Nathan Bass Nov. 14, 2012, 10:24am
CHARLESTON – The United States District Court for the Southern District of West Virginia on Nov. 5 remanded a securities class action case, Olivia Niitsoo v. Alpha Natural Resources, Inc. et al., back to the Circuit Court of Boone County.
This case arises out of the June 1, 2011, merger of Massey Energy Co. into Alpha Natural Resources, Incorporated. Both companies are major producers and sellers of coal.
The merger agreement gave Massey shareholders $10 and 1.025 shares of Alpha common stock for each share of Massey common stock they owned. Niitsoo contends that Alpha shares were overvalued due to Alpha’s hiding of production issues until after the merger was completed.
The suit, originally filed July 13, alleges violations of the Securities Act of 1933, as amended by the Securities Litigation Uniform Standards Act of 1998. The defendants removed the case to the district court on Aug. 16, and Niitsoo moved to remand back to the circuit court on Aug. 30.
Representing the plaintiff from the New York office of Scott and Scott are Donald A. Broggi, Gary Dustin Foster, Joseph P. Guglielmo, Geoffrey M. Johnson, and Stephen J. Teti. West Virginia attorneys Robert G. McCoid of McCamic Sacco and McCoid, and John D. Wooten, Jr. of The Wooton Law Firm represent Niitsoo as well.
They argued that a securities class action filed in state court cannot be removed to federal court if it only alleges violations of federal law. Acknowledging that federal circuits have handled this issue differently, the attorneys argue that under recent case law, SLUSA is best interpreted in favor of their client’s motion to remove back to the state court.
After in depth analysis of the circuit splits on the issue, Chief Judge Joseph R. Goodwin agreed with the Plaintiff Niitsoo, holding that “as counter-intuitive as it may seem, the Securities Act only permits the removal of securities class actions alleging state law fraud violations … which must be dismissed whether they are before state or federal courts. Arguments to the contrary exist, but recent Supreme Court dicta in Kircher v. Putnam Funds Trust, 547 U.S. 633 (2006), persuade me that the defendants cannot properly remove a federal securities class action originally brought in state court."
The case will now head back to the Circuit Court of Boone County for further proceedings.