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State of New Jersey, Dep't of Treasury, Division of Investment v. Fuld

May 17, 2010

THE STATE OF NEW JERSEY, DEPARTMENT OF TREASURY, DIVISION OF INVESTMENT, APPELLANT
v.
RICHARD FULD, JR.; CHRISTOPHER M. O'MEARA; JOSEPH M. GREGORY; ERIN CALLAN; IAN LOWITT; DAVID GOLDFARB; HERBERT H. MCDADE, III; THOMAS RUSSO; MARK WALSH; MICHAEL ANSLIE; JOHN F. AKERS; ROGER S. BERLIND; THOMAS H. CRUIKSHANK; MARSHA JOHNSON EVANS; CHRISTOPHER GENT; ROLAND A. HERNANDEZ; HENRY KAUFMAN; ERNST & YOUNG LLP; JOHN D. MACOMBER
(AMENDED AS PER THE CLERK'S 09/02/09 ORDER)



On Appeal from the United States District Court for the District of New Jersey (D.C. No. 3-09-cv-01629) District Judge: Honorable Anne E. Thompson.

The opinion of the court was delivered by: Sloviter, Circuit Judge

PRECEDENTIAL

Argued April 12, 2010

Before: SLOVITER, HARDIMAN, Circuit Judges, and RESTANI*fn1, Judge.

OPINION OF THE COURT

The State of New Jersey, Department of Treasury, Division of Investment ("New Jersey") appeals the District Court's order denying its motion to remand the action it brought under the Securities Act of 1933, a statute that specifically precludes removal, which defendants had removed to federal court. Defendants/Appellees Richard S. Fuld and various other officers and directors of Lehman Brothers Holdings, Inc., (collectively, "the Directors") have filed a motion to dismiss the appeal for lack of appellate jurisdiction. We proceed to examine our jurisdiction over the District Court's order denying remand.

I. Background

New Jersey manages the pension and retirement plan funds for over 700,000 of its active and retired state employees. In April and June of 2008, New Jersey purchased over $180 million of investment securities from Lehman Brothers Holdings, Inc. ("Lehman") consisting of preferred stock and common stock in Lehman. Three months after New Jersey's June purchases of these securities, Lehman filed for bankruptcy protection.

In March 2009, New Jersey filed a complaint in the Superior Court of New Jersey against the Directors and Ernst & Young LLP, an accounting firm, alleging violation of state law and the federal Securities Act of 1933 (the "Securities Act"), 15 U.S.C. §§ 77k, 77l, 77o, because of alleged material misstatements and omissions regarding the value of Lehman's assets. Lehman, protected by the automatic stay, 11 U.S.C. § 362(a)(1), was not named as a defendant.

New Jersey's complaint was one of dozens filed against the Directors by investors seeking to recover their investment losses. Those actions have been consolidated by the Judicial Panel on Multidistrict Litigation and are pending in the Southern District of New York. See In re Lehman Bros. Holdings, Inc., Sec. & Employee Ret. Income Sec. Act (ERISA) Litig. ("In re Lehman Bros."), 598 F. Supp. 2d 1362, 1364 (J.P.M.L. 2009). Many of the actions, similar to the one brought by New Jersey in state court, were brought by state and local government investment funds.

The Directors removed New Jersey's action to federal court, asserting that it was "related to" the Lehman bankruptcy and hence removable under 28 U.S.C. §§ 1334(b) and 1452(a). New Jersey filed a motion to remand, arguing that section 22(a) of the Securities Act prohibits the removal from state courts of cases arising under the Act.*fn2 See 15 U.S.C. § 77v(a) ("Except as provided in section 77p(c) of this title [relating to class actions], 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."). After considering the conflict between the Bankruptcy Code (which allows removal) and the Securities Act (which prohibits it), the District Court denied New Jersey's motion to remand, finding persuasive the decision of the Second Circuit that the bankruptcy removal statute, 28 U.S.C. §§ 1334(b) and 1452(a), trumps the anti-removal provision of the Securities Act. See State of N.J., Dep't of Treasury, Div. of Inv. v. Fuld, No. 09-1629 (AET), 2009 WL 1810356, at *2 (D.N.J. June 25, 2009) (citing Cal. Pub. Employees' Ret. Sys. v. WorldCom, Inc., 368 F.3d 86 (2d Cir. 2004), cert. denied, 543 U.S. 1080 (2005)). The statutory conflict raises an issue of first impression for our court, and to date the Second Circuit in WorldCom is the only court of appeals to have addressed it. 368 F.3d at 90.

In June 2009, New Jersey filed a notice of appeal from the District Court's order denying remand, citing 28 U.S.C. § 1291 and the collateral order doctrine as the bases for our appellate jurisdiction. New Jersey also filed, in the alternative, a petition for interlocutory appeal under 28 U.S.C. § 1292(b). The District Court granted in part New Jersey's motion for certification under § 1292(b), certifying for appeal the question of "how to resolve the statutory conflict between 28 U.S.C. § 1452(a) and Section 22(a) of the Securities Act of 1933, 15 U.S.C. § 77v(a)." State of N.J., Dep't of Treasury, Div. of Inv. v. Fuld, No. 09-1629 (AET), 2009 WL 2905432, at *1 (D.N.J. Sept. 8, 2009). A motions panel of this court denied the petition in a one-line order. See Order, State of N.J., Dep't of Treasury, Div. of Inv. v. Fuld, No. 09-8068 (3d Cir. Oct. 16, 2009). The motions panel also denied New Jersey's petition for panel rehearing, which requested "that the Petition be referred for decision to the merits panel" in this appeal. N.J.'s Pet. for Panel Rehr'g at 1, State of N.J., Dep't of Treasury, Div. of Inv. v. Fuld, No. 09-8068 (3d Cir. Oct. 30, 2009). Accordingly, appellate jurisdiction must be found, if at all, in 28 U.S.C. § 1291 and the collateral order doctrine.*fn3 Before us is the Directors' motion to dismiss the appeal for lack of jurisdiction.

II. Discussion

The courts of appeals "have jurisdiction of appeals from all final decisions of the district courts of the United States, . . . except where a direct ...


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