In re Facebook, Inc.
922 F. Supp. 2d 475
S.D.N.Y.2013Background
- Zack moves to remand the proposed class action to NY state court under 28 U.S.C. § 1447(c); NASDAQ removed citing federal question jurisdiction under the Exchange Act.
- This action is one of 11 NASDAQ actions alleging NASDAQ’s IPO-related system failures affected Facebook orders during the May 18, 2012 IPO.
- Plaintiff alleges NASDAQ negligently designed and operated the Cross process and failed to halt trading or cancel the IPO as needed, causing damages.
- MDL Panel assigned related actions to this SDNY court for pretrial proceedings, with pre-trial orders addressing remand motions.
- Plaintiff re-filed the remand motion on Nov. 14, 2012; the motion was fully submitted by Dec. 12, 2012; the court denies remand.
- Rule 4626 and accompanying regulatory context are discussed as background for NASDAQ’s duties under the Exchange Act.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Grable federal-question jurisdiction exists | Barbara controls; no federal question | Grable applies; substantial federal issue | Grable jurisdiction exists for substantial federal issue |
| Whether NASDAQ duties raise a substantial federal interest | Duties are state-law design issues | Exchange Act duties create federal interest | Yes; substantial federal interest exists |
| Whether Barbara controls remand outcome | Barbara bars federal jurisdiction | Barbara distinguishable; Exchange Act duties involved | Distinguished; Grable applies |
| Whether the complaint raises a federal question by predicating state claims on Exchange Act rules | Claims rely on state negligence only | Claims implicate federal securities rules under Exchange Act | Rises to federal question under Grable |
Key Cases Cited
- Grable & Sons Metal Prods., Inc. v. Darue Engineering & Mfg., 545 U.S. 308 (U.S. 2005) (federal-question jurisdiction if federal issue is substantial and central)
- Barbara v. New York Stock Exch., 99 F.3d 49 (2d Cir. 1996) (internal exchange rules are not federal questions; preemption concerns)
- D'Alessio v. New York Stock Exch., 258 F.3d 93 (2d Cir. 2001) (federal interest where NYSE duties enforced under Exchange Act)
- Vaden v. Discover Bank, 556 U.S. 49 (U.S. 2009) (well-pleaded complaint rule with Grable exception)
- Rivet v. Regions Bank, 522 U.S. 470 (U.S. 1998) (preemption and removal principles guiding federal question jurisdiction)
- Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321 (2d Cir. 2011) (burden of jurisdiction rests with removing party)