3 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA INTRODUCTION

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1 Case:-cv-0-WHO Document Filed0/0/ Page of UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA 0 PLYMOUTH COUNTY RETIREMENT SYSTEM, v. Plaintiff, MODEL N, INC., et al., Defendants. Case No. -cv-0-who ORDER GRANTING MOTION TO REMAND Re: Dkt. No.. a 0 INTRODUCTION The issue I must decide on plaintiff s motion to remand is whether it was proper to remove this securities class action from the Superior Court of the Ste of California, County of San Meo. Plaintiff Plymouth County Retirement System ( Plymouth ) argues th the Securities Act of (the Securities Act ) prohibits removal of cases, like this one, th are filed in ste court and th assert only Securities Act claims. Plymouth is correct. Contrary to defendants contentions, the amendments to the Securities Act effected through the Securities Litigion Uniform Standards Act of ( SLUSA ) do not provide a basis for remand. Plymouth s motion is GRANTED. Pursuant to Civil Local Rule -(b), the hearing on the motion set for January, 0 is VACATED. BACKGROUND Plymouth brings this securities class action on behalf of all persons who purchased or otherwise acquired the common stock of Model N, Inc. ( Model N ) pursuant to the registrion stement and prospectus issued in connection with Model N s March 0, 0 initial public stock offering. The complaint asserts three causes of action, each for violions of the Securities Act, against Model N, certain Model N officers and directors, and the underwriters of the initial public stock offering (collectively, defendants ). Plymouth initially filed the action in the Superior Court of the Ste of California for the County of San Meo on September, 0. On October

2 Case:-cv-0-WHO Document Filed0/0/ Page of. CZ a 0 0, 0, defendants removed the case to federal court under U.S.C. (a), which authories the removal of any civil action over which the federal district courts have original jurisdiction [e]xcept as otherwise provided by Act of Congress. U.S.C. (a). LEGAL STANDARD A defendant sued in ste court may remove the action to federal court if the action could have been brought in federal court in the first instance. U.S.C. (a). Removal is generally based on the existence of either federal question jurisdiction or diversity jurisdiction. Federal question jurisdiction exists where the action aris[es] under the Constitution, laws, or treies of the United Stes. U.S.C.. Diversity jurisdiction exists where the amount in controversy exceeds $,0 and the case is between citiens of different stes, or citiens of a ste and citiens or subjects of a foreign ste. U.S.C. (a)(). A defendant desiring removal must file in the approprie United Stes district court a notice of removal containing a short and plain stement of the grounds for removal, together with a copy of all process, pleadings, and orders thus far served upon the defendant in the action. U.S.C.. If any time following removal, it appears th removal was improper because of a lack of subject mter jurisdiction, the case must be remanded to ste court. U.S.C. (c). The Ninth Circuit strictly construe[s] the removal stute against removal jurisdiction; accordingly, [f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance. Gaus v. Miles, Inc., 0 F.d, (th Cir. ) (internal quotion marks and citions omitted). This strong presumption against removal jurisdiction means th the defendant generally has the burden of proving, by a preponderance of the evidence, th removal was proper. Singer v. Ste Farm Mut. Auto. Ins. Co., F.d, (th Cir.); Gaus, 0 F.d. However, where a plaintiff seeks remand based on an express exception to removal jurisdiction, the plaintiff has the burden of proving th the express exception exists and applies to his case. Luther v. Countrywide Home Loans Servicing LP, F.d 0, 0 (th Cir. ); Serrano v. 0 Connect, Inc., F.d 0, 0- (th Cir. ). On December, 0, defendants submitted a Stement of Recent Decision pursuant to Civil Local Rule -(d)() bringing to my tention the Supreme Court s recent decision in

3 Case:-cv-0-WHO Document Filed0/0/ Page of DISCUSSION. CZ a 0 0 The dispute the center of this motion has genered a significant split among district courts, with a growing majority ruling in favor of Plymouth s position. The issue arises from the amendments to the Securities Act effected through SLUSA. It is undisputed th before SLUSA, the Securities Act s jurisdictional and antiremoval provisions would have barred removal of this case. The jurisdictional provision placed unqualified concurrent jurisdiction over Securities Act claims in both ste and federal courts, while the antiremoval provision sted, No case arising under this subchapter and brought in any Ste court of competent jurisdiction shall be removed to any court of the United Stes. SLUSA made the removal question less clear. SLUSA amended section v(a), which contains the Securities Act s jurisdictional and antiremoval provisions, by adding the following italicied language: The district courts of the United Stes and the United Stes courts of any Territory shall have jurisdiction of offenses and violions under this subchapter and under the rules and regulions promulged by the Commission in respect thereto, and, concurrent with Ste and Territorial courts, except as provided in section p of this title with respect to covered class actions, of all suits in equity and actions law brought to enforce any liability or duty creed by this subchapter... Except as provided in section p(c) of this title, no case arising under this subchapter and brought in any Ste court of competent jurisdiction shall be removed to any court of the United Stes. U.S.C. v(a). Section p(c), which was also added by SLUSA, provides: Any covered class action brought in any Ste court involving a covered security, as set forth in subsection (b), shall be removable to the Federal district court for the district in which the action is pending, and shall be subject to subsection (b). U.S.C. p(c). Dart Cherokee Basin Opering Co., LLC v. Owens, No. -, 0 WL (U.S. Dec., 0). Defendants ste th portions of Dart Cherokee are relevant to which party has the burden of proving the propriety of removal here. Dkt. No. 0. Having read the decision, I find th it does not merially impact the outcome in this case.

4 Case:-cv-0-WHO Document Filed0/0/ Page of. a 0 0 Section p(b), another SLUSA addition, describes certain securities class actions th are now completely precluded under the Securities Act: No covered class action based upon the stutory or common law of any Ste or subdivision thereof may be maintained in any Ste or Federal court by any prive party alleging () an untrue stement or omission of a merial fact in connection with the purchase or sale of a covered security; or () th the defendant used or employed any manipulive or deceptive device or contrivance in connection with the purchase or sale of a covered security. U.S.C. p(b). Finally, SLUSA added a definitions provision, section p(f), which defines covered class action to include any single lawsuit in which... damages are sought on behalf of more than 0 persons or prospective class members, [or] one or more named parties seek to recover damages on a representive basis on behalf of themselves and other unnamed parties similarly situed. U.S.C. p(f)()(a). Plymouth asserts th removal was improper because this case does not fit within the section p(c) exception to the Security Act s antiremoval provision. According to Plymouth, the section p(c) exception applies only to covered class action[s]... as set forth in subsection (b). Section p(b), in turn, applies only to class action[s] based upon the stutory or common law of any Ste. Thus, because Plymouth brings only Securities Act claims, not ste law claims, removal of the action is barred by the antiremoval provision in section v(a). Defendants respond by focusing on the SLUSA amendment to the Securities Act s jurisdictional provision. Under th provision, ste courts now have concurrent jurisdiction over Securities Act claims except as provided in section p of this title with respect to covered class actions. While section p contains four subsections th refer to covered class actions, including section p(b) and section p(c) discussed above, defendants contend th the jurisdictional provision s reference to section p must be read as a reference to the definition of covered class action contained in section p(f). The parties do not dispute th this case qualifies as a covered class action under th definition. See Opp. n. (Dkt. No. ). Thus,

5 Case:-cv-0-WHO Document Filed0/0/ Page of 0 I according to defendants, the jurisdictional provision as amended by SLUSA strips ste courts of concurrent jurisdiction over this case and cases like it, meaning th the antiremoval provision which applies only to suits brought in ste courts of competent jurisdiction is no bar to removal here. Plymouth has the better of these arguments. Until recently, district courts had split more or less evenly over the two interpretions. Toth v. Envivo, Inc., No. -cv-0-cw, 0 WL, * n. (N.D. Cal. Oct., 0) (citing twenty-nine cases, sixteen granting remand and thirteen denying). Since 0, however, every court in this district to address the issue has granted remand. See Desmarais v. Johnson, No. -cv-0-wha, 0 WL, *- (N.D. Cal. Oct., 0); Toth, 0 WL, *-; Reyes v. Zynga Inc, No. -cv--jsw, 0 WL, *- (N.D. Cal. Jan., 0). Likewise, in the. a 0 Central District of California, courts have uniformly granted remand since. See Rajasekaran v. CytRx Corp., No. -cv-00, 0 WL 0, *- (C.D. Cal. Aug., 0); W. Virginia Laborers Trust Fund v. STEC Inc., No. -cv-0, 0 WL, *- (C.D. Cal. Oct., 0); Layne v. Countrywide Fin. Corp., No. 0-cv-0, WL 0, * (C.D. Cal. July, ); Pipefitters Locals & Pension Trust Fund v. Salem Commc ' ns Corp., No. 0-cv-00, WL, *- (C.D. Cal. June, ). The Central District judge who denied remand in reversed her position in, sting: In considering the issue again, the Court now has available a number of more recent authorities th inform the analysis and prompt the conclusion th remand is approprie. Layne, WL 0, * n. (citing Purowit v. DreamWorks Animion SKG, Inc., No. 0-cv-0, WL 0 (C.D. Cal. Nov., )). This appears to be emerging as the dominant view around the country. Plymouth stes th not a single district court in any district has denied remand since August 0. Mot. - (Dkt. No. ). The cases cited by defendants support this assertion. The most recent case denying remand th defendants cite is from August 0; the rest are from or earlier. Opp. - n.. Plymouth s interpretion of the SLUSA amendments is further supported by dicta from the Supreme Court s decision in Kircher v. Putnam Funds Trust, U.S. (). In th

6 Case:-cv-0-WHO Document Filed0/0/ Page of. CZ a 0 0 case, the Court considered whether a decision to remand a case removed under SLUSA is appealable despite U.S.C. (d) s mande th [a]n order remanding a case to the Ste court from which it was removed is not reviewable, except in certain limited circumstances. Id.. In ruling th such orders may not be appealed, the Supreme Court explicitly endorsed Plymouth s narrow reading of the section p(c) exception to the Security Act s antiremoval provision. The Court sted th authoriion for the removal in [section p(c)], on which the District Court s jurisdiction depends, [is] confined to cases set forth in [section p(b)]. Id. (internal quotion marks omitted). In other words, removal jurisdiction under [section p(c)] is... restricted to precluded actions defined by [section p(b)]. Id. -. Thus, where a Securities Act case filed in ste court is not precluded by section p(b), a federal court has no jurisdiction to touch the case on the merits, and the proper course is to remand to the ste court. Id.. I agree with those courts th have found th while the analysis in Kircher may be dicta, it is nevertheless highly persuasive. Rajasekaran, 0 WL 0, *; see also, Desmarais, 0 WL, *- (granting remand based in part on Kircher); W. Virginia Laborers Trust Fund, 0 WL, *- (same); Layne v. Countrywide Fin. Corp., WL 0 (same); Niitsoo v. Alpha Nural Res., Inc., 0 F. Supp. d, 0-0 (S.D. W. Va. 0) (noting th [t]he stements in Kircher... are particularly strong dicta th address the exact issue of stutory interpretion th is before me today and concluding th section p(c) means exactly wh the Supreme Court says it means in Kircher ). The Ninth Circuit has also provided dicta th reinforces Plymouth s position. In Madden v. Cowen & Co., F.d (th Cir. ), the court of appeals sted: To prevent actions precluded by SLUSA from being litiged in ste court, SLUSA authories defendants to remove such actions to federal court, effectively ensuring th federal courts will have the opportunity to determine whether a ste action is precluded. As the Supreme Court has explained, any suit removable under SLUSA s removal provision, p(c), is precluded under SLUSA s preclusion provision, p(b), and any suit not precluded is not removable. Id. - (th Cir. ) (citing Kircher, U.S. ) (footnotes omitted). Similarly, in Luther v. Countrywide Home Loans Servicing LP, F.d 0 (th Cir. ), the Ninth

7 Case:-cv-0-WHO Document Filed0/0/ Page of Circuit sted th the antiremoval provision in section v(a) strictly forbids the removal of. a 0 0 cases brought in ste court and asserting claims under the [Securities Act]. Id. 0. Thus, by virtue of [section v(a)], the plaintiff s ste court class action alleging only violions of the Securities Act of was not removable, and the district court properly remanded the case to ste court. Id. 0. Weighed against these authorities, defendants counterarguments are not persuasive. Defendants contention th decisions granting remand do not adequely address the SLUSA amendment to the Security Act s jurisdictional provision amounts to mere disagreement with the analysis in those decisions. See Opp. -. The legislive history cited by defendants is hardly compelling, particularly in light of the considerable legislive history cited by Plymouth (and a number of other courts) th supports remand in circumstances like those issue here. See Mot. -0; see also, Desmarais, 0 WL, * (describing SLUSA s legislive history as murky and quoting legislive stements in support of both parties interpretions of the SLUSA amendments); Reyes, 0 WL, * (same); Rajasekaran, 0 WL 0, * (same); Unschuld v. Tri-S Sec. Corp., No. 0-cv-0, WL 0, *- (N.D. Ga. Sept., ) (same). CONCLUSION Accordingly, the motion to remand is GRANTED. This action is remanded to the Superior Court of the Ste of California for the County of San Meo. IT IS SO ORDERED. Ded: January, 0 WILLIAM H. ORRICK United Stes District Judge Defendants ask th I certify this order for review by the Ninth Circuit under U.S.C. (b). Opp.. The request is DENIED. Whether or not a remand order is appealable under section (b), I do not find th certificion is approprie here. See Couch v. Telescope Inc., F.d, - (th Cir. ) (discussing the prerequisites for review under section (b)); Desmarais, 0 WL, * ( Both sides agree th in light of section (d), a remand order is not appealable under section (b). ) (emphasis omitted).