In re Textainer Partnership Securities Litigation, No. C05-0969MMC, 2005 WL 1791559 (N.D. Cal. July 27, 2005).
California U. S. District Judge Maxine M. Chesney, in her decision issued July 27, 2005, ruled that a plaintiff in a class action case removed under the Class Action Fairness Act of 2005, bears the burden of demonstrating that the removal was improper. Judge Chesney also considered, for the first time, the exception to CAFA jurisdiction contained in the lanuage of the Act relating to corporate affairs and governance suits.
The plaintiff, Leonard Labow, filed his purported class action in California state court on behalf of himself and the holders of various limited partnership units issued by various Textainer partnerships against the general partners, challenging a proposed sale of partnership assets and asserting a single cause of action for breach of fiduciary duty under California state law. The defendants removed the case to federal court, primarily relying on CAFA, arguing that CAFA’s jurisdictional requirements of more than $5,000,000 amount in controversy, minimal diversity and more than 100 class member plaintiffs were satisfied.
Addressing the plaintiff’s motion to remand, the court stated that while a defendant ordinarily bears the burden of proving that removal was proper, CAFA’s legislative history indicates that the plaintiff, as the party challenging federal jurisdiction, has the burden of proving that an action removed under CAFA should be remanded. The court also endorsed the statement contained in the Senate Judiciary Committee Report that CAFA’s jurisdictional provisions “should be read broadly, with a strong preference that interstate class actions should be heard in a federal court if removed by any defendant.”
The court determined that, although all of the jurisdictional requirements of Section 1332(d)(5) had been met, CAFA nevertheless did not apply since the CAFA exceptions to corporate governance suits, as set out in Sections 1332(d)(9)(B) and 1453(d)(2), were applicable to this case. Specifically, the plaintiff established to the court’s satisfaction that his breach of fiduciary claims related to the internal affairs or governance of a corporation, and that those claims arose under the laws of the state in which the corporation was organized; consequently, CAFA did not apply. The court also disposed of the defendants’ federal question jurisdiction argument, and granted the plaintiff’s motion to remand.