Elec. Workers Local #357 Pension and Health & Welfare Trusts v. Clovis Oncology, Inc.

• Decision Date: 05 May 2016
• Docket Number: Case No. 16-cv-00933-EMC
• Court: U.S. District Court — Northern District of California
• Parties: Electrical Workers Local #357 Pension and Health & Welfare Trusts, Plaintiff, v. Clovis Oncology, Inc., et al., Defendants.

185 F.Supp.3d 1172

Electrical Workers Local #357 Pension and Health & Welfare Trusts, Plaintiff,

v.Clovis Oncology, Inc., et al., Defendants.

Case No. 16-cv-00933-EMC

United States District Court, N.D. California.

Signed May 5, 2016

Shawn A. Williams, Robbins Geller Rudman & Dowd LLP, San Francisco, CA, David Conrad Walton, James Ian Jaconette, Robbins Geller Rudman & Dowd LLP, San Diego, CA, for Plaintiff.

Aaron Christopher Humes, Stradling Yocca Carlson & Rauth, P.C., Thomas Stedman Brown, Foley Lardner, San Francisco, CA, Tariq Mundiya, Todd G. Cosenza, Charles Dean Cording, Willkie Farr and Gallagher LLP, New York, NY, John Francis Cannon, Stradling Yocca et al, Newport Beach, CA, Roger Allan Lane, Foley and Lardner LLP, Boston, MA, Robert Andrew Sacks, Alexa Megan Lawson-Remer, Sullivan and Cromwell LLP, Los Angeles, CA, Laura Kabler Oswell, Sullivan & Cromwell LLP, Palo Alto, CA, for Defendants.

ORDER GRANTING PLAINTIFF'S MOTION TO REMAND

EDWARD M. CHEN, United States District Judge

I. INTRODUCTION

In this securities class action, Plaintiff Electrical Workers Local #357 Pension and Health & Welfare Trusts ("Electrical Workers") filed suit against Defendants Clovis Oncology, Inc., executives Patrick J. Mahaffy, Erle T. Mast, M. James Barrett, Brian G. Atwood, James C. Blair, Paul Klingenstein, Edward J. McKinley, Scott D. Sandell, Forest Baskett, and venture capital firms NEA 13 GP, Ltd., Aberdare Ventures IV, L.P., and underwriters J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Stifel, Nicolaus & Company, Incorporated, and Mizuho Securities USAS Inc. (collectively "Clovis") alleging violations of sections 11, 12(a)(2), and 15 of the Securities Act of 1933 ("Securities Act"). Before this Court is Electrical Workers' Motion to Remand.

Having considered the parties' briefs and oral argument presented at the hearing on April 18, 2016, the Court hereby GRANTS Electrical Workers' motion to remand.

II. FACTUAL BACKGROUND

Defendants Clovis Oncology, Inc. is a biopharmaceutical company that focuses on acquiring, developing, and commercializing anti-cancer agents in the United States and abroad. Docket No. 1, Exh. A-2 (Compl.) at ¶¶ 2, 27. Clovis's product, rociletinib, or CO-1686, is a "novel, oral, targeted covalent inhibitor of the cancer-causing mutant forms of epidermal growth factor receptor ("EGFR")" that is in clinical development and is "currently being studied for the treatment of non-small cell lung cancer ("NSCLC")." Id. at ¶ 27. Around November 16, 2011, Clovis filed its Prospectus for its initial public offering ("IPO") that formed part of the October 31, 2011 Form S-1/A Registration Statement for the IPO and became effective on November 15, 2011. Id. at ¶ 29. The IPO was successful as 10,700,000 shares of Clovis's common stock were sold at $13 dollars per share raising over $129.4 million in net proceeds. Id. at ¶ 30.

On May 19, 2014, Clovis issued a press release announcing that the Food and Drug Administration ("FDA") had granted "Breakthrough Therapy" designation for rocilentinib. Id . at ¶ 32. The 2012 FDA Safety and Innovation Act created a "Breakthrough Therapy" designation, which expedites the development and review of drugs that treat serious or life-threatening medical conditions as long as they have substantial preliminary clinical evidence of success. Id. at ¶ 31.

Around July 9, 2015, Clovis filed its Prospectus for the secondary offering that formed part of the June 11, 2013 Form S-3/A Registration Statement for the secondary offering and became effective on July 8, 2015. Id. at ¶ 33. This secondary offering resulted in at least 3,525,641 shares of Clovis's common stock sold at $78 per share raising over $259.9 million in net proceeds. Id. at ¶¶ 33–35. On September 17, 2015, Clovis's stock closed at $114.64 per share. Id. at ¶ 36.

On November 16, 2015, Clovis issued a press release disclosing the FDA's request for more clinical data for its efficacy analysis of rociletinib due to the insufficient data that Clovis previously submitted in its New Drug Application ("NDA"). Id. at ¶ 37. After the press release, the price of Clovis's shares decreased to $69.19 per share and ultimately closed at $30.24 per share on the same day—November 16, 2016. Id. at ¶ 38.

On December 15, 2015, Clovis issued another press release announcing that the FDA has extended the Prescription Drug User Fee Act ("PDUFA") date for Clovis's NDA for rociletinib by three months with a new goal date of June 28, 2016. Id. at ¶ 39. After this press release, the price of Clovis's shares decreased $0.89 per share and closed at $32.53 per share the following day on December 16, 2016, representing a 58% decline in the prince of Clovis's stock from the secondary offering price of $78 per share. Id. at ¶ 40.

On January 22, 2016, Plaintiff Electrical Workers Local #357 Pension and Health & Welfare Trusts filed a securities class action in the San Mateo County Superior Court on behalf of all persons who purchased or otherwise acquired Clovis common stock as related to Clovis's Registration Statement and Prospectus that were issued in connection with its July 8, 2015 secondary offering. Id. at ¶ 1. Electrical Workers asserted claims under sections 11, 12(a)(2), and 15 of the Securities Act, 15 U.S.C. §§ 77k, 771(a)(2), and 77o. Id. at ¶¶ 49–69. Electrical Workers allege that the following facts were known by Clovis but concealed from the investing public in Clovis's Registration Statement and Prospectus issued in connection with their secondary offering: (1) the NDA that Clovis submitted to the FDA for rociletinib contained data sets based on both unconfirmed response rates and immature confirmed response rates; (2) Clovis's "Breakthrough Therapy" designation submission contained an immature data set based primarily unconfirmed responses; (3) Clovis presented interim data publicly and at medical meetings that included a data set based primarily on unconfirmed responses; (4) as the efficacy data matured, the number of patients with an unconfirmed response who converted to a confirmed response was lower than expected; and (5) Clovis's NDA was likely to either be delayed or rejected by the FDA. Id. at ¶ 41(a)–(e).

On February 25, 2016, Clovis removed the action to this Court pursuant to 28 U.S.C. § 1441. Docket No. 1 at 2 ("Notice of Removal"). On the same day, Clovis filed a motion to transfer venue under 28 U.S.C. § 1404(a) to the District of Colorado, asserting that four related class actions with similar claims against Clovis are pending there.¹ Docket No. 6 ("Mot. to Transfer"). On March 2, 2016, Electrical Workers filed a motion to remand the action back to state court. Docket No. 13 ("Mot. to Remand"). On March 3, 2016, this Court determined that it would decide the Motion to Remand first. Docket No. 14.

III. DISCUSSION

A. Legal Standard

Under 28 U.S.C § 1441(a), a defendant may remove a civil action filed in state court to federal court if the action could originally have been filed in federal court unless otherwise expressly provided by Congress. 28 U.S.C. § 1441(a). Additionally, if it appears that a district court lacks subject matter jurisdiction over a case previously removed from state court at any time before judgment, then the case must be remanded back to state court. 28 U.S.C. § 1447(c) ; see Libhart v. Santa Monica Dairy Co. , 592 F.2d 1062, 1065 (9th Cir.1979). Upon a motion to remand, the scope of a removal statute is strictly construed against removal. Luther v. Countrywide Home Loans Servicing LP , 533 F.3d 1031, 1034 (9th Cir.2008). "The strong presumption against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper." Gaus v. Miles , 980 F.2d 564, 566 (9th Cir.1992) (internal citations and quotations omitted).

Clovis bears the burden of proving that this action belongs in federal court. This is particularly so when Congress has expressly limited the right to remove particular kinds of lawsuits. Plaintiff does not have the burden of establishing an "express exception" to the removal statute.²

B. This Court Does Not Have Jurisdiction Over This Action

The issue presented is whether the Securities Act, as amended by the Securities Litigation Uniform Standards Act of 1998 ("SLUSA"), explicitly bars removal of this action which asserts only federal Securities Act claims. The majority of courts that have addressed the issue have concluded that removal of securities class actions with only federal claims is explicitly barred by the Securities Act, and, therefore, federal courts must remand these actions to state court. E.g. , Plymouth Cty. Ret. Sys. v. Model N, Inc. , No. 14–CV–04516–WHO, 2015 WL 65110, at *2 (N.D.Cal. Jan. 5, 2015) (agreeing that "because [the plaintiff] brings only Securities Act claims, not state law claims, removal of the action is barred by the antiremoval provision in section 77v(a)" and remanding case); City of Warren Police & Fire Ret. Sys. v. Revance Therapeutics, Inc. , 125 F.Supp.3d 917, 920 (N.D.Cal.2015) (same); Liu v. Xoom Corp. , No. 15–CV–00602–LHK, 2015 WL 3920074, at *4 (N.D.Cal. June 25, 2015) (same). For the reasons stated below, the Court agrees with what is emerging as the majority view.

1. The Statutory Language

The Court's analysis begins with the "plain language of the statute." Jim e nez v. Quarterman , 555 U.S. 113, 118, 129 S.Ct. 681, 172 L.Ed.2d 475 (2009). "In ascertaining the plain meaning of the statute, [a] court must look to the particular statutory language at issue, as well as the language and design of the statute as a whole." K Mart Corp. v. Cartier , 486 U.S. 281, 291, 108 S.Ct. 1811, 100 L.Ed.2d 313 (1988). As long as the plain language of these statutes "is clear and consistent with the statutory scheme at issue, the statute's plain language is conclusive and this Court need not inquire beyond the plain language of the statute." In re Jackson , 184 F.3d 1046, 1051 (9th Cir.1999).

At issue is the language...