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Federal Home Loan Bank of Pittsburgh v. J.P. Morgan Securities Inc.

December 21, 2009

FEDERAL HOME LOAN BANK OF PITTSBURGH, PLAINTIFFS,
v.
J.P. MORGAN SECURITIES INC., J.P. MORGAN CHASE & CO., MOODY'S CORPORATION, MOODY'S INVESTORS SERVICE, INC., AND THE MCGRAW-HILL COMPANIES, INC., DEFENDANTS.



The opinion of the court was delivered by: Arthur J. Schwab United States District Judge

ELECTRONICALLY FILED

MEMORANDUM OPINION

I. Introduction

This action, filed on September 29, 2009 by Federal Home Loan Bank of Pittsburgh ("FHLBP") in the Court of Common Pleas of Allegheny County, Pennsylvania, raises three state law statutory and common law claims, and three claims under section 11, 12(a) and 15 of the Securities Act of 1933, 15 U.S.C. §§ 77k, 77l(a) and 77o. Defendants, J.P. Morgan Securities Inc., J.P. Morgan Chase & Co., Moody's Corporation, Moody's Investors Service, Inc., and the McGraw Hill Companies, Inc., timely removed this case to this Court on October 23, 2009, asserting the following three grounds for removal: (1) this Court has original jurisdiction under 28 U.S.C. § 1332, as amended by the Class Action Fairness Act of 2005 ("CAFA") and all the claims and causes of action may be removed from state court pursuant to 28 U.S.C. § 1453 governing the removal of class actions; (2) this Court has original jurisdiction under 28 U.S.C. § 1334(b) because this matter is related to a pending bankruptcy proceeding, and all the claims and causes of action may be removed from state court pursuant to 28 U.S.C. § 1452*fn1 ; and (3) this Court has original jurisdiction pursuant to the charter by which FHLBP was created, and all the claims and causes of action may be removed from state court pursuant to 28 U.S.C. § 1441.

FHLBP has filed a Motion to Remand this case to the Court of Common Pleas of Allegheny County pursuant to section 22(a), the anti-removal provision of the Securities Act of 1933, 15 U.S.C. § 77v(a), which provides in relevant part:

(a) Federal and State courts; venue; service of process; review; removal; costs The district courts of the United States and the United States courts of any Territory shall have jurisdiction of offenses and violations under this subchapter and under the rules and regulations promulgated by the Commission in respect thereto, and, concurrent with State and Territorial courts, except as provided in section 77p 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 section 77p(c) of this title, 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) (emphasis added).

The anti-removal provision of the Securities Act of 1933 thus prohibits a defendant from removing a case into federal court, unless it is a "covered class action" as provided in section 77p, Additional remedies; limitation on remedies, 15 U.S.C. § 77p. Section 77p(c) provides: "Removal of covered class actions -- Any covered class action brought in any State court involving a covered security, as set forth in subsection (b), shall be removable to the Federal district court for the district in which the action is pending, and shall be subject to subsection (b)." 15 U.S.C. § 77p(c).

CAFA confers jurisdiction on federal courts over certain class actions in which any defendant and any class member are citizens of different states. 28 U.S.C. § 1332(d)(2). CAFA further enables any defendant to remove a qualifying class action to federal court. 28 U.S.C. § 1453(b).*fn2 Although not free from doubt, it appears that CAFA may trump the anti-removal statute, so that if a case is a covered class or "mass action" under CAFA, the anti-removal provisions of 15 U.S.C. § 77v(a) does not apply. See e.g., New Jersey Carpenters Vacation Fund v. Harborview Mortgage Loan Trust, 581 F.Supp.2d 581, 587-88 (S.D.N.Y. 2008) (citations omitted). The Court need not resolve this issue, however, because the foundation of defendants' removal is fundamentally flawed.

Although defendants struggle heroically to recast plaintiff's complaint as a class action, the reality is that FHLBP's complaint commences a single plaintiff lawsuit raising claims on behalf of one corporate entity alleging it has been directly damaged by defendants' collective actions. Even though its 320 members may ultimately benefit from any judgment in plaintiff's favor, this case is, in form and in substance, a single plaintiff lawsuit. Because it is not a class action, the anti-removal provision of the Securities Act of 1933 prohibits removal of this matter from state court, and the Court will grant plaintiff's motion to remand to the Court of Common Pleas of Allegheny County.

II. Removal Jurisdiction

Removal is governed by statute, 28 U.S.C. § 1441, which provides: "(a) 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." (emphasis added). Federal district courts have "federal question" jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States," 28 U.S.C. § 1331, and diversity jurisdiction over citizens of different states, 28 U.S.C. § 1332.

Additionally, CAFA provides for removal of certain class actions, as follows:

The district courts shall have original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which-(A) any member of a class of plaintiffs is a citizen of a State different from any defendant; (B) any member of a class of plaintiffs is a foreign state or a citizen or subject of a foreign state and any defendant is a citizen of a State; or (C) any member of a ...


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