Christians v. KemPharm, Inc.

Decision Date17 July 2017
Docket Number3:17–cv–00002
Citation265 F.Supp.3d 971
Parties Kevin CHRISTIANS, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. KEMPHARM, INC.; Travis C. Mickle; Gordon K. Johnson; R. LaDuane Clifton; Sven Guenther; Christal M.M. Mickle; Danny L. Thompson; Matthew R. Plooster; Richard W. Pascoe; Joseph B. Saluri; David S. Tierney; Cowan and Company, LLC; RBC Capital Markets, LLC; Canaccord Genuity, Inc.; and Oppenheimer & Co., Inc., Defendants.
CourtU.S. District Court — Southern District of Iowa

John E. Lande, Mollie Pawlosky, Dickinson Mackaman Tyler & Hagen PC, Des Moines, IA, Geoffrey M. Johnson, Scott & Scott LLP, Cleveland Heights, OH, Thomas L. Laughlin, IV, Scott & Scott, New York, NY, for Plaintiff

Stephen J. Holtman, Simmons Perrine Moyer & Bergman PLC, Cedar Rapids, IA, George Anhang, Lyle Roberts, Cooley LLP, Washington, DC, for Defendant



Before the Court is Plaintiff Kevin Christians's Motion to Remand, filed on February 13, 2017. Clerk's No. 22. Defendants KemPharm, Inc., Travis C. Mickle, Gordon K. Johnson, R. LaDuane Clifton, Sven Guenther, Christal M.M. Mickle, Danny L. Thompson, Matthew R. Plooster, Richard W. Pascoe, Joseph B. Saluri, and David S. Tierney (collectively "Defendants"1 ) filed a brief in opposition to Plaintiff's Motion on February 27, 2017. Clerk's No. 24. Plaintiff filed a reply on March 7, 2017. Clerk's No. 28. At the parties' request, this Court heard oral argument on the motion on April 27, 2017. Clerk's No. 37. The matter is fully submitted.


On November 4, 2016, Plaintiff filed a Class Action Petition at Law in Iowa District Court for Johnson County.2 Clerk's No. 2–1 at 1–24. In the Petition, Plaintiff alleged violations of three discrete sections of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. §§ 77a et seq. Clerk's No. 2–1 at 19–23. The Petition alleged no claims under state law. Id. On January 12, 2017, Defendants filed a notice of removal of the action to this Court. Clerk's No. 2. On February 13, 2017, Plaintiff filed this Motion for Remand, which challenges the propriety of removal pursuant to 15 U.S.C. § 77v(a) and requests an order remanding the case to Iowa District Court.


Plaintiff asserts his suit cannot be removed to federal court based on the plain language of the Securities Act. Section 77v(a) of the Securities Act contains a jurisdictional provision:

The district courts of the United States ... shall have jurisdiction ... 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 [the Securities Act].

15 U.S.C. § 77v(a). It also contains an anti-removal provision:

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.

Id. Both the jurisdictional provision and the anti-removal provision contain explicit exceptions, defined by cross-references to section 77p and subsection 77p(c) respectively. Section 77p provides in pertinent part,

(b) Class action limitations
No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging—
(1) an untrue statement or omission of a material fact in connection with the purchase or sale of a covered security; or
(2) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.
(c) 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).
(f)(2)(A) Definitions; Covered class action; In general
The term "covered class action" means—
(i) any single lawsuit in which—
(I) damages are sought on behalf of more than 50 persons or prospective class members, and questions of law or fact common to those persons or members of the prospective class, without reference to issues of individualized reliance on an alleged misstatement or omission, predominate over any questions affecting only individual persons or members; or
(II) one or more named parties seek to recover damages on a representative basis on behalf of themselves and other unnamed parties similarly situated, and questions of law or fact common to those persons or members of the prospective class predominate over any questions affecting only individual persons or members.

15 U.S.C. § 77p.

The resolution of this motion requires the Court to interpret and apply these statutory provisions to determine whether an action filed in state court that pleads causes of action exclusively under federal law, i.e., the Securities Act, can be removed to federal district court. Clerk's No. 22.

A. General Principles

As a general matter, "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." 28 U.S.C. § 1441(a). "The propriety of removal thus depends on whether the case originally could have been filed in federal court." City of Chicago v. Int'l Coll. of Surgeons , 522 U.S. 156, 163, 118 S.Ct. 523, 139 L. Ed. 2d 525 (1997). When a complaint raises only questions of federal law, the district courts have original jurisdiction and the action may be filed in district court at the outset. See 28 U.S.C. § 1331 ("The district courts ... have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States."). "[T]he federal question ordinarily must appear on the face of a properly pleaded complaint." Jefferson Cty., Ala. v. Acker , 527 U.S. 423, 431, 119 S.Ct. 2069, 144 L. Ed. 2d 408 (1999).

"[T]he party seeking removal has the burden to establish federal subject matter jurisdiction, [and] all doubts about federal jurisdiction must be resolved in favor of remand." Baker v. Martin Marietta Materials, Inc. , 745 F.3d 919, 923 (8th Cir. 2014) (alterations in original) (quoting Cent. Iowa Power Coop. v. Midwest Indep. Transmission Sys. Operator, Inc. , 561 F.3d 904, 912 (8th Cir. 2009) ). District courts "strictly ... construe legislation permitting removal." Dahl v. R.J. Reynolds Tobacco Co. , 478 F.3d 965, 968 (8th Cir. 2007) ; see 28 U.S.C. § 1446. If a removing defendant fails to strictly adhere to the procedural requirements for removal or fails to demonstrate that the federal court unambiguously has subject matter jurisdiction, removal is improper, and the district court must remand the case to the applicable state court. See Baker , 745 F.3d at 925–26.

B. Statutory Exceptions

Although section 1441 permits any civil action over which federal courts have original jurisdiction to be removed, that general rule does not apply where "otherwise expressly provided by Act of Congress." 28 U.S.C. § 1441. By its plain language, section 1441"requires any exception to the general removability rule to be express. " Breuer v. Jim's Concrete of Brevard, Inc. , 538 U.S. 691, 697, 123 S.Ct. 1882, 155 L. Ed. 2d 923 (2003) (emphasis added). The Supreme Court has interpreted this explicitness requirement to mean that "whenever the subject matter of an action qualifies it for removal, the burden is on the plaintiff to find an express exception." Id. at 698, 123 S.Ct. 1882 ; see Lonny Sheinkopf Hoffman, Burdens of Jurisdictional Proof , 59 ALA. L. REV. 409, 427 (2008) ("[T]he [ Breuer ] Court meant ... that the burden ought to be on the party who is trying to show this is one of those rare instances when Congress established a grant of original jurisdiction without a corresponding removal right.").

Thus, when a plaintiff moves to remand a removed case, the defendant bears the burden in the first instance of showing that the federal court has original jurisdiction over the action. See Baker , 745 F.3d at 925–26. If the basis for the motion to remand is that the federal court lacks subject matter jurisdiction, the plaintiff enjoys the presumption that "all doubts about jurisdiction must be resolved in favor of remand." Id. at 923. But if the sole basis for the motion is an express statutory exception that does not implicate the federal court's subject matter jurisdiction, then the plaintiff no longer enjoys the benefit of that presumption. The law requires only that doubts about federal subject matter jurisdiction be construed in the plaintiff's favor. See id. ; see also Cent. Iowa Power Coop. , 561 F.3d at 912 ; Dahl , 478 F.3d at 968. The opposite is true with respect to doubts about the applicability of a statutory exception to removal. See Breuer , 538 U.S. at 697, 123 S.Ct. 1882.

C. Applicable Standard

In this case, Defendants have satisfied their burden to show that this Court has original subject matter jurisdiction of the action. Plaintiff does not contest that this action arises exclusively under the laws of the United States. See 28 U.S.C. § 1331. Instead, Plaintiff requests remand based on the express statutory exception found in section 77v(a).

Under Eighth Circuit precedent, the anti-removal provision in 15 U.S.C. § 77v(a) does not implicate this Court's subject matter jurisdiction. See In re Norfolk S. Ry. Co. , 592 F.3d 907, 912 (8th Cir. 2010). The Eighth Circuit has held that analogous statutory removal bars, which provide that civil actions initiated in state courts under certain statutory schemes "may not be removed to any district court of the United States," see 28...

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