Dennis v. Hart, No. 12-55241 (9th Cir. 2013)
Annotate this CaseIn these consolidated cases, plaintiffs filed shareholder derivative suits in California state court alleging that PICO's compensation policies violated state law. Defendants removed the cases to federal court, arguing that the Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. 78n-1(a)(1), barred the suits. The court concluded that Section 27 of the Securities Exchange Act, 15 U.S.C. 78aa(a), did not confer federal jurisdiction; defendants identified no significant federal issue that would confer jurisdiction; and the doctrine of complete preemption did not apply. Therefore, removal was improper and the district court lacked jurisdiction to do anything other than remand them to state court. Accordingly, the court vacated with instructions to remand the cases to state court. The court dismissed defendants' cross appeals for lack of jurisdiction.
Court Description: Securities. The panel vacated the district court’s orders in shareholder derivative suits alleging that a corporation’s executive compensation policies violated state law. The suits followed shareholders’ advisory “say-on-pay” vote on executive compensation pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The panel held that removal of the suits from state court was improper because the plaintiffs asserted state-law causes of action, and, under the well-pleaded complaint rule, their allegations regarding the say-on-pay vote were insufficient to establish federal-question jurisdiction. The panel rejected defendants’ arguments that federal jurisdiction existed under § 27 of the Securities Exchange Act of 1934, the “significant federal issue” rule, or the complete preemption doctrine. The panel vacated the decisions of the district court with instructions to remand the cases to state court. The panel dismissed the cross-appeals for lack of jurisdiction.
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