurisdiction requirements. Those two sections are inapplicable when removing based on federal question jurisdiction. The converse, of course, is also true. A defendant may remove an action based on diversity jurisdiction even if the action does not present a federal question. Indeed, that is the very purpose of diversity jurisdiction.
The same is true for a foreign state defendant removing a civil action under § 1441(d).
Section 1441 is hardly unique in that regard. The other statutes authorizing removal also operate independently. For example, § 1442(a) and (b) authorize removal of actions against certain federal officers or agencies. Nothing in § 1442 directs a removing defendant to comply with any part of § 1441 and, accordingly, a defendant may remove the action without meeting the diversity, federal question, or foreign state jurisdictional requirements. See, e.g., Leite v. Crane Co.,
It is also worth noting that statutes authorizing removal also appear outside of Title 28. See also, e.g.,
The point being, a defendant may successfully remove an action from state to federal court by pointing to and complying with a statutory basis for removal, not every statutory basis for removal. See, e.g., Mir,
3. Section 1453's Text
With that background, the court turns to § 1453. "As with any question of statutory interpretation, [a court's] analysis begins with the plain language of the statute. [W]hen deciding whether the language is plain, [courts] must read the words in their context and with a view to their place in the overall statutory scheme. If the statutory language is plain, we must enforce the statute according to its terms." Rainero v. Archon Corp.,
It bears repeating, CAFA's removal provision, § 1453(b), states:
In general. -A class action may be removed to a district court of the United States in accordance with section 1446 (except that the 1-year limitation under section 1446(c)(1) shall not apply), without regard to whether any defendant is a citizen of the State in which the action is brought, except that such action may be removed by any defendant without the consent of all defendants.
Put simply, a CAFA-qualifying class action may be removed by any defendant.
Section 1453(d) specifically excepts certain actions from removal under § 1453 :
Exception. -This section shall not apply to any class action that solely involves-
(1) a claim concerning a covered security as defined under section 16(f)(3) of the Securities Act of 1933 ( 15 U.S.C. 78p(f)(3) ) and section 28(f)(5)(E) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78bb(f)(5)(E) );
(2) a claim that relates to the internal affairs or governance of a corporation or other form of business enterprise and arises under or by virtue of the laws of the State in which such corporation or business enterprise is incorporated or organized; or
(3) a claim that relates to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security (as defined under section 2(a)(1) of the Securities Act of 1933 ( 15 U.S.C. 77b(a)(1) ) and the regulations issued thereunder).
That is, if an action "solely" alleges a claim falling into one of the three exceptions, then the action may not be removed under CAFA. Such an action, however, might be removable under some other removal statute. For example, a defendant could remove a state law class action involving a covered security, as defined under § 16(f)(3), pursuant to § 16(c) of the Securities Act, notwithstanding § 1453(d)(1)'s prohibition.
Thus, read as a whole, CAFA's plain language "creates original jurisdiction for and removability of all class actions that meet the minimal requirements and do not fall under one of the limited exceptions."
Because § 1453's plain language is unambiguous, the court need not address CAFA's purpose or legislative history.
*962Those considerations, however, also support the conclusion that defendants properly removed this action. The Supreme Court has explained that CAFA's " 'provisions should be read broadly, with a strong preference that interstate class actions should be heard in a federal court if properly removed by any defendant.' " Dart Cherokee,
In addition, "Congressional sponsors of the bill repeatedly emphasized the breadth of CAFA, while insisting that each exception must be construed narrowly." HarborView,
Despite that notable absence of any reference to antiremoval statutes, plaintiff argues that removal is barred because the above analysis fails to take into account § 22(a)'s removal bar. However, the court declines plaintiff's invitation to essentially read § 1441(a)'s except clause into § 1453 because doing so would contradict the general independence of removal provisions, CAFA's purpose, and render numerous statutory provisions superfluous.
4. Section 1441(a)'s Except Clause Compared to § 1453(d)
Unlike § 1453, § 1441(a) does not enumerate three specific exceptions to its removal purview, but instead broadly states: "Except as otherwise expressly provided by Act of Congress, any civil action [for which original jurisdiction would exist] ... may be removed." That is, unless some other federal statute says otherwise, the action may be removed under § 1441(a) if the district court would have had original jurisdiction. The underlying premise of plaintiff's argument is that a similarly broad exception applies to § 1453. That reading does not comport with the plain language of either statute or the overall statutory scheme.
Both prior to and after CAFA's enactment in 2005, courts have interpreted § 1441(a)'s broad except clause as a reference to antiremoval provisions in other federal statutes. See above at Part B.2. (compiling cases); see also, e.g., Cacioppe v. Superior Holsteins III, Ltd.,
*963Farmers & Merchants Bank v. Hamilton Hotel Partners of Jacksonville Ltd. P'ship,
Despite knowing exactly how to make a removal provision subordinate to antiremoval statutes, Congress chose not to do so for § 1453. Instead, Congress chose to enumerate only three specific exceptions to removal under § 1453. The absence of § 1441(a)'s except clause, or anything even resembling it, weighs heavily against reading such a broad exception into § 1453. See United States v. Providence J. Co.,
Moreover, "[t]he general rule of statutory construction is that the enumeration of specific exclusions from the operation of a statute is an indication that the statute should apply to all cases not specifically excluded." Blausey v. United States Tr.,
Relatedly, § 1453 directly addresses what should occur if plaintiff alleges claims removable under 1453(b) and a claim excepted under § 1453(d) -a possibly more difficult situation than that presented here. In that situation, § 1453 unambiguously allows removal.
The Supreme Court's analysis of § 1441(a)'s except clause provides further support that the clause should not be read into all removal provisions. In Breuer v. Jim's Concrete of Brevard, Inc.,
Those conclusions also bear on the present issue. First, if § 1441(a)'s except clause is to be taken seriously, then it should not be read into every removal statute. But that is just what plaintiff would have the court do. Though § 1453 is entirely silent about § 22(a)-or any other antiremoval provision-plaintiff argues that the court must ensure removal under § 1453 does not violate § 22(a). Far from taking § 1441(a)'s "express exception requirement seriously," that reading renders the except clause entirely superfluous. That is because if antiremoval provisions automatically applied to all removal statutes, regardless of the text of those statutes, § 1441(a) would operate the same way with or without the except clause. See Duncan v. Walker,
Lastly, § 1453(b) itself becomes largely superfluous if it is read to include § 1441(a)'s exception. Section 1332(d)(2), states "district courts have original jurisdiction of any civil action" satisfying the CAFA requirements.
5. Section 1441(c) Compared to § 1453
Both parties argue that this court's decision should be informed by how courts treated § 1441(c) vis-à-vis § 1441(a) before the former's amendment in 1990.
Defendants argue that similar to how § 1453(b) should operate, courts concluded that cases otherwise barred from removal by § 1441(a)'s except clause could nevertheless be removed under pre-1990 § 1441(c). This court agrees. Pre-1990 courts reasoned that subsections (a) and pre-amendment subsection (c) "refer to two completely different situations" with the latter "grant[ing] additional removal jurisdiction in a class of cases which would not otherwise be removable" under the former. Gregg,
Despite that parallel, plaintiff argues that in fact pre-1990 subsection (c) shows that when Congress resolves conflicts between diversity jurisdiction and antiremoval statutes it does so explicitly. That argument, however, begs the question because it assumes antiremoval statutes automatically apply to all removal provisions-an assumption that the above discussion shows lacks merit. And plaintiff has provided no reason to suspect that § 22(a) operates differently than other run-of-the-mill antiremoval provisions.
CONCLUSION
In sum:
[W]hen an anti-removal provision such as Section 22(a) is invoked, the threshold question is whether removal is being effectuated by way of the general removal statute,28 U.S.C. § 1441 (a), or by way of a separate removal provision that "grants additional removal jurisdiction in a class of cases which would not otherwise be removable under the prior grant of authority." If removal is being effectuated through a provision[, like § 1453,] that confers additional removal jurisdiction, and that provision contains no exception for nonremovable federal *966claims, the provision should be given full effect.
WorldCom,
Section 1453 grants defendant an additional, independent basis for removing an action from state to federal court. The parties do not dispute and the court finds that plaintiff's California claims satisfy CAFA's removal requirements. Because § 1453 says nothing about incorporating § 1441(a)'s except clause, or otherwise deferring to antiremoval provisions, § 22(a) does not bar removal of this action. In addition, plaintiff's application of § 22(a) to all removal provisions unnecessarily renders numerous statutory clauses superfluous. Lastly, removal in this situation accords with Congress' " 'overall intent ... to strongly favor the exercise of federal diversity jurisdiction over class actions with interstate ramifications.' " Jordan,
Based on the foregoing, plaintiff's motion to remand is DENIED.
IT IS SO ORDERED.
The court also finds the plaintiff's state law claims meet CAFA's requirements. Plaintiff seeks over $342.8 million in damages on behalf of a worldwide class consisting of "thousands" of members. Compl. ¶¶ 26, 122, 124; Compl. at 29.
Plaintiff also points to Baker v. Dynamic Ledger Solutions, 17-cv-06850-RS, ECF No. 34 (N.D. Cal. April 19, 2018), where the court remanded an action involving both state law and Securities Act claims. That decision does not help plaintiff or assist the court because the Baker defendant removed the action pursuant to § 1441(a), rather than § 1453. As discussed below, two removal statutes treat antiremoval provisions differently.
Section 1441(d) states: "Any civil action brought in a State court against a foreign state as defined in section 1603(a) of this title may be removed by the foreign state to the district court of the United States for the district and division embracing the place where such action is pending...."
In fact, contrary to federal question removal under §§ 1331 & 1441(a), § 16(c) specifically contemplates the removal of state law claims.
Though not relevant here, CAFA's definitional provision, § 1332(d), also directs or allows courts to decline jurisdiction when certain conditions are present.
Though neither party engages on the topic, "district courts [ ] have original jurisdiction of any civil action" qualifying under CAFA.
At the time subsection (c) provided that "an entire case 'may' be removed ... '[w]henever a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise nonremovable claims or causes of action.' " Emrich,
See also Passarella v. Ginn Co.,
The court also notes that reading § 1441(a)'s except clause into the current version of § 1441(c) -a natural extension of plaintiff's overarching argument-renders subsection (c) nonsensical. Under that reading, subsection (c) would provide for the removal of an action with nonremovable claims-e.g., a Securities Act claim-while simultaneously prohibiting removal of that same action.
Because the court denies plaintiff's motion to remand, the court also denies plaintiff's request for attorneys' fees.