Pew v. Cardarelli, No. 06-5703 (2d Cir. 2008)

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06-5703-mv Pew v. Cardarelli 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2006 (Argued: April 24, 2007 Decided: May 13, 2008) Docket No. 06-5703-mv - - - - - - - - - - - - - - - - - - - - -x ESTATE OF BARBARA PEW (DECEASED), JOHN PEW, JR., INDIVIDUALLY AND AS EXECUTOR OF THE ESTATE OF BARBARA E. PEW, HAROLD PEW, DONNA PEW, H. NANCY HANN, JULIA HUDASKY and KATHLEEN PRICKETT, on behalf of themselves and all others similarly situated, Plaintiffs-Respondents, - v.DONALD P. CARDARELLI, PETER J. O NEILL and PRICEWATERHOUSECOOPERS LLP, Defendants-Petitioners. - - - - - - - - - - - - - - - - - - - - -x Before: JACOBS, Chief Judge, KEARSE and POOLER, Circuit Judges. Judge Pooler dissents in a separate opinion. On this petition for leave to appeal an order of the United States District Court for the Northern District of 1 New York (Mordue, C.J.), which granted plaintiffs motion to 2 remand this action to New York State Supreme Court, we 3 conclude that the action falls within the grant of federal 4 jurisdiction in the Class Action Fairness Act. 5 Consequently, we have authority to accept jurisdiction to 6 review the district court s order. 7 jurisdiction and, on the merits, we reverse the remand 8 order. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 For Plaintiffs-Respondents We elect to exercise ROBERT I. HARWOOD (James Flynn, on the brief), Wechsler Harwood LLP, New York, NY. HAROLD G. COHEN, Dilworth Paxson LLP, Cherry Hill, NJ. STUART SAVETT (James J. Rodgers, on the brief), Dilworth Paxson LLP, Philadelphia, PA. DAVID M. GARBER, Mackenzie Hughes LLP, Syracuse, NY. For Defendants-Petitioners PHILIP D. ANKER (Peter K. Vigeland, Matthew M. Graves, on the brief), Wilmer Cutler Pickering Hale and Dorr LLP, New York, NY. JAMES J. CAPRA, JR. (Matthew L. Craner, Alison F. Swap, on the brief), Orrick, Herrington & Sutcliffe LLP, New York, NY. DENNIS JACOBS, Chief Judge: 2 1 This case construes certain provisions of the Class 2 Action Fairness Act of 2005 ( CAFA ), Pub. L. No. 109-2, 119 3 Stat. 4 (codified in scattered sections of Title 28, United 4 States Code). 5 forum for securities cases that have national impact, 6 without impairing the ability of state courts to decide 7 cases of chiefly local import or cases that concern 8 traditional state regulation of the state s corporate 9 creatures. One purpose of CAFA is to provide a federal CAFA does that by expanding federal diversity 10 jurisdiction, by allowing removal of securities cases of 11 national impact from the state courts, and by conferring 12 appellate jurisdiction to review orders granting or denying 13 motions to remand such removed cases. 14 This putative class action was commenced in New York 15 State Supreme Court, and was removed to the United States 16 District Court for the Northern District of New York 17 (Mordue, C.J.). 18 issuer -abetted by the issuer s auditor -failed to disclose, 19 while marketing certain debt certificates, that the issuer 20 was insolvent. 21 consumer fraud statute. 22 is whether such a claim falls within an exception to CAFA s The action alleges that officers of an Plaintiffs seek relief under New York s The main question for this appeal 3 1 grant of original and appellate jurisdiction--for class 2 actions that solely involve claims that relate[] to the 3 rights, duties (including fiduciary duties), and obligations 4 relating to or created by or pursuant to any security. 5 U.S.C. § 1332(d)(9)(C); id. § 1453(d)(3). 6 question of first impression in the circuit courts. 7 28 This is a Although the matter is not entirely clear given the 8 imperfect wording of the statute, we hold that the present 9 suit does not fall within this exception to CAFA Consequently, we have authority to accept an 10 jurisdiction. 11 appeal from the district court s order granting plaintiffs 12 motion to remand this action to the state court. 13 to grant defendants petition for permission to appeal and, 14 on the merits, we reverse the district court s remand order. We elect 15 I 16 17 Agway, Inc., an agricultural supply and marketing 18 cooperative, sought to raise capital by issuing money market 19 certificates ( Certificates ) -unsecured, fixed-interest 20 debt instruments. 21 Certificates, and ended its practice of repurchasing them 22 prior to maturity. Later, Agway suspended sale of the Agway filed for bankruptcy in September 4 1 2002. 2 plaintiffs over these Certificates. 3 This is the second litigation brought by these The 2003 Lawsuit. Plaintiffs, seeking to represent a 4 class of individuals who purchased the Agway Certificates 5 between September 2000 and September 2002, filed a lawsuit 6 in New York Supreme Court against Agway officers Donald P. 7 Cardarelli and Peter J. O Neill, as well as Agway s auditor, 8 PriceWaterhouseCoopers, LLP ( defendants ). 9 was predicated on the federal securities laws -in That complaint 10 particular, § 11(a) of the Securities Act of 1933, 15 U.S.C. 11 § 77k(a) -and it asserted that misrepresentations in Agway s 12 financial statements fraudulently concealed that Agway was 13 insolvent and could only discharge its previous debt through 14 the issuance of new debt instruments. 15 Defendants removed the action to the United States 16 District Court for the Northern District of New York. 17 Plaintiffs then amended the complaint to plead essentially 18 the same acts of concealment under New York s consumer fraud 19 law, which creates a private right of action for victims of 20 [d]eceptive acts or practices in the conduct of any 21 business, trade or commerce or in the furnishing of any 22 service, N.Y. Gen. Bus. Law § 349(a). 5 See id. § 349(h). 1 As to the federal securities claim, Judge Mordue 2 granted defendants motion to dismiss with prejudice. 3 Pew v. Cardarelli, No. 5:03-cv-742, 2005 WL 3817472, at *7 4 (N.D.N.Y. Mar. 17, 2005). 5 supplemental jurisdiction over plaintiffs state law claim, 6 dismissing without prejudice. 7 summary order, ruling that no reasonable investor could 8 have been misled about the nature and extent of the risks 9 associated with investing in Agway Certificates. See Judge Mordue declined to exercise Id. at *16. We affirmed by Pew v. 10 Cardarelli, 164 Fed. App x 41, 44 (2d Cir. 2006) (summary 11 order). 12 The 2005 Lawsuit. The present lawsuit, filed in New 13 York Supreme Court, makes essentially the same factual 14 allegations, but seeks relief only under the state consumer 15 fraud statute, N.Y. Gen. Bus. Law § 349. 16 the action to federal court under CAFA, which in some 17 circumstances permits removal of class actions based wholly 18 on state law. 19 court, arguing that their suit falls within an exception to 20 CAFA s removal provision for actions that relate[] to the 21 rights, duties (including fiduciary duties), and obligations 22 relating to or created by or pursuant to any security, and Defendants removed Plaintiffs moved to remand the case to state 6 1 that the district court therefore lacks jurisdiction over 2 it, 28 U.S.C. § 1332(d)(9)(C), and cannot accede to removal, 3 id. § 1453(d)(3). 4 Estate of Pew v. Cardarelli, No. 5:05-cv-1317, 2006 WL 5 3524488 (N.D.N.Y. Dec. 6, 2006). 6 Chief Judge Mordue agreed, and remanded. Defendants filed the present petition pursuant to 28 7 U.S.C. § 1453(c), seeking permission to appeal the district 8 court s remand order. 9 to grant defendants motion for leave to appeal, we might 10 We advised the parties that were we also elect to decide the merits simultaneously. 11 II 12 13 CAFA requires that any petition for review of an order 14 granting or denying a motion to remand be made to the court 15 of appeals not less than 7 days after entry of the order. 16 28 U.S.C. § 1453(c)(1) (emphasis added). 17 Circuit concluded, this is surely a typographical error, 18 because the uncontested legislative intent behind § 1453(c) 19 was to impose a seven-day deadline for appeals, not a 20 waiting period. 21 2006) (emphasis added). 22 interpreting the statute to mean not more than 7 days. As the Third Morgan v. Gay, 466 F.3d 276, 277 (3d Cir. We join our sister circuits in 7 1 Id.; see also Miedema v. Maytag Corp., 450 F.3d 1322, 1326 2 (11th Cir. 2006) (reaching same interpretation); Amalg. 3 Transit Union Local 1309 v. Laidlaw Transit Servs., Inc., 4 435 F.3d 1140, 1146 (9th Cir. 2006) (same); Pritchett v. 5 Office Depot, Inc., 420 F.3d 1090, 1093 n.2 (10th Cir. 2005) 6 (same). 7 on the seventh business day after the entry of the district 8 court s order. Defendants petition is timely because it was filed 9 III 10 11 Ordinarily, an order of remand is unappealable. See 28 12 U.S.C. § 1447(d). Plaintiffs argue that we lack 13 jurisdiction to decide the present appeal because defendants 14 failed to make a timely application to the district court to 15 stay its order of remand. 16 of appeal on a timely filing, without mention of a stay. 17 See 28 U.S.C. § 1453(c)(1). 18 granting the federal courts of appeals jurisdiction to 19 review remand orders notwithstanding section 1447(d), 20 Congress did not require a defendant to seek a stay. 21 1453(c)(1). Section 1453 conditions the right We therefore hold that in 22 8 Id. § IV 1 2 Plaintiffs contend that we lack appellate jurisdiction 3 to review the order of remand, by virtue of 28 U.S.C. § 4 1453(d)(3). 5 As always, we have jurisdiction to determine our 6 jurisdiction. 7 2001). 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 See Kuhali v. Reno, 266 F.3d 93, 100 (2d Cir. Section 1453 provides, in pertinent part: (b) In general. -A class action may be removed to a district court of the United States . . . without regard to whether any defendant is a citizen of the State in which the action is brought . . . . (c) Review of remand orders. (1) In general. -Section 1447 shall apply to any removal of a case under this section, except that notwithstanding section 1447(d), a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals not less than 7 days after entry of the order. (2) Time period for judgment. -If the court of appeals accepts an appeal under paragraph (1), the court shall complete all action on such appeal, including rendering judgment, not later than 60 days after the date on which such appeal was filed . . . . (d) Exception. -This section shall not apply to any class action that solely involves . . . 9 (3) a claim that relates to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security . . . . 1 2 3 4 5 6 As explained in detail infra, § 1453(d)(3) mirrors § 7 1332(d)(9)(C), which provides an exception to CAFA s grant 8 of original federal jurisdiction. 9 Subsection (b) permits defendants (who are New York 10 residents) to remove the action from New York Supreme Court. 11 Subsection (c) gives defendants the right to petition this 12 Court for an appeal of the district court s remand order. 13 Compare 28 U.S.C. § 1447(d) ( An order remanding a case to 14 the State court from which it was removed is not reviewable 15 on appeal or otherwise . . . . ). 16 The plain language of subsection (d) ( This section 17 shall not apply . . . . (emphasis added)) limits all of § 18 1453, including subsection (c), which delineates the scope 19 of our authority to accept an appeal from a remand order. 20 Therefore, § 1453(d) limits our jurisdiction to review the 21 district court s remand order.1 1 It may seem odd that Congress would confine appellate jurisdiction to review a remand order to precisely the same boundaries used to limit the district court s original jurisdiction; but the § 1453(d) exceptions are not the only exceptions to CAFA s expansion of federal jurisdiction--and the other exceptions do not purport to double as limitations 10 1 Within our bounded appellate jurisdiction we 2 nevertheless retain discretion to decline to hear such 3 appeals. 4 may accept an appeal from an order of a district court 5 granting or denying a motion to remand . . . . 6 1453(c)(1) (emphasis added). 7 will be guided by consideration of the importance and 8 novelty of the issues raised by the case. 9 v. FedEx Ground Package Sys. Inc., 457 F.3d 675, 678 (7th 10 Cir. 2006) (exercising discretion to accept an appeal to 11 address [an] important question under CAFA). 12 elect to entertain defendants appeal because the question 13 of whether a state-law deceptive practices claim predicated 14 on the sale of a security is removable under CAFA is 15 important and consequential, and a decision of the question 16 will alleviate uncertainty in the district courts. 17 18 Section 1453(c) provides that a court of appeals 28 U.S.C. § A sound exercise of discretion See, e.g., Hart Here, we Lastly, because we grant defendants petition for leave to appeal, see infra, we also elect to decide the merits of on appellate jurisdiction. See, e.g., 28 U.S.C. § 1332(d)(5)(A) (excepting from CAFA s grant of original jurisdiction any class action in which the primary defendants are States, State officials, or other governmental entities against whom the district court may be foreclosed from ordering relief ). 11 1 the appeal simultaneously. This approach finds support in 2 the caselaw, see, e.g., Wallace v. La. Citizens Prop. Ins. 3 Corp., 444 F.3d 697, 701 n.5 (5th Cir. 2006) ( Although this 4 case comes to us as a petition to accept the appeal, the 5 parties sufficiently address the basis for the underlying 6 appeal, thus allowing us to rule on the merits. ), and it is 7 permitted by the Federal Rules of Appellate Procedure, see 8 Fed. R. App. P. 2. 9 the motion for leave to appeal, and decide the merits later. 10 That course would be inefficient because in order to decide 11 whether we have appellate jurisdiction we must construe the 12 same statutory language upon which the district court rested 13 its remand order (and because the parties have already 14 briefed their positions on that virtually identical 15 statute). 16 Court has only 60 days to render a decision. 17 Doral Dental IPA of N.Y., LLC, 469 F.3d 271, 275 (2d Cir. 18 2006) ( CAFA s 60-day clock for rendering judgment starts 19 running on the day that the Court s order granting 20 permission to appeal is filed. ). 21 we elect to decide the merits of the appeal now. Plaintiffs urge us to decide now only Moreover, once leave to appeal is granted, the 22 12 See DiTolla v. Rather than spin wheels, V 1 2 To determine whether the district court properly 3 remanded to state court (and whether we lack appellate 4 jurisdiction under § 1453(c)), we must consider an exception 5 to CAFA s grant of original federal jurisdiction, for any 6 class action that solely involves a claim . . . that relates 7 to the rights, duties (including fiduciary duties), and 8 obligations relating to or created by or pursuant to any 9 security. 28 U.S.C. § 1332(d)(9)(C). If plaintiffs 10 state-law consumer fraud claim falls within this exception, 11 the district court lacks jurisdiction and properly remanded 12 the case to state court (and we lack appellate jurisdiction 13 to review that determination). 14 We first look to the statute s plain meaning; if the 15 language is unambiguous, we will not look farther. 16 Connecticut Nat l Bank v. Germain, 503 U.S. 249, 253-54 17 (1992). 18 makes it ambiguous, we read the wording, consider the 19 statutory context, and consult the legislative history. 20 we conclude that all modes of analysis agree. 21 22 See Here, because the imperfect drafting of the statute CAFA amends the diversity jurisdiction statute by adding § 1332(d), which confers original federal 13 And 1 jurisdiction over any class action with minimal diversity 2 (e.g., where at least one plaintiff and one defendant are 3 citizens of different states) and an aggregate amount in 4 controversy of at least $5 million (exclusive of interest 5 and costs). 6 purely local matters and issues of particular state concern 7 in the state courts, Lowery v. Alabama Power Co., 483 F.3d 8 1184, 1194 (11th Cir. 2007), Congress excluded from CAFA s 9 expanded jurisdiction (inter alia) certain securities- See 28 U.S.C. § 1332(d)(2). However, to keep 10 related class actions, described in three subsections (set 11 out in the margin). 2 2 Subsection (A) of § 1332(d)(9) carves Section 1332(d)(9) provides: Paragraph (2) [granting district courts original jurisdiction over such class actions] shall not apply to any class action that solely involves a claim (A) concerning a covered security as defined under 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)); (B) that relates to the internal affairs or governance of a corporation or other form of business enterprise and that arises under or by virtue of the laws of the State in which such corporation or business enterprise is incorporated or organized; or (C) that relates to the rights, duties (including fiduciary duties), and obligations relating to or 14 1 out class actions for which jurisdiction exists elsewhere 2 under federal law, such as under the Securities Litigation 3 Uniform Standards Act ( SLUSA ), i.e., state-law fraud 4 claims in connection with the purchase or sale of securities 5 traded on a national stock exchange, see 15 U.S.C. § 6 78bb(f); § 77r(b)(1)). 7 carves out class actions that are within the states purview 8 of corporate law and governance. 9 exception to federal jurisdiction in subsection (A) of § Subsection (B) of § 1332(d)(9) It is undisputed that the 10 1332(d)(9) is inapplicable here because the Certificates are 11 not traded nationally, nor are they listed on any national 12 securities exchange. 13 1332(d)(9) is inapplicable because plaintiffs claims do not 14 concern corporate governance. 15 16 17 18 19 20 21 Likewise, subsection (B) of § The bone of contention is subsection (C) of § 1332(d)(9), which carves out any class action 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 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). 15 1 2 3 4 Act of 1933) and the regulations issued thereunder). As explained supra, the same wording is used in § 5 1453(d)(3), which provides an exception to defendants power 6 to remove an action, see 28 U.S.C. § 1453(b), and an 7 exception to our jurisdiction to review a district court s 8 remand order, see id. § 1453(c). 9 and removal provisions operate in tandem. Thus CAFA s jurisdictional If there is 10 original jurisdiction for plaintiffs underlying claim, we 11 have appellate jurisdiction, we reverse the remand order, 12 and this action remains in federal district court. 13 district court lacked jurisdiction over the underlying 14 claim, we would dismiss the appeal for lack of appellate 15 jurisdiction, the remand order would stand, and the action 16 would be consigned to state court. 17 original and appellate jurisdiction depend on whether 18 plaintiffs allegations fall within CAFA s exception for 19 claims that relate to rights, duties and obligations related 20 to or created by or pursuant to a security. If the Accordingly, both 21 To aid analysis, it is useful to break down the wording 22 of § 1332(d)(9)(C) and § 1453(d)(3) into numbered phrases as 23 24 25 follows: [i] [Section 1332(d)(2) and section 1453(b) and 16 1 2 3 4 5 6 7 8 9 10 11 (c)] shall not apply to any class action that solely involves a claim . . . that relates to [ii] the rights, duties (including fiduciary duties), and obligations [iii] relating to or created by or pursuant to [iv] any security . . . . The sentence as a whole cannot be read to cover any and 12 all claims that relate to any security, because that would 13 afford no meaning to [ii] and [iii], which are evidently 14 terms of limitation. 15 and obligations (those that relate to, are created by or 16 arise pursuant to a security), what are those rights, duties 17 and obligations? 18 If the limitation is to rights, duties The statute gives clues as to the import of each term. 19 The word duties expressly includes fiduciary duties, 20 which reinforces the common understanding that duties are 21 owed by persons (whether human or artificial). 22 Obligations can be owed by persons or by instruments, but 23 the natural reading of this statutory language is to 24 differentiate obligations from duties by reading obligations 25 to be those created in instruments, such as a certificate of 26 incorporation, an indenture, a note, or some other corporate 27 document. And certain duties and obligations of course 17 1 relate to securities even though they are not rooted in a 2 corporate document but are instead superimposed by a state s 3 corporation law or common law on the relationships 4 underlying that document. 5 of the security-holders (or their trustees or agents) to 6 whom these duties and obligations run. 7 that creates an obligation generates a corresponding right 8 in the holder. 9 Finally, the rights are those Thus, an instrument Plaintiffs argue (and the dissent essentially agrees) 10 that the term rights . . . relating to . . . any security 11 includes the right to bring any cause of action that relates 12 to a security. 13 was intended by the use of the term. 14 interpretation would render superfluous § 1332(d)(9)(A) 15 (excepting class actions concerning a covered security ) 16 and § 1453(d)(1) (same), because all covered securities 17 are (of course) securities. 18 (excepting suits relating to rights, duties and obligations 19 relating to or created by or pursuant to any security ). But this would defeat any limitation that Moreover, this See 28 U.S.C. § 1332(d)(9)(C) 20 The Agway Certificates -which the parties agree are 21 securities under CAFA -certainly create obligations, and 22 therefore corresponding rights in the holders. 18 For 1 example, the Certificates create rights in the holders to a 2 rate of interest and to principal repayment at certain 3 dates. 4 rights; rather, it is a state-law consumer fraud action 5 alleging that Agway fraudulently concealed its insolvency 6 when it peddled the Certificates. 7 the rights . . . and obligations created by or pursuant 8 to a security must be claims grounded in the terms of the 9 security itself, the kind of claims that might arise where 10 the interest rate was pegged to a rate set by a bank that 11 later merges into another bank, or where a bond series is 12 discontinued, or where a failure to negotiate replacement 13 credit results in a default on principal. 14 claim -that a debt security was fraudulently marketed by an 15 insolvent enterprise -does not enforce the rights of the 16 Certificate holders as holders, and therefore it does not 17 fall within § 1332(d)(9)(C) and § 1453(d)(3). 18 But the present suit does not relate[] to those Claims that relate[] to The present Our interpretation arguably renders the words relating 19 to superfluous. But forced as we are to construe CAFA s 20 cryptic text, Lowery, 483 F.3d at 1187, we prefer an 21 interpretation that preserves the meaning of an entire 22 subsection. In any event, the words relating to are 19 1 repetitive and lack any predictable or precise effect. 2 28 U.S.C. § 1332(d)(9)(C) (excepting from federal 3 jurisdiction any class action solely involving a claim that 4 relates to the rights, duties (including fiduciary duties), 5 and obligations relating to or created by or pursuant to any 6 security ) (emphases added). 7 See Interpretation of a word or phrase depends upon 8 reading the whole statutory text[ and] considering the 9 purpose and context of the statute . . . . Dolan v. U.S. 10 Postal Serv., 546 U.S. 481, 486 (2006). 11 CAFA confirms an overall design to assure that the federal 12 courts are available for all securities cases that have 13 national impact (including those that involve securities 14 traded on national exchanges), without impairing the ability 15 of state courts to decide cases of chiefly local import or 16 that concern traditional state regulation of the state s 17 corporate creatures: 18 ¢ Review of SLUSA and Thus, although SLUSA bars state-law class actions 19 from all courts if the class alleges a fraudulent 20 statement or omission or manipulative device in 21 connection with the purchase or sale of a security 22 traded on a national exchange, see 15 U.S.C. § 20 1 77p(b), it carves out an exception for actions 2 that are based on the law of the state in which 3 the issuer is incorporated or organized and that 4 concern transactions with or communications to 5 persons who already hold the securities of the 6 issuer, see id. § 77p(d)(1)(A)-(B), thereby 7 creating concurrent jurisdiction in cases that are 8 likely to have both national and local impact. 9 10 ¢ CAFA s amendments to the diversity statute - 11 including its exceptions -proceed along similar 12 lines, granting federal courts jurisdiction over 13 all class actions (with regard to securities and 14 otherwise) over $5 million in the aggregate if the 15 class members are largely out of state, see 28 16 U.S.C. § 1332(d)(3), (4). 17 in context, we infer that diversity jurisdiction 18 is created under CAFA for all large, non-local 19 securities class actions, subject to the three 20 exceptions discussed above. Reading the provisions 21 22 The legislative history confirms our reading of CAFA. 21 1 See S. Rep. No. 109-14, at 45 (2005), reprinted in 2005 2 U.S.C.C.A.N. 3, 42-43. 3 skepticism as to the probative value of the Senate Report 4 because it was issued after CAFA s enactment (by ten days). 5 Blockbuster, Inc. v. Galeno, 472 F.3d 53, 58 (2d Cir. 2006). 6 However, as the Eleventh Circuit has pointed out, the Report 7 was submitted to the Senate on February 3, 200[5] -while 8 that body was [still] considering the bill. 9 F.3d at 1206 n.50 (emphasis added) (citing 151 Cong. Rec. This Circuit has expressed some Lowery, 483 10 S909, 978 (daily ed. Feb. 3, 2005)). 11 appropriate in this case to examine the legislative history 12 of these particularly knotty provisions. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 We therefore think it Certain passages from the Senate Judiciary Committee Report speak directly to the issue here: [T]he Act excepts from . . . [its grant to the district courts of original] jurisdiction those class actions that solely involve claims that relate to matters of corporate governance arising out of state law. . . . By corporate governance litigation, the Committee means only litigation based solely on . . . the rights arising out of the terms of the securities issued by business enterprises. . . . The subsection 1332(d)(9) exemption to new section 1332(d) jurisdiction is also intended to cover disputes over the meaning of the terms of a security, which is generally spelled out in some formative document of the business enterprise, such as a certificate of 22 incorporation or a certificate of designations. 1 2 3 S. Rep. 109-14, at 45 (emphases added). 4 demonstrate that Congress intended that § 1332(d)(9)(C) and 5 § 1453(d)(3) should be reserved for disputes over the 6 meaning of the terms of a security, such as how interest 7 rates are to be calculated, and so on. 8 consistent with our interpretation of § 1332(d)(9)(C) and § 9 1453(d)(3) as applying only to suits that seek to enforce These passages This is entirely 10 the terms of instruments that create and define securities, 11 and to duties imposed on persons who administer securities. 12 13 14 CONCLUSION For the foregoing reasons, we have appellate 15 jurisdiction to review the district court s remand order. 16 Furthermore, we grant defendants leave to appeal, reverse 17 the district court s remand order, and remand the case to 18 the district court for further proceedings. 19 20 21 22 23 23 1 2 POOLER, Circuit Judge, dissenting: The majority opinion misconstrues the plain language of 3 a statute and reaches an incorrect result. 4 believe we are bound by the text of the enactment, I am 5 constrained, respectfully, to dissent. 6 Because I We are called upon in this case to apply certain 7 provisions of the Class Action Fairness Act of 2005 8 ( CAFA ), Pub. L. No. 109-2, 119 Stat. 4 (codified in 9 scattered sections of 28 U.S.C.). There is no dispute that 10 CAFA s general purpose is to significantly expand federal 11 court jurisdiction over multistate class action litigation. 12 As United States District Judge Sarah S. Vance, of the 13 Eastern District of Louisiana, has commented, CAFA 14 represents the largest expansion of federal jurisdiction in 15 recent memory. 16 Action Fairness Act of 2005, 80 Tul. L. Rev. 1617, 1643 17 (2006). 18 expansion of federal jurisdiction over multistate class 19 actions. 20 plain terms, is applicable to the instant case. Sarah S. Vance, A Primer on the Class CAFA, however, contains certain exceptions to the I believe that one of these exceptions, by its 24 By 1 contrast, the majority appears to believe that CAFA contains 2 little in the way of plain terms. 3 the imperfect wording of the statute, Opinion at 4; it is 4 asserted that the imperfect drafting of the statute makes 5 it ambiguous, id. at 13; and that we are forced . . . to 6 construe CAFA s cryptic text, id. at 19 (quoting Lowery 7 v. Alabama Power Co., 483 F.3d 1184, 1187 (11 th Cir. 2007)). 8 But I fear that a reader of the majority s opinion must be 9 forgiven if he or she comes to the conclusion that the That is, we are told of 10 generally opaque quality of CAFA has been merely asserted 11 rather than demonstrated. 12 the specific provision of CAFA that I believe governs this 13 case, I expect that this reader may conclude that the 14 majority has simply departed from the statutory text in 15 favor of a dubious consideration of the supposed legislative 16 intent of the statute s drafters. 17 respectfully, I am compelled to dissent. More importantly, with respect to Accordingly, and 18 19 20 I. The Applicability of 28 U.S.C. Section 1332(d)(9)(C). I agree with the majority that the central issue 25 1 on this appeal is the exception, now codified at 28 U.S.C. 2 Section 1332(d)(9), which states that CAFA s broad grant of 3 federal court jurisdiction over multistate class action 4 litigation shall not apply to any class action that solely 5 involves a claim 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 (A) concerning a covered security as defined under 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)); I agree with the majority that the exemption to federal 30 jurisdiction set forth in 28 U.S.C. Section 1332(d)(9)(A) is 31 not applicable here. (B) that relates to the internal affairs or governance of a corporation or other form of business enterprise and that arises under or by virtue of the laws of the State in which such corporation or business enterprise is incorporated or organized, or (C) 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 provision s reach is expressly 26 1 limited to claims involving covered securit[ies] as defined 2 under 16(f)(3) of the Securities Act of 1933. 3 recognized by the district court, covered securities as 4 defined by the Securities Act are securities that are 5 traded nationally or listed on a regulated national 6 exchange. 7 77p(f)(3); 78bb(f)(5)(E). 8 3524488 at *5 (N.D.N.Y. 2006). 9 either of the parties that the Agway Certificates are traded As See 15 U.S.C. § 77r(b), cited in 15 U.S.C. §§ Pew v. Cardarelli, 2006 WL There is no assertion by 10 nationally, nor that they are they listed on any national 11 securities exchange. 12 I also agree with the majority regarding the 13 inapplicability of Section 1332(d)(9)(B). 14 speaks of suits relating to the internal affairs or 15 governance of the firm against which the suit is brought. 16 The claims asserted by the plaintiffs here only go to the 17 integrity of their investment in the Agway Money Market 18 Certificates ( the Certificates ); they do not seek to alter 19 the course of Agway s management. 20 therefore over the proper construction of the terms of 28 27 That section Our disagreement is 1 2 U.S.C. Section 1332(d)(9)(C). The majority correctly asserts that Section 3 1332(d)(9)(C) cannot be read to cover any and all claims 4 that relate to any security . . . . 5 example, as the defendants argue, if Congress had intended 6 for a standard misrepresentation claim to come within § 7 1332(d)(9)(C), it could have simply provided that the 8 exception applied to any claim relating to a security (or 9 relating to the purchase or sale of a security ). Opinion at 17. For There 10 would have been no need for Congress to add the words that 11 the exception applies only to a claim relating to the 12 rights, duties . . . and obligations relating to or created 13 by or pursuant to any security. Defts. Br. at 12-13 14 (emphasis in original). 15 issue in this case, however, it is readily apparent that the 16 instant suit in fact relates to rights and obligations 17 created by, or at least relating to, those securities. 18 If we examine the securities at The majority correctly identifies the Certificates as 19 unsecured, fixed-interest debt instruments. 20 More specifically, the plaintiffs assert that, by issuing 28 Opinion at 4. 1 the Certificates, Agway undertook the obligation to repay 2 purchasers principal at maturity dates between October 31, 3 1998 and October 31, 2013, and to pay interest until 4 maturity at stated rates between 4.5% and 9.5%. 5 63. 1 6 degenerated into a classic Ponzi scheme which could only 7 meet its ongoing payment obligations to holders of the 8 Certificates through the irresponsible issuance of new 9 Certificates. 10 Complaint ¶ The plaintiffs central allegation is that Agway had Complaint ¶¶ 2, 3. The complaint alleges that 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Agway was insolvent from the beginning of the Class Period, because the value of its assets during that time . . . was insufficient by several hundred million dollars to discharge its Money MarketCertificate-related liabilities, and the only substantial liquid source of funds available to discharge the hundreds of millions of dollars of Money Market Certificates sold and maturing during and after the Class Period was other peoples money from the sale of hundreds of millions of dollars of new Money Market Certificates to plaintiffs and other unsuspecting investors. 1 Citations to the complaint refer to the state court complaint, filed on September 22, 2005, in the Supreme Court of the State of New York for the County of Onondaga. 29 1 2 Complaint ¶ 3 (emphases in original). 3 that Agway fraudulently concealed the fact that it could not 4 meet its unqualified obligations with respect to the 5 Certificates, i.e., that the plaintiffs were fraudulently 6 deprived of their right to repayment of the principle 7 component of their investment: 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Thus, it is alleged [T]he new Money Market Certificates purchased by plaintiffs . . . had no possibility of ever being fully repaid. To the contrary, aside from the money of plaintiffs and other hapless investors, . . . the only possible source for Agway s satisfaction of any portion of the principal amount of the new Money Market Certificates . . . was the dismantling and sale of Agway s most valuable remaining business segments . . . . But these valuable assets would never be available in connection with the more distant maturities of the new Money Market Certificates . . . because the assets would have to be disposed of to meet Agway s presently existing obligations with respect to the hundreds of millions of dollars of previously sold Money Market Certificates maturing during and shortly after the Class Period. Complaint ¶ 5 (emphases in original). In light of these allegations, the applicability of the 30 1 Section 1332(d)(9)(C) exemption appears to me to be obvious. 2 By issuing the Certificates, Agway took on an obligation to 3 pay interest and principle to the purchasers of the 4 Certificates. 5 corresponding right to receive these payments. 6 suit plainly concerns Agway s failure to fulfill its 7 obligations with respect to the Certificates and the 8 plaintiffs consequent deprivation of their rights with 9 respect to the same. These purchasers therefore possessed a The instant If this suit therefore does not solely 10 involve a claim that relates to the rights . . . and 11 obligations relating to or created by or pursuant to the 12 Certificates, I am at a loss to understand why. 2 13 14 15 16 II. 17 explicitly acknowledges the initial premise of the argument The Majority s Failed Effort to Deny the Applicability of Section 1332(d)(9)(C). An odd feature of the majority s opinion is that it 2 Although there are still few cases considering Section 1332(d)(9)(C), I note that one district court has held that the exemption applies in cases involving rights of payment to the holders of debt securities. See Genton v. Vestin Realty Mortg. II, Inc., 2007 WL 951838 at *3 (S.D. Cal. Mar. 9, 2007) ( Plaintiffs . . . claims arise directly from Vestin Realty s alleged failure to pay Plaintiffs their pro rata share as security owners in Vestin as required by the Operating Agreement. ). 31 1 just made. 2 Certificates certainly create obligations, and therefore 3 corresponding rights in the holders. . . . [T]he 4 Certificates create rights in the holders to a rate of 5 interest and to principle repayment at certain dates. 6 Opinion at 18-19. 7 idiosyncratic turn: 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 That is, the majority writes that the But then the majority takes an But the present suit does not relate[] to those rights; rather, it is a statelaw 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 19. 32 1 Now there are a host of comments that could be made 2 about this passage. For example, the phrase Certificate 3 holders as holders seems to be without sense. 4 wonders why a suit involving a failure to negotiate 5 replacement credit [which] results in a default on 6 principal would fall within the purview of Section 7 1332(d)(9)(C), but a suit, such as the present one, 8 involving the fraudulent marketing of debt securities which 9 results in a default on principal, does not. Further, one But the most 10 important thing to be said about the passage is that it 11 constitutes a wholly inexplicable departure from the plain 12 text of Section 1332(d)(9)(C). 13 Thus, the majority s recitation of what claims must 14 be in order to fall within the Section 1332(d)(9)(C) is 15 purely its own invention. 16 merely say, without qualification, that claims which 17 relate[] to the rights another term which is 18 unqualified of securities holders are exempted from CAFA s 19 scope. 20 specifications as to what claims must be in order to The terms of the Section itself I can only conclude that the majority s 33 1 qualify for exemption is an act of judicial re-drafting of 2 CAFA. 3 the bench is a cardinal sin of the judicial profession. 4 We frequently hear, however, that legislating from Further, the majority s assertion that this suit is a 5 state-law consumer fraud action is of no moment. If the 6 plaintiffs were challenging a bank merger, or the 7 discontinuance of a bond series, or a failure to negotiate 8 replacement credit, such actions would presumably be brought 9 under state corporate law. But the terms of CAFA simply do 10 not contain any indication that this distinction has any 11 import whatsoever. 12 that the suit is one in which securities holders are seeking 13 the enforcement of rights created by, or relating to, the 14 securities they hold. 15 is finished. 16 Under those terms, all that matters is If this condition is met, our inquiry The majority s attempt to justify its eccentric reading 17 of Section 1332(d)(9)(C) is left to rest upon dubious 18 legislative intent. 19 Senate Report relating to the passage of CAFA 20 demonstrate[s] that Congress intended that § 1332(d)(9)(C) Specifically, it is noted that the 34 1 . . . should be reserved for disputes over the meaning of 2 the terms of a security, such as how interest rates are to 3 be calculated, and so on. 4 109-14, at 45 (2005)). 5 [t]his Circuit has expressed some skepticism as to the 6 probative value of [this] Senate Report because it was 7 issued after CAFA s enactment . . . . 8 Blockbuster, Inc. v. Galeno, 472 F.3d 53, 58 (2d Cir. 9 2006)). Opinion at 23 (quoting S. Rep. But the majority acknowledges that Id. at 22 (quoting The majority appears to believe this skepticism is 10 cured by the views of the Eleventh Circuit. Id. For my 11 part, I believe that the Seventh Circuit fully justifies our 12 skepticism with its observation that the report in question 13 has no more force [as a source of legislative intent] than 14 an opinion poll of legislators less really, as it speaks 15 for fewer. 16 voted not to send the proposal to the floor. 17 Senators did not express themselves on the question; 18 likewise 435 Members of the House and one President kept 19 their silence. 20 F.3d 446, 448 (7 th Cir. 2005). Thirteen Senators signed this report and five Another 82 Brill v. Countrywide Home Loans, Inc., 427 35 1 Far more importantly, the Senate Report s assertion 2 that the scope of Section 1332(d)(9)(C) is limited to suits 3 involving disputes over the terms of securities simply has 4 no relation to the enacted text. 5 text unambiguously exempts from CAFA s reach suits involving 6 claims of rights . . . and obligations created by or 7 pursuant to a security and contains not a word suggesting 8 that these terms are limited in the manner asserted by the 9 majority. As already noted, that In such circumstances, the Supreme Court has 10 instructed us that it would be improper for us to consult 11 legislative history as to the meaning of the statutory 12 provision at issue: 13 14 15 16 17 18 19 20 21 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 22 (1992) (internal quotation marks omitted). 3 3 I believe that it is important to note that the majority does not assert that the inapplicability of Section 1332(d)(9)(C) to this case has anything to do with the 36 III. 1 2 A Concluding Observation. Writing almost ninety ago, a wise and revered judge 3 noted that statutes are designed to meet the fugitive 4 exigencies of the hour. Benjamin N. Cardozo, The Nature of 5 the Judicial Process, 83 (1921). 6 under such circumstances, he concluded that it sometimes 7 happens that gaps appear between the statutory language 8 and the facts presented by a given case. 9 situations, he asserted that judges, in order to reach 10 decisions, have the discretion to apply the statutory 11 language in a manner which effectively adds to or subtracts 12 from the existing text as if the judge were acting as a 13 legislator. 14 get carried away in this regard: Because they are enacted In such He cautioned, however, that judges should not merits of the plaintiffs claims. The majority is wise to avoid any such assertion. Although it is true that CAFA was enacted upon an express finding by Congress that there have been abuses of the class action device, 28 U.S.C. Section 1711(a)(2), the substantive terms of the statute are wholly jurisdictional; they afford the federal courts no authority to use CAFA as a vehicle for dismissing suits considered to be meritless. In sum, we have only decided here that federal jurisdiction exists and we remand [this] case to the district court for further proceedings, Opinion at 23, without any instruction as to how it should decide the merits of the plaintiffs claims. 37 1 2 3 4 5 6 7 8 9 10 11 In countless litigations, the law is so clear that judges have no discretion. They have the right to legislate within gaps, but often there are no gaps. We shall have a false view of the landscape if we look at the waste spaces only, and refuse to see the acres already sown and fruitful. Id. at 129. I believe the application of CAFA to the facts of the 12 instant case leads to the straightforward conclusion that 13 the district court correctly held that the case should be 14 remanded to state court. 15 contrast, I believe that the majority has ignored the plain 16 terms of CAFA, created its own waste space, and filled in 17 the resulting gap with an unwarranted exercise of 18 legislative power. In other words, no gap exists. I must therefore respectfully dissent. 38 By

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