In re Edward Jones Holders Litigation

• Decision Date: 25 September 2006
• Docket Number: No. CV06-1974FMC(VBKX).,CV06-1974FMC(VBKX).
• Parties: In re EDWARD JONES HOLDERS LITIGATION
• Court: U.S. District Court — Central District of California

453 F.Supp.2d 1210

In re EDWARD JONES HOLDERS LITIGATION

No. CV06-1974FMC(VBKX).

United States District Court, C.D. California.

September 25, 2006.

David M. Harris, David P. Niemeier, James H. Ferrick, Greensfelder, Hemker and Gale, St. Louis, MO, Evan Ray Goldstein, Peter B. Gelblum, Seth E. Pierce, Mitchell Silberberg & Knupp Los Angeles, CA, for Edward Jones Holders Litigation.

ORDER DENYING PLAINTIFFS' MOTION TO REMAND

COOPER, District Judge.

This matter is before the Court on Plaintiffs' Motion to Remand (docket no. 32), filed May 4, 2006. The Court has considered the moving, opposition, reply and sur-reply documents submitted in connection with the motion. The Court deems this matter appropriate for decision without oral argument. See Fed.R.Civ.P. 78; Local Rule 7-15. Accordingly, the hearing set for October 16, 2006, is removed from the Court's calendar. For the reasons and in the manner set forth below, the Court hereby DENIES the Motion.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Defendant, Edward D. Jones & Co., L.P., d/b/a Edward Jones ("Defendant" or "Jones"), is one of the largest brokerage houses ill the country, providing clients with investment advice on a variety of investments, including mutual funds, through its network of 9,000 brokers. See Consolidated Amended Individual Complaint, Complaint on Behalf of the Public and Class Action Complaint ("Compl."), September 16, 2004, ¶ 9. In their operative Complaint, Plaintiffs Todd Bressler and William O. Potter ("Plaintiffs"), individually and on behalf of the public and a Class of others similarly situated, seek restitution and disgorgement of monies gained by Defendant as a result of its alleged violation of California's Unfair Competition Law, Cal. Bus. & Prof.Code § 17200, and breach of its fiduciary duties to Plaintiff and the Class. Specifically, Plaintiffs allege that Defendant entered into agreements with certain mutual fund companies whereby Defendant placed the companies on an internal "Preferred Funds" list and received retention "kickbacks" based on the amount of money held by Plaintiff and the Class members in those funds. Id. ¶¶ 13-15, 17. In order to maximize the amount of the kickbacks, Defendant allegedly offered Plaintiffs and the Class biased advice to maintain their' accounts with Defendant and their holdings in the Preferred. Funds. Id. ¶¶ 2, 28, 41.¹ At no time did Defendant disclose the "existence, nature, amount and source of the retention kickbacks" to Plaintiffs, the Class or the public. Id. ¶¶ 40, 42.

On February 24, 2004, Defendant removed the case to this Court, arguing that the state law claims were preempted by the Securities Litigation Uniform Standards Act ("SLUSA"). On March 22, 2004, Plaintiff (Bressler) moved to remand.² After full briefing, the Court found that, because the alleged wrongdoing by Defendant was not "in connection with the purchase or sale of covered securities," SLUSA did not apply. Accordingly, the Court granted Plaintiffs motion and remanded the action to state court. See generally Order Granting Plaintiff's Motion to Remand, Case No. CV 04-1219 FMC (RNBx), May 11, 2004.

Slightly less than two years later, on March 31, 2006, Defendant filed a second Notice of Removal, asserting that the Supreme Court's intervening decision in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 548 U.S. ___, 126 S.Ct. 1503, 164 L.Ed.2d 179 (March 21, 2006), compels a finding that Plaintiffs' claims are in fact preempted by SLUSA. Plaintiffs dispute the applicability of the Dabit decision to the facts of this case, as well as Defendant's compliance with proper removal procedures and, concomitantly, move to remand once again.

LEGAL STANDARD

A motion to remand is the proper procedure for challenging removal. See N. Cal. Dist. Council of Laborers v. Pittsburg-Des Moines Steel Co., 69 F.3d 1034, 1038 (9th Cir.1995). The removal statute is strictly construed, and any doubt about the right of removal is resolved in favor of remand. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.1992); see also Prize Frize, Inc. v. Matrix, Inc., 167 F.3d 1261, 1265 (9th Cir.1999). Consequently, if a plaintiff challenges the defendant's removal of a case, the defendant bears the burden of establishing the propriety of the removal. See Gaus, 980 F.2d at 566; Duncan v. Stuetzle, 76 F.3d 1480, 1485 (9th Cir.1996).

DISCUSSION

I. As Plaintiffs' Motion is Untimely, All Objections to Procedural Defects in the Removal Process Are Waived

As a threshold matter, Plaintiffs argue that remand is warranted due to what they perceive to be specific procedura defects in the filing of the Notice of Removal. Mot. at 5-16. First, Plaintiffs maintain that the Notice of Removal is defective because it was not filed within the time limitations set forth under 28 U.S.C. § 1446(b). Second, Plaintiffs fault Defendant for filing a "successive" removal notice — i.e., predicating removal on the same legal theory as was previously advanced and rejected by the Court in its (pre-Dabit) Order of May 11, 2004, in Case No. 04-1219 FMC (RNBx). However, because Plaintiffs' Motion to Remand Was filed outside of the thirty (30) day period prescribed under 28 U.S.C. § 1447(c), the Court cannot entertain Plaintiffs' objections to Defendant's failure to follow proper removal procedure(s).³

Pursuant to 28 U.S.C. § 1447(c), "[a] motion to remand [a] case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal...." 28 U.S.C. § 1447(c) (2006); see also N. Cal. Dist. Council of Laborers, 69 F.3d at 1038 ("[T]he district court had no authority to remand the case to the state court on the basis of a defect in removal procedure raised for the first time more than 30 days after the filing of the notice of removal."); James Wm. Moore, 16 Moore's Federal Practice § 107.41[1][d] (Matthew Bender 3d ed.) ("A party that fails to object to a procedural defect within the 30-day limit waives its right to object."). In addition, sua sponte remand of cases for defects in the removal procedure is strictly prohibited. See Kelton Arms Condominium Owners Ass'n, Inc. v. Homestead Ins. Co., 346 F.3d 1190, 1192 (9th Cir.2003).

Here, Plaintiffs acknowledge that Defendant filed its Notice of Removal on March 31, 2006 and that the Motion to Remand was filed, at the earliest, thirty-two (32) days later, on May 2, 2006. See Decl. of Marc L. Godino. in Support of Plaintiffs' Reply ¶ 6.⁴ Nevertheless, Plaintiffs insist that their motion was timely filed pursuant to operation of Fed.R.Civ.P. 6(e). Specifically, Plaintiffs argue that the Rule afforded them an additional three days' filing time because the Notice of Removal was served upon them by mail. The Court disagrees.

As several other courts have recognized, "Rule 6(e) is, limited to those periods of time which are initiated by `service of notice.' It is not extended to periods of time which are initiated by `filing." Delew v. Las Vegas Metro. Police Dep't, 108 F.Supp.2d 1146, 1148 (D.Nev.2000) (holding Rule 6(e) inapplicable to period for filing motion to remand under 28 U.S.C. § 1447(c)) (citing William W Schwarzer, A. Wallace Tashima & James M. Wagstaffe, Federal Civil Procedure Before Trial, § 2:1089.7a) (citing Pavone v. Mississippi Riverboat Amusement Corp., 52 F.3d 560, 566 (5th Cir.1995) (motion to remand for procedural defects filed 33 days after notice of removal untimely)); see also 1015 Half St. Corp. v. Warehouse Concepts, Inc., 1999 WL 1212885, *4, 1999 U.S. Dist. LEXIS 19135 *13 n. 7 (D.D.C.1999) ("Federal Rule of Civil Procedure 6(e) does not extend the thirty-day period provided by § 1447(c)."); 16 Moore's Federal Practice § 107.41[1][d] ("The 30-day period [under 28 U.S.C. § 1447(c)] runs from the date that the notice of removal is filed, not from when the plaintiff is served with the notice. The time limit is not extended if the defendant mails the notice to the plaintiff.").

Accordingly, even assuming arguendo that Plaintiffs' Motion to Remand was filed as of May 2, 2006, the thirty-second day from the filing of the Notice of Removal, it is still untimely, such that Plaintiffs have failed to preserve their right to challenge removal on the basis of procedural defects.

II. Remand is Not Otherwise Warranted Because Plaintiffs' Claims are Preempted by SLUSA

"SLUSA is a federal statute that preempts state-law securities actions under certain circumstances." Smith v. Arthur Andersen LLP, 421 F.3d 989, 1007 (9th Cir.2005) (internal quotations omitted). It provides, in pertinent part:

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.

15 U.S.C. § 77p(b)(1)-(2); see also 15 U.S.C. § 78bb(f)(1)(A)-(B). Accordingly, SLUSA preemption is triggered when the following conditions are met: (1) the underlying suit is a "covered class action," (2) the action is based on state law, (3) the action concerns a "covered security," and (4) the defendant is alleged to have misrepresented or concealed a material fact or used or employed a manipulative device or contrivance "in connection with the purchase or sale" of a security.⁵

In the instant case, Plaintiffs do not dispute that both the class and the mutual fund securities at issue are "covered" under the SLUSA. However, they argue that Defendant's allegedly wrongful conduct — the acceptance of the retention kickbacks and failure to inform Plaintiffs, the Class and the public about the same does not involve fraud "in connection with the purchase or sale" of the securities. Mot. at 16-17.

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