Stephens v. Gentilello, 853 F. Supp. 2d 462

Background

Plaintiffs filed a putative class action in New Jersey state court (Stephens v. Gentilello) alleging negligent sale of annuities without a Guaranteed Income Benefit Rider (GIB Rider).
Defendants removed the case to federal court in 2009 under SLUSA, asserting preemption for a securities class action based on misrepresentations or omissions.
Plaintiffs amended to drop the NJ Consumer Fraud Act claim and the matter was remanded to state court in 2010 after Defendants acknowledged SLUSA did not apply.
A Second/Third Amended Class Action Complaint in state court maintained state-law claims (breach of contract, fiduciary duty, negligence, unjust enrichment).
In 2011, multiple defendants again removed to federal court arguing SLUSA applicability, based in part on deposition testimony alleging misrepresentations.
The court granted remand, holding the second removal untimely and that deposition testimony did not establish a SLUSA predicate; fees for removal were denied with each side bearing its own costs.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does SLUSA apply to remove the state-law claims here?	Stephens contends SLUSA does not apply; misrepresentations are not a predicate of the claims.	Defendants argue the misrepresentation allegations and deposition testimony show a covered class action involving a covered security.	No; SLUSA does not apply as misrepresentations were not a predicate to liability and removal was improper.
Does deposition testimony convert the action into a SLUSA-covered removal?	Deposition statements are background and not the factual predicate; they do not establish a federal issue per SLUSA.	Depositions show grounds for removal by alleging fraud/misrepresentation connected to securities.	No; deposition testimony did not establish a SLUSA predicate sufficient for removal.
Was the second removal timely under 28 U.S.C. § 1446(b)?	Removal based on deposition testimony on July 20, 2011; filed October 4, 2011, beyond 30 days.	Argues receipt of discovery or other papers could restart the 30-day clock.	Untimely; removal was more than 30 days after ascertaining removability.
Should the court award attorneys’ fees and costs under § 1447(c)?	Defendants’ second removal was improper and delaying; fees should be awarded.	Removal was arguably reasonable given arguments and case complexity.	Denied; court declined to award fees given lack of objective unreasonableness in removal.

Key Cases Cited

Grable & Sons Metal Prods., Inc. v. Dane Eng’g & Mfg., 545 U.S. 308 (U.S. 2005) (embedded federal issue must be substantial for jurisdiction in state-law claims)
Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677 (U.S. 2006) (federal interest must justify turning state claim into federal case)
City of Chicago v. Int’l College of Surgeons, 522 U.S. 156 (U.S. 1997) (well-pleaded complaint rule; federal question must be raised by complaint)
Caterpillar Inc. v. Williams, 482 U.S. 386 (U.S. 1987) (plaintiff masters complaint; cannot rely on federal questions embedded in defenses)
Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804 (U.S. 1986) (jurisdiction cannot be sustained on plaintiff’s theory not advanced)
Abels v. State Farm Fire & Gas. Co., 770 F.2d 26 (3d Cir. 1985) (strict construction of removal statutes favors remand)
Bowles v. Russell, 551 U.S. 205 (U.S. 2007) (Congress decides federal court jurisdiction and timing rules)
Samuel-Bassett v. Kia Motors Am., Inc., 357 F.3d 392 (3d Cir. 2004) (burden on removing party to prove jurisdiction at all stages)
Rowinski v. Salomon Smith Barney, Inc., 398 F.3d 294 (3d Cir. 2005) (misrepresentation in predicate analysis for SLUSA removal)
LaSala v. Bordier et Cie, 519 F.3d 121 (3d Cir. 2008) (distinguishes essential vs. background misrepresentations for SLUSA)
Brown v. Calamos, 664 F.3d 123 (7th Cir. 2011) (background misrepresentations do not compel SLUSA removal)
Prager v. Knight/Trimark Group, 124 F.Supp.2d 229 (D.N.J. 2000) (test for removal under SLUSA in district court)