By: Seth Taylor
Suppose you run a small corporation in the business of auctioneering stamps, coins, and other collectibles. Sensing that your corporation’s financial prospects are on the decline, large financial institutions drive the price of the company’s stock down. Your shareholders sue in state court alleging a breach of state law in manipulating stock prices while also referencing breaches of federal securities law.
Can the defendant financial institutions remove the case to federal court? This question is set to be answered by the Supreme Court in Manning v. Merrill Lynch, which deals specifically with whether section 27 of the Securities Exchange Act of 1934 allows defendants to remove a case to federal court when the plaintiff brings state-law claims in state court, but references violations of a related federal regulation.
In Manning, the Supreme Court has an opportunity to resolve several circuit splits at once by deciding how the removal provisions of section 27 should be construed relative to the general federal question jurisdiction statute. This Commentary urges the Court to hold that the requirement of section 1331 is a necessary prerequisite to the triggering of any exclusive jurisdiction provision. This holding would prevent wholly state-law claims brought in state court from being removed to federal court, thereby preserving the federal-state balance that Congress intended to create through the Exchange Act.