Federal Judiciary

S.D.N.Y. Notes Split Re Whether CAFA Removal Provision Trumps Non-Removal Provision of Securities Act

This putative class action, which is rooted in the mortgage-backed securities crisis, addresses an issue of first impression in this Circuit-whether the removal provision of the Class Action Fairness Act of 2005, Pub.L. 109-2, § 4(a), 119 Stat. 9, Feb. 18, 2005 (?CAFA?), trumps the anti-removal provision of Section 22(a) of the Securities Act of 1933, 15 U.S.C. § 77a et seq. Plaintiffs filed this suit in New York State Supreme Court for violation of Sections 11, 12, and 15 of the Securities Act of 1933, 15 U.S.C. § 77a et seq. , in connection with issuance of HarborView Mortgage Loan Pass-Through Certificates (?Bonds?), alleging misrepresentations in the Prospectuses and Registration Statements of these bonds. Defendants-HarborView, the issuer, as well as depositors, investment banks, credit rating agencies-removed the case to this Court, relying on CAFA's jurisdiction and removal provisions 28 U.S.C. §§ 1332(d)(2), 1453(b).

Plaintiffs now move to remand the case back to State court, contending that it is the Plaintiffs' right to choose its forum as provided in the anti-removal provision of Section 22(a) of the Securities Act of 1933, 15 U.S.C. § 77v(a). Further, Plaintiffs cite the recent California District Court decision, affirmed by the 9th Circuit, Luther v. Countrywide Home Loans, 07cv8165, 2008 U.S. Dist. LEXIS 26534 (C.D.Cal. Feb. 28, 2008) aff'd 533 F.3d 1031 (9th Cir. Jul. 16, 2008), which held that CAFA does not trump the anti-removal provision in § 22(a) of the 1933 Act. A clear split in the Circuits is evidenced by recent holdings in this Circuit. After a review of the decisions and the legislative history, I am constrained to follow, what at least in my view, comports more closely with the decisions in this Circuit and deny the m otion.

Full post as published by Split Circuits on September 30, 2008 (boomark / email).