Stevenson v. Becker

Background

The order addresses two related putative class actions: Stevenson v. Becker, No. 23-cv-02277-HSG, and a related action brought by Stephen Rossi and others, No. 23-cv-02335-HSG. The plaintiffs initially filed the actions in Santa Clara Superior Court. They asserted claims under Sections 11, 12, and 15 of the Securities Act of 1933 against SVB Financial Group’s directors, officers, and auditors.

According to the complaints, SVB had agreed to acquire Boston Private Bank & Trust Company. Plaintiffs alleged that offering materials for the transaction contained materially false statements and omitted required or necessary information. After the merger, SVB experienced financial trouble and filed for bankruptcy in March 2023. Plaintiffs alleged that SVB stock lost substantially all of its value.

Defendants removed the actions to federal court under 28 U.S.C. § 1452(a), which permits removal of a civil action related to a bankruptcy case when the federal court has bankruptcy jurisdiction. Plaintiffs moved to remand, arguing that Section 22(a) of the Securities Act barred removal and that the claims were not sufficiently related to the bankruptcy proceeding. Plaintiffs also argued that equitable considerations favored remand.

Court’s analysis

The court recognized that Section 22(a) generally provides concurrent state and federal jurisdiction over Securities Act claims and states that a case brought under the Act in a state court of competent jurisdiction may not be removed, except for a specified statutory exception. The court also recognized that Section 1452(a) permits removal of claims related to a bankruptcy case.

The court concluded that the two statutes conflict because Section 1452(a) permits removal in circumstances where Section 22(a) forbids it. The court found persuasive the Second Circuit’s reasoning in a prior case and adopted its conclusion that the Securities Act’s removal bar does not prevent removal under Section 1452(a) when the action is related to a bankruptcy case. The court rejected plaintiffs’ arguments that later Supreme Court precedent required a different analysis and that the Securities Act was necessarily more specific than the bankruptcy removal provision.

The court applied the Ninth Circuit’s “related to” bankruptcy standard, under which a proceeding qualifies if its outcome could conceivably affect the bankruptcy estate. The court relied on SVB’s bylaws, which entitled defendants to advancement of and indemnification for attorneys’ fees and costs. It also noted that the bankruptcy court had required reporting of expenses paid under insurance policies and approval before using policy proceeds to pay a settlement or judgment. The court concluded that these circumstances created “related to” jurisdiction.

The court then considered equitable remand under Section 1452(b), which allows remand on any equitable ground. It found that the plaintiffs asserted only federal claims, that the action was related to and had already affected the bankruptcy estate, and that the equitable factors did not favor remand.

Disposition

The court denied plaintiffs’ motion to remand in Stevenson, Dkt. No. 56, and denied plaintiffs’ motion to remand in the related Rossi action, Dkt. No. 39. The order therefore left the cases in federal court at this stage; it did not decide whether plaintiffs ultimately proved their Securities Act claims.

The court granted plaintiffs’ administrative motion for leave to submit supplemental materials, but stated that the additional materials did not change its remand analysis. Because counsel for all parties did not oppose certification for interlocutory appeal, the court directed the parties to meet and confer and submit a stipulation and proposed certification order addressing the requirements for such an appeal. The court also set a telephonic case-management conference and directed the parties to submit a joint case-management statement.