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: CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005

Plaintiffs Plead Their Way out of State Court - - What Happened to the Art of Artful Pleading?!?

Puglisi v. Citigroup Alternative Investments, LLC, 08-9774, 2008 WL 1515071 (S.D.N.Y. May 29, 2009)

The plaintiffs wanted to stay in state court; however, they alleged so many charges that the federal court was the proper forum to resolve these nasty allegations. Did they forget about artful pleading?

The plaintiffs brought suit against Citigroup Alternative Investments in New York State Court alleging improper marketing and promotion of securities. 

Citigroup successfully removed the case under CAFA to the Southern District of New York. 

The plaintiffs moved to remand relying on the 'internal affairs' exception and the 'securities' exception under CAFA. 

After briefing on plaintiff's motion to remand in the instant action concluded, the Southern District of New York, in ECA Acquisitions, inc. v. MAT Three, LLL., No. 09 Civ. 590 (S.D.N.Y. May 1, 2009), denied the plaintiff's motion to remand noting that none of the exceptions to CAFA applied because the complaint alleged improper marketing and promotion of securities.

Based on the order in ECA Acquisitions, the district court allowed the plaintiffs to supplement their brief to argue why the order was either in error or inapposite. The plaintiffs were unable to move the court and their motion was denied. 

The district court held that the mis-marketing allegations did not fall within the internal affairs exception contained in 1332(d)(9)(B) because the allegations concerned how the company represented itself to the public. The district court further noted that the securities exception has been narrowly construed and is reserved for disputes over the meaning of the terms of a security; therefore, plaintiff's complaint went beyond the securities exception contained in 1332(d)(9)(C) by alleging Citigroup falsely advertised the investment funds.            

While the plaintiff's choice of forum is normally given some deference, the district court was not pleased with the plaintiff attempting to have a New York State Court hear Delaware State law claims. Moreover, the court noted that federal jurisdiction under CAFA was preferred since the complaint involves millions of dollars and plaintiffs from across the country, which is precisely the sort of interstate case of national importance Congress intended to be heard in federal court when passing CAFA.

To be fair, the plaintiffs did not know the allegations against Citigroup would eventually keep them in federal court. However, it appears that in the future plaintiffs will have to use their words wisely, and a new movement of artful pleading to keep claims in state court will likely follow based on these rulings.

For a good cartoon on pleading, click here.

By:       Adam Bosso

Full post as published by CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005 on August 26, 2009 (boomark / email).