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).
U. S. District Judge Aleta A. Trauger, of the Middle District of Tennessee, considering one of the exceptions to federal jurisdiction under the Class Action Fairness Act of 2005, granted the plaintiffs’ motion to remand on the grounds that the Securities Act of 1933 exception under CAFA “carved out” the plaintiff’s claims, so CAFA was inapplicable.
On May 31, 2005, the plaintiff filed a shareholder class action in the Chancery Court for Nashville, Davidson County, Tennessee, seeking equitable relief only. The causes of action were based on Delaware state law, and included breach of fiduciary duty and self-dealing claims surrounding a corporate merger scheduled to take place in August of 2005. The defendants removed the case to federal court, alleging federal jurisdiction under CAFA. The plaintiff moved to remand, asserting that a breach of fiduciary duty claim was one of the “carve outs” under CAFA, thereby making the case non-removable.
The Court noted that while CAFA applied to civil class actions commenced on or after February 18, 2005 and that this case met that criterion, 28 U.S.C. § 1453(d) provides that a class action arising solely upon duties and obligations imposed by the Securities Act of 1933 is not within the purview of CAFA. The defendants argued that Section 1453 was ambiguous; however, neither side was able to cite any cases interpreting the section. The Court disagreed with the defendant’s argument, and found that the wording of the section was not ambiguous, and thus, there was no need to trigger the expansion of its inquiry into the legislative history of CAFA.
The defendant also argued that the claims included an “imbedded federal question” based on the plaintiff’s allegation that the defendant had made misstatements in its requisite SEC filings. However, the Court disposed of that argument, since the plaintiff had made Delaware state law breach of fiduciary and self-dealing claims only, and a finding of a SEC or other federal law violation was not essential to the resolution of those state law claims.
The Court held that it did not find the language of Section 1453 “ambiguous in the least,” and since any class action solely based upon breach of fiduciary duty in connection with a security is excepted from CAFA, granted the plaintiff’s motion to remand. The Court also denied the plaintiff’s motion for attorney’s fees, since there was no case law interpreting the relevant section of CAFA.