Ninth Circuit Affirms Remand to State Court of Countrywide Home Securities Suit

Holding:

In this action brought under the Securities Act of 1933 ("SA"), the U.S. Court of Appeals for the Ninth Circuit affirmed the district court's order remanding the case to state court. Plaintiff-appellee David H. Luther ("Luther") filed this class action against defendants-appellants Countrywide Home Loans, CWALT, Inc., several of Countrywide’s subsidiaries, various loan trusts, and several underwriters ("defendants-appellants") in Los Angeles County Superior Court ("state court") accusing them of making false and misleading registration statements. Defendants-appellants removed to federal court pursuant to the Class Action Fairness Act of 2005 ("CAFA"). Luther then filed a motion to remand to state court pursuant to Section 22(a) of the SA, which prohibits removal of claims brought in state court under the SA. The district court granted Luther’s motion and remanded to state court. On appeal, the Ninth Circuit held that CAFA’s grant of the right of removal of certain class action proceedings did not supersede SA's Section 22(a) that provides an express exception to removal. Specifically, the SA is the more specific statute: it applies to the narrow subject of securities cases and its Section 22(a) more precisely applies only to claims arising under the SA. CAFA, on the other hand, applies to a “generalized spectrum” of class actions. The district court's grant of Luther motion to remand was therefore warranted.

Detailed Summary:

Alleging various violations of the SA, Luther filed a class action in state court against defendants-appellants. The action was brought on behalf of all persons and entities who acquired hundreds of billions of dollars worth of mortgage pass-through certificates from CWALT, Inc. between January 2005 and June 2007. Opinion, p. 9118.

Luther alleged that the defendants-appellants violated sections 11, 12(a)(2), and 15 of the SA, 15 U.S.C. Sections 77k, 77l(a)(2) and 77o, by issuing false and misleading registration statements and prospectus supplements for the mortgage pass-through certificates. In particular, Luther alleged that the risk of the investments was much greater than…

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