Legal News

Class action properly removed to state court

By Jason Siegel

Although the Class Action Fairness Act of 2005 allowed the removal to federal court of large class actions with diverse parties, it did not supersede the specific bar against removal of state actions involving only state claims in 22(a) of the Securities Act of 1933, the 9th U.S. Circuit Court of Appeals held on July 14.

Full text of the decision

David Luther filed a class action against Countrywide Home Loans Servicing L.P. in California state court, alleging that it issued false and misleading registration statements and prospectus supplements in violation of the Securities Act of 1933.

Countrywide removed the case to federal court pursuant to CAFA, which allows such removal of class actions with claims exceeding $5 million and when at least one plaintiff is diverse from at least one defendant.

In federal court, Luther moved to remand to state court, arguing that 22(a) of the Securities Act of 1933 barred the removal of his suit. The court granted Luther's motion, and Countrywide appealed, arguing the passage of CAFA ended 22(a)'s long-standing bar against removal.

The 9th Circuit affirmed. The court said § 22(a)'s bar against removal superseded CAFA's removal provisions. Citing the U.S. Supreme Court's holding in Radzanower v. Touche Ross & Co., the court said,

"'It is a basic principle of statutory construction that a statute dealing with a narrow, precise, and specific subject is not submerged by a later enacted statute covering a more generalized spectrum.' Here, the Securities Act of 1933 is the more specific 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."

Read more of this week's court decisions here

Full post as published by Legal Pad | LA on July 28, 2008 (boomark / email).