23-1262 Krasner v. Cedar Realty Trust, Inc.
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
August Term 2023
(Argued: October 6, 2023 Decided: November 14, 2023
No. 23-1262
–––––––––––––––––––––––––––––––––––– JONATHAN KRASNER,
Plaintiff-Appellee,
-v.-
CEDAR REALTY TRUST, INC., BRUCE J. SCHANZER, GREGG A. GONSALVES, ABRAHAM EISENSTAT, STEVEN G. ROGERS, SABRINA L. KANNER, DARCY D. MORRIS, RICHARD H. ROSS, SHARON STERN, AND WHEELER REAL ESTATE INVESTMENT TRUST, INC.
Defendants-Appellants
––––––––––––––––––––––––––––––––––––
Before: LIVINGSTON, Chief Judge, ROBINSON, and KAHN, Circuit Judges.
Plaintiff-Appellee, Jonathan Krasner, filed a putative shareholder class action complaint in New York State Supreme Court, alleging Maryland state law claims on behalf of himself and all similarly situated preferred stockholders of Cedar Realty Trust, Inc. (“Cedar”), a New York-based corporation incorporated in Maryland, following its August 2022 merger with Wheeler Real Estate Investment Trusts, Inc. (“Wheeler”) (collectively, “Defendants”). The complaint alleges Cedar and its leadership breached fiduciary duties owed to, and a contract with,
1 shareholders such as Krasner, and that Wheeler both aided and abetted the breach and tortiously interfered with the relevant contract. The Defendants collectively removed the case, invoking federal jurisdiction under the Class Action Fairness Act (CAFA), but the United States District Court for the Eastern District of New York (Irizarry, J.) remanded the case to state court after Krasner argued that an exception to CAFA jurisdiction applied to his claims. Following an appeal by the Defendants, we conclude that the “securities-related” exception applies. See 28 U.S.C. §§ 1322(d)(9)(C), 1453(d)(3). Accordingly, the appeal is DISMISSED for lack of federal jurisdiction.
FOR PLAINTIFF-APPELLEE: MILES D. SCHREINER, Monteverde & Associates, PC, New York, NY, on behalf of Plaintiff-Appellee Jonathan Krasner.
FOR DEFENDANTS-APPELLANTS: JERROLD A. THROPE, Gordon Feinblatt LLC, Baltimore, MD (Kathryn C. Cole, Greenberg Traurig LLP, Garden City, NY, on the brief), on behalf of Defendants-Appellants Cedar Realty Trust, Inc. and Wheeler Real Estate Investment Trust, Inc.
Douglas H. Flaum, Jennifer Burns Luz, Goodwin Procter LLP, New York, NY and Boston, MA, on behalf of Defendants- Appellants Bruce J. Schanzer, Gregg A. Gonsalves, Abraham Eisenstat, Steven G. Rogers, Sabrina L. Kanner, Darcy D. Morris, Richard H. Ross, and Sharon Stern.
DEBRA ANN LIVINGSTON, Chief Judge:
In this appeal from an order of the United States District Court for the
Eastern District of New York (Irizarry, J.), remanding this putative class action to
New York State Supreme Court, we again consider the securities-related exception
2 to the federal jurisdiction conferred by the Class Action Fairness Act of 2005
(“CAFA”). In particular, we consider whether this exception excludes from
federal jurisdiction a shareholder class action that asserts: (1) breach of contract
and fiduciary duty claims against insider defendants, which relate to the
shareholders’ securities; and (2) aiding and abetting and tortious interference
claims against outsider defendants, which are contingent on the claims against the
insiders.
We conclude that CAFA’s securities-related exception, set forth at 28 U.S.C.
§§ 1322(d)(9)(C) and 1453(d)(3), applies in this context. 1 Specifically, we hold that
this exception applies to the claim that an outsider aided and abetted an insider’s
purported breach of fiduciary duty arising from a security and owed to
shareholders. The exception likewise applies to the claim that an outsider
tortiously interfered with a contract between a shareholder and a company where
1 As relevant here, the securities-related exception to CAFA’s grant of original diversity jurisdiction applies to any class action that solely involves a claim: (C) that relates to rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security (as defined under section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. § 77b(a)(1)) and the regulations issued thereunder). 28 U.S.C. § 1332(d)(9). Identical language in § 1453(d) of Title 28 makes clear that appellate courts lack jurisdiction to review orders remanding class actions to state courts where the exception applies.
3 such contract sets out shareholder rights with respect to a security. In both
instances, the claims against the outsider plainly “relate[] to the rights, duties
(including fiduciary duties), and obligations relating to or created by or pursuant
to” a security, 28 U.S.C. § 1322(d)(9)(C), because they necessarily depend on
proving breaches of duties and obligations created by the security. That
dependence makes the claims “relate[d].” Id. Accordingly, we do not have
jurisdiction to hear this appeal and must dismiss it.
BACKGROUND
Plaintiff-Appellee, Jonathan Krasner (“Krasner”), filed a putative
shareholder class action complaint on October 14, 2022, in New York State
Supreme Court, alleging Maryland state law claims on behalf of himself and all
similarly situated preferred stockholders of Cedar Realty Trust, Inc. (“Cedar”), a
New York-based corporation incorporated in Maryland. According to Krasner,
a reverse cash-out merger between Cedar and Wheeler Real Estate Investment
Trust, Inc. (“Wheeler”) in August 2022 deprived stockholders like him of a
liquidation preference and/or conversion rights guaranteed by the Articles
Supplementary, a contract between Cedar and its preferred stockholders under
4 Maryland law that defines the rights of these stockholders in connection with their
securities.
Krasner’s four-count complaint alleges that Cedar, Cedar’s CEO Bruce
Schanzer, and the Cedar Board of Directors (the “Board”) breached (1) a contract
with, and (2) fiduciary duties owed to, Krasner and other holders of Cedar
preferred stock when Cedar entered the deal. The complaint also alleges that, in
acquiring Cedar, Wheeler (3) tortiously interfered with the preferred stockholders’
contractual rights and (4) aided and abetted the Board’s breach of its fiduciary
duties. Notably, the two counts against Wheeler depend on the success of the
two against Cedar: Under Maryland law, breach of contract is an element of the
tortious interference claim, see Fowler v. Printers II, Inc., 598 A.2d 794, 802 (Md. Ct.
Spec. App. 1991) (explaining the elements of Maryland’s tortious interference law),
and breach of fiduciary duty is an element of the aiding and abetting claim, see
Sutton v. FedFirst Fin. Corp., 126 A.3d 765, 792 (Md. Ct. Spec. App. 2015) (explaining
the elements of Maryland’s aiding and abetting law).
Thirty days after Krasner filed suit, the Defendants removed the case to the
Eastern District of New York pursuant to CAFA. See 28 U.S.C. § 1332(d)(2).
Krasner moved to remand, arguing that at least one of CAFA’s three jurisdictional
5 exceptions, as set forth in 28 U.S.C. § 1332(d)(9), precluded federal jurisdiction.
Judge Irizarry granted the remand motion, deciding sua sponte that CAFA’s
numerosity requirement, 28 U.S.C. § 1332(d)(5)(B), was not satisfied and
suggesting, in passing, that Plaintiffs’ claims “appear[ed] to fall within” the CAFA
exceptions. Krasner v. Cedar Realty Trust, Inc., No. 22-cv-06945, 2023 WL 3057387,
at *3 (E.D.N.Y. Apr. 24, 2023). Defendants petitioned for leave to appeal, which
this Court granted.
We conclude that we lack appellate jurisdiction over this case because it
“solely involves . . . a claim that relates to the rights, duties (including fiduciary
duties), and obligations relating to or created by or pursuant to any security.” 28
U.S.C. § 1453(d)(3). For the same reason, the district court was correct to remand
the case. 2 See 28 U.S.C. § 1332(d)(9)(C).
I
“It is axiomatic that federal courts are courts of limited jurisdiction.”
Lyndonville Sav. Bank & Trust Co. v. Lussier, 211 F.3d 697, 700 (2d Cir. 2000).
Within the bounds of Article III, however, Congress has the authority to shape that
2 Because we lack jurisdiction under the securities-related exception, we need not address the district court’s determination that the complaint does not satisfy CAFA’s numerosity requirement.
6 jurisdiction—an authority it exercised by passing CAFA in 2005. See CAFA, Pub.
L. No. 109-2, 119 Stat. 4 (2005). The legislation’s stated purpose is threefold: (1)
“assure fair and prompt recoveries for class members with legitimate claims,” (2)
“restore the intent of the framers of the United States Constitution by providing
for Federal court consideration of interstate cases of national importance under
diversity jurisdiction,” and (3) “benefit society by encouraging innovation and
lowering consumer prices.” Id. at 119 Stat. 5.
CAFA expanded federal jurisdiction to permit a defendant to remove a class
action or mass action to federal court, notwithstanding the absence of the complete
diversity or federal question typically required for removal. The statute grants
federal courts jurisdiction over only those class actions involving 100 or more class
members, an aggregate amount in controversy greater than $5,000,000, and
minimal diversity, i.e., where at least one plaintiff and one defendant are citizens
of different states. See 28 U.S.C. §§ 1332(d)(2), 1332(d)(5); see also Blockbuster, Inc.
v. Galeno, 472 F.3d 53, 56 (2d Cir. 2006) (explaining how CAFA operates).
Such removal is subject to the general remand statute, 28 U.S.C. § 1447,
which authorizes district courts to remand those cases that do not meet CAFA’s
threshold requirements. See 28 U.S.C. § 1453(c)(1). Typically, “an order
7 remanding a case to the State court from which it was removed is not reviewable
on appeal or otherwise.” 28 U.S.C. § 1447(d). But CAFA also expanded
appellate jurisdiction, allowing courts of appeal to accept interlocutory appeals
from orders on motions to remand cases that were removed under the statute.
See 28 U.S.C. § 1453(c).
In broadening federal courts’ authority to hear class actions, CAFA
simultaneously carved out exceptions to that authority. Where these exceptions
apply, removal to federal court is not proper, and the district court must remand
the proceedings to the state jurisdiction from whence they came due to lack of
jurisdiction. See, e.g., 28 U.S.C. §§ 1332(d)(4)(A), (B), and (5)(A). Here, Krasner
argues that each of three exceptions involving securities and corporate governance
apply. See 28 U.S.C. § 1332(d)(9)(A), (B), and (C). These carve-outs to federal
jurisdiction under CAFA are respectively known as the “covered security”
exception, the “internal affairs” exception, and the “securities-related” exception.
They appear twice in the U.S. Code, once as exceptions to our appellate
jurisdiction, see 28 U.S.C. § 1453(d), and once as exceptions to the district courts’
original jurisdiction, see 28 U.S.C. § 1332(d)(9). “These provisions work in
tandem and are given the same meaning,” so that if we lack appellate jurisdiction
8 under any of the corporate exceptions, “the district court likewise lack[s] original
jurisdiction.” BlackRock Fin. Mgmt. Inc. v. Segregated Acct. of Ambac Assurance
Corp., 673 F.3d 169, 176 (2d Cir. 2012) (citing Greenwich Fin. Servs. Distressed Mortg.
Fund 3 LLC v. Countrywide Fin. Corp., 603 F.3d 23, 27 (2d Cir. 2010)).
For the reasons set forth herein, we conclude that the securities-related
exception is applicable in this case, depriving us of jurisdiction over this appeal
and, at the same time, requiring remand for lack of original jurisdiction to the New
York courts. Because we conclude that the securities-related exception set forth
at 28 U.S.C. §§ 1332(d)(9)(C) and 1453(d) is applicable, we need not and do not
opine on the reach of the other exceptions.
II
We do not evaluate the scope of CAFA’s securities-related exception in a
vacuum. Guiding our understanding of its meaning is a trilogy of cases this
Court decided more than a decade ago. See Estate of Pew v. Cardarelli, 527 F.3d 25
(2d Cir. 2008); Greenwich, 603 F.3d 23; BlackRock, 673 F.3d 169. In each case, we
explored and outlined the contours of 28 U.S.C. § 1332(d)(9)(C), the securities-
related exception that excludes from federal jurisdiction any class action “that
solely involves a claim . . . that relates to the rights, duties (including fiduciary
9 duties), and obligations relating to or created by or pursuant to any security (as
defined under section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)) and
the regulations issued thereunder).”
This Court first grappled with the securities-related exception in Cardarelli.
See 527 F.3d at 25. A proposed class of plaintiffs had sued the issuer of debt
certificates under a New York consumer fraud statute, alleging the issuer had
failed to disclose that it was insolvent when it sold them the certificates. Id. The
majority held that the suit did not fall within the securities-related exception
because the exception only covers claims “grounded in the terms of the security
itself.” Id. at 31–32. In reaching this result, the Cardarelli court recognized that
“certain duties and obligations of course ‘relate to’ securities even though they are
not rooted in a corporate document but are instead superimposed by a state’s
corporation law or common law on the relationships underlying that document.”
Id. at 31. However, because the state-law consumer fraud action at issue “d[id]
not enforce the rights of the [plaintiff] Certificate holders as holders,” but instead
enforced their rights as purchasers, the claim did “not fall within [the securities-
related exception].” Id. at 32 (emphasis added).
10 Next, in Greenwich, we addressed a scenario in which the plaintiffs did “seek
enforcement of their rights as holders rather than as purchasers of securities.”
603 F.3d at 29. That case concerned the fallout from the 2008 financial crisis.
Countrywide Financial Corporation (“Countrywide”), the primary defendant in
the dispute, had raised money to lend to consumers by selling mortgages it owned
to specially-created trusts. Id. at 25. The trusts received payments from the
mortgage borrowers and, in turn, sold to investors certificates that legally entitled
them to repayment of the mortgage principal plus interest. Id. When
Countrywide entered into a multistate agreement to settle predatory lending
claims, it agreed to modify the terms of the mortgages, “creat[ing] the possibility
that the homeowners would make smaller payments of interest and principal to
the trusts, thereby decreasing the value of the certificates.” Id. In response, the
certificate-holders filed a putative class action, seeking declaratory judgments that
Countrywide was required, under the terms of its agreements with the trusts, to
repurchase the modified loans. Id.
We concluded that the securities-related exception applied to the holders’
claims because “[p]laintiffs’ asserted right to force Countrywide Servicing to
repurchase the loans arises from the deal instruments themselves, not from an
11 extrinsic provision of state law, such as the consumer fraud statute that formed the
basis of the action in Cardarelli.” Greenwich, 603 F.3d at 29. Countrywide had
argued that the securities-related exception could not apply to the holders’ claims
because the holders were not party to the agreements between the company’s
subsidiaries and the trusts that had sold them securities. In rejecting that
premise, we held that “the fact that the certificate holders are not themselves
parties to the [agreements] is not relevant. The focus of the inquiry is on the
source of the right that the plaintiff’s claim seeks to enforce.” Id. We also
explained that collateral legal issues raised by the suit did not preclude the
exception’s application. Given the “expansive language of the exception[],” we
determined that “the phrase ‘solely involves’ cannot be stretched so far as to limit
[the securities-related exception] to class actions that raise no collateral issues and
for which there are no affirmative defenses.” Id. at 31. Instead, we said the
phrase “solely involves” “ensures that federal jurisdiction under CAFA cannot be
defeated by adding a claim that falls within a § 1332(d)(9) exception to a class
action complaint advancing one or more other claims.” Id. at 32.
Two years after Greenwich, we addressed the meaning of the securities-
related exception for a third time. See Blackrock, 673 F.3d at 169. The case
12 involved the same type of mortgage pool trust and certificate scheme that the
Greenwich court had examined, but this time the plaintiff was a trustee, not a
securities holder. Specifically, the Bank of New York Mellon (“BNY”), in its
capacity as trustee for 530 residential mortgage-backed securities trusts, had
negotiated an $8.5 billion settlement to resolve claims that Countrywide breached
representations and warranties about the credit quality and property values of its
mortgages. Id. at 173. The terms of the settlement mandated court approval of
the trust, so BNY filed a petition in New York state court seeking the necessary
declaratory judgment. Id. at 174. Some certificate-holders intervened, seeking
to exclude from the settlement the trusts in which they had invested by removing
the entire proceeding under the “mass action” application of CAFA. Id. at 175.
The district court denied the BNY’s subsequent motion to remand, reasoning that
the securities-related exception did not apply where the trustee’s conduct in
approving the settlement was to be evaluated pursuant not only to the agreement
underlying the securities, but some other source of law “such as New York’s
common law of trusts.” Id. at 179 (internal quotation marks omitted).
We rejected the district court’s reading and held that “duties superimposed
by state law as a result of the relationship created by or underlying the security
13 fall within the plain meaning of the statute, which expressly references ‘duties
(including fiduciary duties).’” Id. (referring to the securities-related exception).
As support, we cited both Cardarelli and an opinion from the District of New
Jersey, Rubin v. Mercer Ins. Grp., Inc., No. 10-cv-6816 (MLC), 2011 WL 677466
(D.N.J. Feb. 15, 2011). Id. Notably, the New Jersey opinion addressed aiding
and abetting breach of fiduciary claims like those before us now. See Rubin, 2011
WL 677466 at *4 (“The Complaint ‘relates to’ the rights, duties, and obligations
created by virtue of Plaintiff's ownership of [securities], in that both claims
asserted pertain to the alleged breach of fiduciary duty: the alleged breach of duty
by the Individual Defendants, and the coordinate claim against Removing
Defendants for aiding and abetting the same.”).
The Cardarelli trilogy establishes several principles relevant to this case.
First, the securities-related exception applies where plaintiffs, in their capacity as
security-holders, bring claims that are “grounded in the terms of the security
itself.” See Cardarelli, 527 F.3d at 31–32. Second, whether a party in the litigation
was a party to the contracts underlying the securities is “not relevant” because
Congress focused the exception on “the source of the right that the plaintiff’s claim
seeks to enforce,” not the identity of the parties. Greenwich, 603 F.3d at 29.
14 Third, “duties superimposed by state law as a result of the relationship created by
or underlying the security fall within the plain meaning of the statute.”
BlackRock, 673 F.3d at 179.
With these lessons in mind, we turn to the present matter.
III
“We review de novo a district court’s subject matter jurisdiction
determination.” Cutrone v. Mortg. Elec. Registration Sys., Inc., 749 F.3d 137, 142 (2d
Cir. 2014). Likewise, “[w]e review questions of statutory interpretation de novo,”
L.S. v. Webloyalty.com, Inc., 954 F.3d 110, 114 (2d Cir. 2020) (internal quotation
marks and citation omitted), keeping in mind that “[b]ecause ‘statutory
procedures for removal are to be strictly construed,’ we ‘resolv[e] any doubts
against removability.’” Taylor v. Medtronic, Inc., 15 F.4th 148, 150–51 (2d Cir.
2021) (quoting In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 488 F.3d 112, 124
(2d Cir. 2007)). As ever, we have jurisdiction to determine our own jurisdiction.
See Kuhali v. Reno, 266 F.3d 93, 100 (2d Cir. 2001).
To decide whether CAFA’s securities-related exception excludes Krasner’s
claims from federal jurisdiction, we start with the statute’s text. “A fundamental
canon of statutory construction is that, unless otherwise defined, words will be
15 interpreted as taking their ordinary, contemporary, common meaning.” Perrin v.
United States, 444 U.S. 37, 42 (1979). “When the express terms of a statute give us
one answer and extratextual considerations suggest another, it’s no contest. Only
the written word is the law[.]” Bostock v. Clayton Cnty., 140 S. Ct. 1731, 1737
(2020).
And yet, some terms are admittedly indeterminate—for example, “relates
to,” the term at the crux of this case. If ‘relate to’ “‘were taken to extend to the
furthest stretch of its indeterminacy, then for all practical purposes’ there would
be no limits, as ‘[r]eally, universally, relations stop nowhere.’” Dubin v. United
States, 599 U.S. 110, 119 (2023) (quoting New York State Conference of Blue Cross &
Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995)). The Supreme Court
has repeatedly declared that “[t]his language thus cannot be ‘considered in
isolation,’ and the Court must ‘go beyond the unhelpful text and the frustrating
difficulty of defining [this] key term’ and look to statutory context.” Id. (first
quoting Maracich v. Spears, 570 U.S. 48, 59 (2013); then quoting Travelers, 514 U.S.
at 656). No doubt “the phrase refers to a relationship or nexus of some kind,” but
“the kind of relationship required, its nature and strength, will be informed by
context.” Id.
16 The context of “relates to” as it appears in the securities-related exception
illuminates why the exception applies to the aiding and abetting and tortious
interference claims that Krasner brings against Wheeler. First, exceptions to
CAFA’s expansion of federal jurisdiction, such as 28 U.S.C. § 1332(d)(9)(C),
generally promote the adjudication of state-specific issues in state courts. See,
e.g., 28 U.S.C. § 1332(d)(4)(A) (excepting from federal jurisdiction class actions
where most plaintiffs and at least one key defendant are citizens of the state where
the action was initially filed if that state is also where principal alleged injuries
were incurred); 28 U.S.C. § 1332(d)(4)(B) (excepting claims where two-thirds or
more of the plaintiffs, and the primary defendants, are citizens of the state where
the action was initially filed); 28 U.S.C. § 1332(d)(9)(B) (excepting claims that relate
to a corporation’s internal affairs and arise under the laws of the state where the
corporation is incorporated). Second, the securities-related exception is located
within a trio of exceptions that all concern corporate laws and relationships. See
28 U.S.C. § 1332(d)(9)(A)–(C). Taken together, these context clues demonstrate
that the purpose of the exception, in keeping with CAFA’s “overall design,” is “to
assure that the federal courts are available for all securities cases that have national
impact . . . without impairing the ability of state courts to decide cases of chiefly
17 local import or that concern traditional state regulation of the state’s corporate
creatures[.]” Cardarelli, 527 F.3d at 32.
The question here is whether a claim that requires proving a breach of
fiduciary duty (i.e., the aiding and abetting claim) and a claim that requires
proving a breach of a contractual obligation (i.e., the tortious interference claim)
“relate[] to” state-law fiduciary duties and contract obligations “created by”
Krasner’s securities. 28 U.S.C. § 1332(d)(9)(C). Given the context of the statute’s
design, the answer must be yes. The claim that Wheeler aided and abetted a
breach of fiduciary duty by the Cedar Board necessarily depends on proving a
breach of fiduciary duty grounded in Krasner’s securities and the Articles
Supplementary, the agreement defining the rights of the preferred stockholders.
Similarly, the claim of tortious interference necessarily depends on proving a
breach of the Articles Supplementary. To argue that such claims do not “relate[]
to the rights, duties (including fiduciary duties), and obligations relating to or
created by or pursuant to” a security strains credulity. 3 Where proving a
3 Judge Motz aptly articulated this point in her dissenting opinion in Dominion Energy, Inc. v. City of Warren Police and Fire Ret. Sys., 928 F.3d 325, 344 (4th Cir. 2019). For the abovementioned reasons, we agree with her reading of our own case law and the statutory text, and we respectfully disagree with the Dominion Energy court’s majority opinion.
18 concededly excepted claim (such as breach of fiduciary duty) is an element of
another claim (such as aiding and abetting said breach), a relation plainly exists.
To be sure, we must beware adopting a reading of the covered securities
exception that risks sweeping in “any and all claims that relate to any security.”
Cardarelli, 527 F.3d at 31. But our interpretation does no such thing. The aiding
and abetting claim here arises under state fiduciary duty law as it concerns rights
and obligations in connection with Krasner’s securities, and it depends on proof
of Cedar’s direct breach of fiduciary duty. So, too, for the tortious interference
claim stemming from the insiders’ alleged breach of the Articles Supplementary.
This case is wholly unlike Cardarelli, where the claims at issue were not in any way
grounded in the terms of the relevant securities, but rather in a state’s law of
consumer fraud. Our holding today thus reflects an understanding of the phrase
“relates to” that is neither so broad as to negate CAFA’s purpose nor so narrow as
to atextually read the phrase out of the statute. 4
4 We recognize that the Cardarelli majority suggested that the exception’s reference to “relating to” (as in rights, duties, and obligations “relating to or created by or pursuant to” a security) is “repetitive and lack[s] any predictable or precise effect.” 527 F.3d at 32. Our holding today does not rely on that use of the term, but instead construes the meaning of “relates to” as it appears in the phrase, “a claim that relates to the rights, duties (including fiduciary duties), and obligations” associated with a security. This phrase has proved instructive in delineating the scope of the exception. See Blackrock,
19 The fact that the aiding and abetting and tortious interference claims are
brought against a non-party to the underlying security and its associated
agreement is irrelevant. Congress included no language conditioning the
exception’s applicability on the identity of the defendants to the claim. Rather, it
framed the exception around whether the claim “relates to” rights, duties, and
obligations “relating to or created by or pursuant to any security.” 28 U.S.C.
§ 1332(d)(9)(C). Thus, as we have previously stated, “[t]he focus of the inquiry is
on the source of the right that the plaintiff’s claim seeks to enforce.” Greenwich,
603 F.3d at 29. And here, shareholders may only claim that a party aided and
abetted a breach of fiduciary duty or tortiously interfered with a contract if they
can show that their securities gave rise to the relevant fiduciary or contractual duty
in the first place—in other words, that the source of the obligations that were
breached was grounded in a security.
673 F.3d at 179 (explaining that “certain duties and obligations of course ‘relate to’ securities”); Greenwich, 603 F.3d at 31 (noting Congress’s decision to “use the [] broad phrase ‘relates to.’”). Because the aiding and abetting claim “relates to” the fiduciary duties “created by” the securities in question, and the tortious interference claim “relates to” the obligations “created by” the same securities, both claims fit within the plain meaning of the statute—regardless of how one construes the provision’s second reference to the words “relating to.”
20 Defendants argue, finally, that the claims against Wheeler were created by
state common law and thus do not arise out of the terms of the securities. We
again disagree. The terms of the Articles Supplementary, which govern the
preferred shares at issue, do not contain the words “fiduciary duty,” yet
Defendants do not dispute that Krasner’s breach of fiduciary duty claim, standing
alone, would fall within the securities-related exception. This is because “duties
superimposed by state law as a result of the relationship created by or underlying
the security fall within the plain meaning of the statute.” BlackRock, 673 F.3d at
179. In other words, “securities are created and defined not simply by their own
text.” Greenwich, 603 F.3d at 29. Here, the securities created a relationship
between Cedar and Krasner that gave rise to fiduciary duties on the part of Cedar
and the potential for additional claims against those parties who aid and abet
Cedar’s breach of those duties. Thus, the aiding and abetting claim—and by the
same logic, the tortious interference with contract claim—“seek[] enforcement of
a right that arises from an appropriate instrument.” Id.
CONCLUSION
In sum, the securities-related exception applies, and the district court
properly remanded the case to state court. We, therefore, lack jurisdiction to hear
21 this appeal because it “solely involves a claim . . . that relates to the rights, duties
(including fiduciary duties), and obligations relating to or created by or pursuant
to” a security, as the exception defines that term. 28 U.S.C. § 1453(d)(3).
Accordingly, we DISMISS the appeal.