Book v. ProNai Therapeutics, Inc.
5:16-cv-07408
N.D. Cal.Jun 12, 2017Background
- Two related securities class actions (Book and Gallas) filed in California state court against ProNAi Therapeutics, its officers/directors, and IPO underwriters alleging violations of Sections 11 and 15 of the Securities Act of 1933 arising from a 2015 IPO.
- Defendants removed both actions to federal court; plaintiffs moved to remand to state court under 15 U.S.C. § 77v(a).
- Defendants opposed remand, arguing § 77v(a) grants exclusive federal jurisdiction over “covered class actions” asserting 1933 Act claims and therefore removal was proper.
- The district court reviewed prior district precedent (Young v. Pac. Biosciences) and multiple district decisions that interpreted § 77v(a) to bar removal of Securities Act-only class actions.
- The U.S. Supreme Court had pending certiorari petitions on the question of concurrent state-court jurisdiction over 1933 Act class actions; defendants moved to stay pending Supreme Court action.
- The court concluded § 77v(a) bars removal of class actions asserting only 1933 Act claims, granted plaintiffs’ remand motions, and denied defendants’ motions to stay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 77v(a) bars removal of class actions asserting only Securities Act claims | Section 77v(a) expressly bars removal of cases arising under the 1933 Act brought in state court | § 77v(a) should be read to give federal courts exclusive jurisdiction over “covered class actions” raising 1933 Act claims, permitting removal | Court held § 77v(a) bars removal of Securities Act-only class actions and remanded the cases |
| Whether the case should be stayed pending the Supreme Court’s potential resolution of the jurisdictional question | Stay unnecessary; remand required under § 77v(a) | Stay warranted because Supreme Court consideration could resolve removability and federal jurisdiction | Court denied stay because it concluded it lacks jurisdiction after remand ruling |
Key Cases Cited
- Gaus v. Miles, Inc., 980 F.2d 564 (9th Cir.) (removal burden on proponent and resolve doubts against removal)
- Ethridge v. Harbor House Rest., 861 F.2d 1389 (9th Cir. 1988) (removal statute must be strictly construed)
- Knox v. Agria Corp., 613 F. Supp. 419 (S.D.N.Y.) (court adopting interpretation that federal courts have exclusive jurisdiction over certain covered class actions)