Duane Morris Class Action Review - 2023 - Report - Page 89
that the 30-day removal deadline under § 1446(b)(3) is not triggered by the defendant’s
possession of information about removability. The litigation involved parallel state class
actions alleging that the defendants’ stores charged an amount for notary services that
exceeded the $2.50 fee permitted by New Jersey state law. Id. at 234. Neither
complaint alleged that the amount-in-controversy exceeded $5 million, as required for
removal under the CAFA. Id. at 235. During the course of the state litigation, one
defendant produced a spreadsheet that disclosed the number of transactions at issue,
which revealed that each case had an amount-in-controversy exceeding $5 million. Id.
More than seven months later (and after an adverse appellate decision affirming the
denial of the defendants’ motion to dismiss), the defendants removed both complaints
on the basis that the CAFA’s jurisdictional requirements were met. Id. The district court
remanded the cases back to state court after finding that the defendants’ removal was
untimely under § 1446(b). Id. The Third Circuit vacated the district court’s remand order.
It reasoned that the spreadsheet the defendant produced was not received by the
defendants for purposes of the CAFA and thus did not trigger the 30-day removal clock.
Id. at 241. The Third Circuit explained that the removal clock under the CAFA is
triggered based only on what a defendant can ascertain from the four corners of a
complaint or other paper the defendant “receives” and that § 1446(b) does not impose a
duty to search company records to investigate possible removal grounds. Id. at 239. For
these reasons, the Third Circuit held that the district court erred.
In Bernstein, et al. v. Bristol-Myers Squibb Co., 2022 U.S. Dist. LEXIS 171437 (D.N.J.
Sep. 22, 2022), the plaintiff filed a class action in state court, alleging that the
defendants’ Form S-4 statement filed with the U.S. Securities and Exchange
Commission pertaining to certain Contingent Value Rights (Registration Statement) was
false and misleading, and constituted a violation of the Securities Act of 1933. Id. at *2.
The defendants removed the action pursuant to the CAFA. The plaintiff subsequently
filed a motion to remand, and the court granted the motion. The defendants thereafter
filed a motion to transfer venue, and the court denied the motion. The plaintiff
contended that the defendants’ Registration Statement failed to disclose actions the
defendants were taking that would delay approval by the Food and Drug Administration
of a cancer therapy a company it recently acquired had been developing, which would
prevent a $6.4 billion payout promised to stockholders. Id. at *2-3. The defendants filed
a motion to transfer the case to the U.S. District Court for the Southern District of New
York on the grounds that there were three substantially similar actions that were already
pending in that district. The plaintiff asserted that the CAFA did not provide federal
subject-matter jurisdiction over the action because the CAFA provides that § 1332(d)(2)
“shall not apply to any class action that solely involves a claim . . . concerning a covered
security as defined under [Section] 16(f)(3) of the Securities Act of 1933 and Section
28(f)(5)(E) of the Securities Exchange Act of 1934.” Id. at *3-4. The court found that a
covered security pursuant to Section 18(b) of the CAFA is "a security designated as
qualified for trading in the national market . . . that is listed, or authorized for listing, on a
national securities exchange.” Id. at *4. The court ruled that since the securities issues
were publicly traded on the New York Stock Exchange at the time of the alleged
misrepresentation, they fell under the plain definition of “covered security.” Id. at *5. The
court accordingly determined that it did not have subject-matter jurisdiction under the
CAFA. The court further opined that it was settled law that the framework of the CAFA
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Duane Morris Class Action Review – 2023
