Dennis Ex Rel. PICO Holdings, Inc. v. Hart
724 F.3d 1249
9th Cir.2013Background
- Dodd-Frank requires public companies to conduct an advisory say-on-pay vote at least every three years.
- PICO Holdings held a say-on-pay vote; a majority of shareholders expressed dissatisfaction with executive compensation.
- In May 2011, 61% voted against the 2010 compensation package; the Board took no action.
- Plaintiffs filed California state-law shareholder derivative suits against PICO and Board members.
- Defendants removed the actions to federal court and then sought dismissal/remand; district courts remanded portions for lack of jurisdiction.
- The court vacated the district court’s orders, remanded to state court, and dismissed cross-appeals for lack of jurisdiction; plaintiffs awarded costs of appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether removal was proper or required remand | Dennis/Assad argue improper removal to federal court | PICO contends federal jurisdiction exists under several theories | Removal improper; district court lacked jurisdiction to remand or rule on merits. |
| Whether Section 27 of the Exchange Act confers jurisdiction | Plaintiffs rely on federal authority to bar state-law claims | Defendants rely on Section 27 to confer exclusive federal jurisdiction | Section 27 does not confer jurisdiction here because claims are state-law and do not allege Exchange Act liability. |
| Whether the significant federal-issue doctrine confers jurisdiction | Federal issues embedded in state claims could trigger jurisdiction | Congressional intent to insulate say-on-pay from liability creates significant federal issue | No significant federal issue justifies federal jurisdiction; defense is insufficient for jurisdiction. |
| Whether the complete preemption doctrine applies | Complete preemption could convert state claims to federal ones | Exchange Act preemption would fully occupy field | Complete preemption does not apply; Exchange Act does not fully displace state-law claims. |
Key Cases Cited
- Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (U.S. 2005) (significant federal issue can support jurisdiction when substantial)
- Caterpillar, Inc. v. Williams, 482 U.S. 386 (U.S. 1987) (well-pleaded complaint rule governs federal-question jurisdiction)
- ARCO Envtl. Remediation, LLC v. Dep’t of Health & Envtl. Quality of Mont., 213 F.3d 1108 (9th Cir. 2000) (remand required when no subject-matter jurisdiction)
- Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941 (9th Cir. 2009) (complete preemption limited; not applicable here)
- Lippitt v. Raymond James Fin. Servs., Inc., 340 F.3d 1033 (9th Cir. 2003) (Exchange Act does not fully displace state law)
- Matsushita Electric Indus. Co. v. Epstein, 516 U.S. 367 (U.S. 1996) (dual litigation possible in state and federal courts)
- Sparta Surgical Corp. v. NASD, Inc., 159 F.3d 119 (9th Cir. 1998) (Section 27 not applicable when not enforcing Exchange Act provisions)