Plumbers' Union Local No. 12 Pension Fund v. Nomura Asset Acceptance Corp..

Decision Date20 January 2011
Docket NumberNo. 09–2596.,09–2596.
CourtU.S. Court of Appeals — First Circuit
PartiesPLUMBERS' UNION LOCAL NO. 12 PENSION FUND, Individually and on behalf of all others similarly situated; Plumbers' & Pipefitters' Welfare Educational Fund; NECA–IBEW Health & Welfare Fund, Plaintiffs, Appellants,v.NOMURA ASSET ACCEPTANCE CORPORATION; John P. Graham; Nathan Gorin; John McCarthy; David Findlay; Alternative Loan Trust 2006–AF1; Alternative Loan Trust 2006–AF2; Alternative Loan Trust 2006–AP1; Alternative Loan Trust AR2; Alternative Loan Trust AR3; Alternative Loan Trust 2006–AR4; Alternative Loan Trust 2006–WF1; Nomura Securities International, Inc.; Greenwich Capital Markets, Inc.; UBS Securities, LLC; Citigroup Global Markets, Inc.; Merrill Lynch, Pierce, Fenner & Smith, Inc.; Goldman, Sachs & Co.; Alternative Loan Trust 2006–AR1, Defendants, Appellees.


Eric Alan Isaacson with whom Arthur C. Leahy, Joseph D. Daley, Thomas E. Egler, Susan G. Taylor, Nathan R. Lindell, Amanda M. Frame, Coughlin Stoia Geller Rudman & Robbins LLP, Thomas G. Shapiro, Adam M. Stewart, Robert E. Ditzion and Shapiro Haber & Urmy LLP were on brief for appellants.Stephen D. Poss with whom Sarah Heaton Concannon and Goodwin Procter LLP were on brief for the issuer defendants, appellees Nomura Asset Acceptance Corporation, John P. Graham, Nathan Gorin, John McCarthy, David Findlay, Alternative Loan Trust 2006–AF1, Alternative Loan Trust 2006–AF2, Alternative Loan Trust 2006–AP1, Alternative Loan Trust 2006–AR1, Alternative Loan Trust 2006–AR2, Alternative Loan Trust 2006–AR3, Alternative Loan Trust 2006–AR4, Alternative Loan Trust 2006–WF1.William H. Pane with whom Mark C. Fleming, Timothy J. Perla and Wilmer Cutler Pickering Hale and Dorr LLP were on brief for the underwriter defendants, appellees Nomura Securities International, Inc., Greenwich Capital Markets, Inc., UBS Securities LLC, Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Inc., and Goldman, Sachs & Co.Before BOUDIN and HOWARD, Circuit Judges, and BARBADORO,* District Judge.BOUDIN, Circuit Judge.

Three union pension and welfare funds 1 appeal from a district court order dismissing at the complaint stage their putative class action against eight trusts, the “depositor” that organized them, the trusts' underwriters and five officers of the depositor. The lawsuit sought redress for losses suffered when plaintiffs acquired trust certificates representing mortgage-backed securities. The background facts are largely undisputed.

The lead defendant, Nomura Asset Acceptance Corporation (Nomura Asset), played the organizing role in the creation of the securities at issue in this case. As depositor, it acquired mortgages from various banks and transferred them to the eight trusts, all of which are separate legal entities. Each trust pooled the mortgages acquired by it and, with Nomura Asset, issued trust certificates representing interests in that trust. Then Nomura Asset and the trusts worked with underwriters to sell the certificates to investors.

The certificates constitute securities under the federal securities laws, and to permit their initial sale, a registration statement was required, disclosing information about the securities being offered. One registration statement, filed on July 22, 2005, covered three trusts (2006–AP1, 2006–AR1, 2006–AR2); the other, filed on April 19, 2006, covered the remaining five (2006–AF1, 2006–AF2, 2006–AR3, 2006–AR4, 2006–WF1). These were “shelf registrations,” see 17 C.F.R. § 230.415(a) (2010), signaling an intent to offer securities in the future and containing certain information about Nomura Asset, the trusts and the securities.

The registration statements were not themselves offerings and did not become effective until Nomura Asset and the trusts updated them by filing prospectus supplements that described the details of the offering for each trust. The registration statements and prospectus supplements (collectively, “offering documents”) explain in detail the characteristics of the mortgages that Nomura Asset acquired and transferred to each trust. The federal securities laws, yet to be discussed, impose liability for false or misleading statements causing harm to purchasers.

In this case, plaintiffs bought trust certificates representing interests in two of the eight trusts; one trust (AP1 trust) was covered by the earlier registration statement and a September 27, 2005, prospectus supplement; the other (AF1 trust), by the later of the two registration statements and a May 25, 2006, prospectus supplement. One of the three plaintiffs bought certificates in the AF1 trust, a second in the AP1 trust and the third in both trusts. Thereafter, on November 13, 2007, Moody's downgraded the rating of all of the certificates for all eight trusts and the certificates are now worth much less than what plaintiffs originally paid for them. This lawsuit followed shortly thereafter.

On January 31, 2008, one of the three union funds filed suit in state court, asserting violations of sections 11, 12(a)(2) and 15 of the Securities Act of 1933, 15 U.S.C. §§ 77k(a), 77 l(a)(2), 77 o (2006). Section 11 imposes liability for false or misleading statements contained in a registration statement, id. § 77k(a); section 12(a)(2) imposes similar liability on sellers who make such statements in a prospectus or oral communication, id. § 77 l(a)(2). Section 15 imposes liability on one who “controls any person liable” under sections 11 or 12. Id. § 77 o .

The case was removed to federal district court, the other funds entered as plaintiffs and ultimately a joint amended complaint was filed listing as defendants Nomura Asset, the eight trusts, the trusts' underwriters and five officers and directors of Nomura Asset.2 The gravamen of the complaint is that the offering documents contained false or misleading statements, and as a result plaintiffs purchased securities whose true value when purchased was less than what was paid for them. The suit was cast as a class action comprised of purchasers of the certificates of the eight trusts covered by the two registration statements.

Defendants filed motions to dismiss for lack of standing, Fed.R.Civ.P. 12(b)(1), and for failure to state a claim, Fed.R.Civ.P. 12(b)(6). On September 30, 2009, the district court granted defendants' motions to dismiss and entered judgment. Claims related to the trusts whose certificates had been purchased by none of the named plaintiffs were dismissed for lack of Article III standing; claims relating to the other two trusts were dismissed on statutory grounds; and no class was ever certified. The present appeal followed.

Jurisdiction. At the outset, plaintiffs say that the original action brought in state court may have been improperly removed and that the district court may thus have lacked subject matter jurisdiction; although plaintiffs did not contest jurisdiction until they lost the case in the district court, lack of subject matter jurisdiction can be noticed at any time and cannot be waived. United States v. Cotton, 535 U.S. 625, 630, 122 S.Ct. 1781, 152 L.Ed.2d 860 (2002); Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 93–94, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998). But we conclude that any flaw in the removal was not one of subject matter jurisdiction and therefore has been waived or forfeited for lack of a timely objection. 28 U.S.C. § 1447(c) (2006) (requiring objection within 30 days of removal).

Removal is ordinarily permitted in civil actions where the same case could originally have been brought in federal court [e]xcept as otherwise expressly provided by Act of Congress.” 28 U.S.C. § 1441(a). One exception—section 22 of the Securities Act, 15 U.S.C. § 77v(a)—is that “no case arising under [the Securities Act] and brought in any State court of competent jurisdiction shall be removed to any court of the United States.” However, assuming that this limitation applied,3 we conclude that section 22's limitation would not be one of subject matter jurisdiction but merely an advantage that a plaintiff could forfeit by failure to make timely objection.

There are some casual references in reported circuit-court decisions to section 22 as a limitation on subject matter jurisdiction, e.g., Emrich v. Touche Ross & Co., 846 F.2d 1190, 1197–98 (9th Cir.1988) (but the objection was made within 30 days, so that conclusion was dictum); Westinghouse Credit Corp. v. Thompson, 987 F.2d 682, 683 (10th Cir.1993) (but the remand order was unreviewable whatever the defect); yet a larger number of circuits have held that similarly phrased anti-removal provisions do not implicate subject matter jurisdiction.4

Civil suits asserting claims under the Securities Act are within the “arising under” clause of Article III and can easily be brought as original actions in federal court. 15 U.S.C. § 77v(a). Although expressed as a bar on removal of such cases from state court, section 22(a)'s aim is not to preclude hearing such cases in federal court but instead to “favor [ ] plaintiffs' choice of forum.” Pinto v. Maremont Corp., 326 F.Supp. 165, 167 n. 2 (S.D.N.Y.1971); see Cook, Recrafting the Jurisdictional Framework for Private Rights of Action Under the Federal Securities Laws, 55 Am. U. L. Rev. 621, 632–34 (2006).

Given that federal courts are otherwise competent to address federal securities claims and do so all the time, it makes far more sense to view section 22 as creating a waivable right to insist on non-removal. That course achieves the statute's aim to protect the plaintiff's preference for a state forum, but it prevents the mischief of allowing a party to sit on an objection, raising it only if and when the objector is dissatisfied with the result. Cf. 14C C. Wright, A. Miller, E. Cooper & J. Steinman, Federal Practice & Procedure § 3739, at 817–18 (4th ed. 2009) (limiting removal objections to thirty-day period prevents...

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