Indiana State District Council of Laborers and HOD Carriers Pension Fund v. Renal Care Group, Inc., No. Civ. 3:05-0451, 2005 WL 2000658 (M.D. Tenn. August 18, 2005).
Judge Aleta A. Trauger, writing for the U. S. District Court for the Middle District of Tennessee, examined one of the exceptions to federal jurisdiction conferred under the Class Action Fairness Act of 2005. The court granted the plaintiffs’ motion to remand on the basis that one of the CAFA exceptions “carved out” claims regarding the Securities Act of 1933.
On May 31, 2005, the plaintiff filed a shareholder class action in the Chancery Court of Davidson County, Tennessee, in which the causes of action were based on alleged breach of fiduciary duties surrounding a corporate merger scheduled to take place in August, 2005. The defendants quickly removed the case to federal court, alleging federal jurisdiction under CAFA. The plaintiff timely moved to remand, on the ground that a breach of fiduciary duty claim was “carved out” of CAFA by the language of the Act, thereby making CAFA inapplicable as grounds for federal jurisdiction.
The court noted while that CAFA applied to civil class actions commenced on or after February 18, 2005, Section 1453(d), however, provides that a class arising solely upon duties and obligations under the Securities Act of 1933 is not within the purview of CAFA. The defendants argued an ambiguity in the construction of Section 1453, but neither side could cite any cases interpreting the section. The court disagreed with the defense position, and did not find any wording of the section to be ambiguous so as to trigger expansion of the judicial inquiry into the legislative history of CAFA. The court held that section 1453 was clear and unambiguous, and any class action solely based upon breach of fiduciary duty in connection with a security is a “carve out” from CAFA, so the plaintiff’s motion to remand was granted.