23 F. Supp. 3d 378
S.D.N.Y.2014Background
- MDL proceeding consolidates 19 cases where States and DC sue S&P (and Moody’s in Mississippi) over alleged deceptive practices in credit ratings.
- Seventeen State Cases were brought in state courts and removed to federal court; two Declaratory Judgment Cases were filed by S&P against South Carolina and Tennessee in federal court.
- Merits of claims are not at issue; central question is proper forum and jurisdiction for these disputes (federal vs. state courts).
- CRARA framework limits on preemption and requires state actions to enforce fraud/deceit remain viable; SEC regulations require disclosure but do not prohibit state enforcement actions.
- Court analyzes whether removal was proper under 28 U.S.C. § 1441 and whether CAFA or diversity applies, and whether Younger abstention requires dismissal/remand of declaratory actions.
- Court grants States’ remand motions for the State Cases, remands all State Cases to state court, and dismisses the Declaratory Judgment Cases under Younger abstention; Mississippi’s fee request denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the State Cases contain a federal question. | States argue no federal question; claims arise under state law. | S&P argues federal-question jurisdiction under Grable/S Grable-related theory. | No federal-question jurisdiction; remand appropriate. |
| Whether Mississippi case is removable under CAFA mass action or diversity. | Mississippi case removable under CAFA mass action or diversity. | Hood v. AU Optronics confines CAFA mass actions; diversity may be lacking. | CAFA mass-action removal invalid; complete diversity lacking; remand required. |
| Whether S&P’s Declaratory Judgment Cases should be dismissed under Younger abstention. | S&P seeks federal rulings; state actions pending; no substantial federal issue requirement for abstention. | Parallel state proceedings warrant abstention; federal interference inappropriate. | Younger abstention applies; Declaratory Judgment Cases dismissed. |
| Whether removal was objectively reasonable and costs/fees awarded. | Removal reasonable given CAFA/diversity theories. | Removal contested but colorable; costs denied only for Mississippi case. | Fees denied; removal had colorable basis. |
Key Cases Cited
- Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (U.S. 2005) (establishes substantial federal-question doctrine for Grable-jurisdiction)
- Gunn v. Minton, 133 S. Ct. 1059 (U.S. 2013) (four Grable factors for federal jurisdiction over state-law claims)
- Hood ex rel. Mississippi v. AU Optronics Corp., 134 S. Ct. 736 (U.S. 2014) (CAFA mass-action interpretation; limits removal under Hood)
- Purdue Pharma L.P. v. Kentucky, 704 F.3d 208 (2d Cir. 2013) (discusses state vs. federal jurisdiction and CAFA boundaries)
- New Orleans Pub. Serv., Inc. v. Council of City of New Orleans, 491 U.S. 350 (U.S. 1989) (abstention framework and preemption considerations)
- Caterpillar Inc. v. Williams, 482 U.S. 386 (U.S. 1987) (federal question jurisdiction cannot be inferred from federal defenses)
- D’Alessio v. New York Stock Exchange, Inc., 258 F.3d 93 (2d Cir. 2001) (illustrates removal where state claims rest on federal-law considerations)
- Barbara v. New York Stock Exchange, Inc., 99 F.3d 49 (2d Cir. 1996) (state contract-like issues grounded in internal rules; not federalized)
- Shinnecock Indian Nation v. City of Long Beach, 686 F.3d 133 (2d Cir. 2012) (limits on federal-question jurisdiction where federal issue is not central)