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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 21-2989-MDL-ALTONAGA/Torres
In re:
JANUARY 2021 SHORT SQUEEZE
TRADING LITIGATION
_________________________________/
This Document Relates to the Actions in the
Other Broker Tranche
ORDER
THIS CAUSE came before the Court on Defendant, Apex Clearing Corporation’s Rule 12
Motion to Dismiss Plaintiffs’ Amended Consolidated Other Broker Tranche Class Action
Complaint [ECF No. 422], filed on October 15, 2021. Plaintiffs filed a [Response] in Opposition
[ECF No. 435], to which Defendant filed a Reply [ECF No. 440]. The Court has carefully
considered the Amended Consolidated Class Action Complaint (“Amended CCAC”) [ECF No.
410], the parties’ written submissions, the record, and applicable law. For the following reasons,
the Motion is granted.
I.
BACKGROUND
This putative class action is brought on behalf of Defendant’s customers and other
individual investors who suffered losses as a result of Defendant’s decision to block them from
purchasing shares of AMC Entertainment Holdings, Inc. (“AMC”), GameStop Corporation
(“GME”), and Koss Corporation (“KOSS”) for nearly three-and-a-half hours on January 28, 2021.
(See Am. CCAC ¶¶ 1–2, 29, 67, 93). Defendant is a broker-dealer for certain direct customers and
provides clearing broker services to introducing broker-dealers and their customers. (See id. ¶¶ 1,
24–25).
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Leading up to January 28, 2021, individual investors began purchasing large numbers of
shares of AMC, GME, and KOSS. (See id. ¶¶ 3, 57, 59, 64). The increased demand for these
stocks drove share prices up and led to a “short squeeze.”1 (See id. ¶¶ 59–64). In a “short squeeze,”
individual investors like Plaintiffs typically “stand to benefit . . . as the value of the stocks they
purchased increases. Short sellers, on the other hand, risk further losses, as stock prices rise as a
natural consequence of market forces.” (Id. ¶ 63 (alteration added)).
In response to the ongoing market volatility, at approximately 10:31 a.m.2 on January 28,
2021, Defendant “blocked its direct customers and directed its [i]ntroducing [b]roker-[d]ealers to
block [their] [c]ustomers from purchasing shares of AMC, GME, and KOSS.” (Id. ¶ 67 (alterations
added); see also id. ¶¶ 68–72, 74–75).
Defendant has maintained it restricted trading due to potential future collateral
requirements the National Securities Clearing Corporation (“NSCC”)3 “appeared it may impose
on [Defendant] as part of the margin system NSCC maintains to comply with the [Securities and
Exchange Commission]’s standards for covered clearing agencies.” (Id. ¶ 77 (alterations added;
quotation marks omitted)). Specifically, Defendant received an NSCC report at 8:30 a.m.
projecting substantially increased collateral requirements. (See id. ¶ 76).
Yet Defendant did not take any action to “confirm the higher collateral number” from the
NSCC. (Id. ¶ 80). Moreover, documents submitted to regulators reveal Defendant knew its NSCC
collateral deposit requirement was lower than initially expected at 10:00 a.m. — approximately 30
1 In a “short squeeze,” short sellers are pressured to purchase the affected stocks at inflated, and continually
rising, prices in order to cover their losses and prevent potentially greater losses. (See Am. CCAC ¶ 62).
2 All times refer to the Central Time Zone.
3 The NSCC “is the central counterparty that clears cash transactions in the U.S. equities markets, netting
securities deliveries and payments among NSCC’s clearing members, and guaranteeing completion of
trades even if one party to the transaction defaults.” (Am. CCAC ¶ 32).
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minutes before it implemented the trading restrictions. (See id. ¶¶ 76, 78, 80). And despite having
the opportunity to confirm the lower number on a call with the Depository Trust and Clearing
Corporation4 at 10:47 a.m., Defendant waited until 1:55 p.m. to lift the trading restrictions. (See
id. ¶¶ 76, 78–80). In any event, Defendant has subsequently admitted it was never unable to meet
its capital requirements. (See id. ¶¶ 83–84).
As a result of Defendant’s one-way trading restrictions, Plaintiffs were prevented from
purchasing additional shares of these stocks, the prices of these stocks fell, and Plaintiffs were
forced to either sell at artificially suppressed prices or continue holding their shares despite
depreciating values. (See id. ¶¶ 2, 6–7, 65).
Plaintiffs assert claims for negligence, breach of fiduciary duty, and tortious interference
with a business relationship. (See id. ¶¶ 100–123). Plaintiffs, Erik Chavez (see id. ¶¶ 14–17) and
Peter Jang (see id. ¶¶ 18–21), did not file lawsuits in other districts that were then transferred to
the Court through the Judicial Panel on Multidistrict Litigation (“JPML” or “Panel”), nor did they
file a separate action in this District that was then consolidated with this multidistrict litigation
(“MDL”). Instead, Plaintiffs assert claims related to the events of January 28 for the first time
directly in this MDL. (See generally id.).5
4 The Depository Trust Clearing Corporation “keeps a record of the stocks owned through the clearing
brokerage firms for NSCC members, including [Defendant], and establishes financial requirements for
clearing brokerage firm members, which include deposit requirements designed to reduce risk to the
DTCC.” (Am. CCAC ¶ 31 (alteration added)).
5 Plaintiffs Chavez and Jang first asserted their claims in the Consolidated Class Action Complaint (see
[ECF No. 359] ¶¶ 70–77), in response to which Defendant filed a Motion to Dismiss [ECF No. 405].
Plaintiffs then filed the Amended CCAC, thereby rendering moot the initial Motion to Dismiss.
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Defendant moves to dismiss the Amended CCAC on the grounds that: (1) Plaintiffs’ claims
are not properly before the Court as part of this MDL proceeding (see Mot. 22–24)6; (2) Plaintiffs
lack Article III standing (see id. 24–28); (3) Plaintiffs fail to state claims upon which relief can be
granted (see id. 28–57, 61–62); and (4) Plaintiffs’ state law tort claims are preempted by federal
securities laws (see id. 57–61). Because the Court agrees that Plaintiffs’ claims have not been
properly consolidated in this MDL, and hence the Court lacks subject matter jurisdiction, the Court
does not reach Defendant’s remaining arguments.
II.
LEGAL STANDARD
Subject matter jurisdiction must be established before a case can proceed on the merits.
See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 93–95 (1998). This is because “[f]ederal
courts are courts of limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 377 (1994) (alteration added). It is presumed that a federal court lacks jurisdiction in a case
until the plaintiff demonstrates the court has jurisdiction over the subject matter. See id. (citing
Turner v. Bank of N. Am., 4 U.S. 8, 11 (1799); McNutt v. Gen. Motors Acceptance Corp. of Ind.,
298 U.S. 178, 182–83 (1936)). “[B]ecause a federal court is powerless to act beyond its statutory
grant of subject matter jurisdiction, a court must zealously insure that jurisdiction exists over a
case[.]” Smith v. GTE Corp., 236 F.3d 1292, 1299 (11th Cir. 2001) (alterations added; citations
omitted).
A defendant may attack subject matter jurisdiction under Rule 12(b)(1) in two ways — a
facial attack or factual attack. See Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir.
1980). A facial attack asserts a plaintiff has failed to allege a basis for subject matter jurisdiction
in the complaint. See id. (citation omitted). In a facial attack, the plaintiff’s allegations are taken
6 The Court uses the pagination generated by the electronic CM/ECF database, which appears in the headers
of all court filings.
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as true for purposes of the motion, see id. (citation omitted); and the plaintiff is afforded safeguards
like those provided in challenging a Rule 12(b)(6) motion raising the failure to state a claim for
relief, see Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11th Cir. 1990) (citation omitted). A district
court may sua sponte convert a motion to dismiss under Rule 12(b)(6) to a Rule 12(b)(1) motion
to dismiss relying on a facial challenge to subject matter jurisdiction. See McElmurray v. Consol.
Gov’t of Augusta-Richmond Cnty., 501 F.3d 1244, 1247, 1251 (11th Cir. 2007).
In contrast to a facial challenge, a factual attack “challenges the existence of subject matter
jurisdiction in fact, irrespective of the pleadings, and matters outside the pleadings, such as
testimony and affidavits, are considered.” Menchaca, 613 F.2d at 511 (citation omitted). In a
factual attack, courts are free to weigh the evidence to satisfy themselves they have the power to
hear the case. See Lawrence, 919 F.2d at 1529 (citations omitted). No presumption of truth
attaches to the plaintiff’s allegations, and the existence of disputed material facts does not prevent
the trial court from evaluating for itself the merits of the jurisdictional claim. See id. (citations
omitted). “In the face of a factual challenge to subject matter jurisdiction, the burden is on the
plaintiff to prove that jurisdiction exists.” OSI, Inc. v. United States, 285 F.3d 947, 951 (11th Cir.
2002) (citations and footnote call number omitted).
“A dismissal for lack of subject matter jurisdiction is not a judgment on the merits and is
entered without prejudice.” Stalley ex rel. U.S. v. Orlando Reg’l Healthcare Sys., Inc., 524 F.3d
1229, 1232 (11th Cir. 2008) (citing Crotwell v. Hockman-Lewis Ltd., 734 F.2d 767, 769 (11th Cir.
1984)).
III.
ANALYSIS
Defendant presents a factual challenge to the Court’s subject matter jurisdiction over
Plaintiffs’ claims under 28 U.S.C. section 1407(a) and the Supreme Court’s decision in Lexecon
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Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998). (See Mot. 22–24; Reply 34–
36). Specifically, Defendant argues both Lexecon and Section 1407 require cases consolidated in
an MDL to be remanded to their originating courts once pretrial proceedings have concluded. (See
Mot. 22). Because Plaintiffs asserted their claims for the first time directly in the MDL, their
claims do not have an originating “home” court to return to (see id. 23); and there is no apparent
statutory authority that would permit the Court, sitting in its capacity as custodian of the MDL
member cases, to accept new complaints or new claims by new plaintiffs directly within the MDL
proceeding (see id.; Reply 35). Therefore, Defendant contends the Court lacks subject matter
jurisdiction over Plaintiffs, Chavez and Jang’s claims. (See Mot. 23; Reply 34–36).7 The Court
agrees.
Section 1407 sets forth the procedure by which actions may be added to an MDL. The
statute was enacted to authorize the transfer and centralization of existing actions filed in different
districts that share common facts. See Gelboim v. Bank of Am. Corp., 574 U.S. 405, 410 (2015)
(citing H.R. Rep. No. 1130, 90th Cong., 2d Sess., 2 (1968)). Upon a determination that
consolidation would promote convenience and efficiency, the JPML may transfer such actions to
a “transferee” district for consolidated pretrial proceedings. See 28 U.S.C. §§ 1407(a)–(b). After
the JPML authorizes an MDL and transfers actions to a transferee district, “[a]ny party or counsel
in actions previously transferred under Section 1407 shall promptly notify the Clerk of the Panel
of any potential tag-along actions in which that party is also named or in which that counsel
appears.” J.P.M.L. R. 7.1(a) (alteration added). The Clerk may then “enter a conditional order
7 Although there are some features of Section 1407 that suggest the issue is a defect in venue, the Court
treats it as an issue of subject matter jurisdiction because the parties address it as such in their briefing and
other courts that have considered the propriety of direct filing have likewise treated it as a matter of subject
matter jurisdiction. Regardless of whether the defect is one of venue or subject matter jurisdiction, the fate
of Plaintiffs, Chavez and Jang’s claims remains the same.
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transferring that action to the previously designated transferee district court[.]” Id. 7.1(b)
(alteration added).
There is one exception to this process: “[p]otential tag-along actions filed in the transferee
district do not require Panel action.” Id. 7.2(a) (alteration added). To invoke this exception, a
party filing a tag-along action in the transferee district “should request assignment of such action[]
to the Section 1407 transferee judge in accordance with applicable local rules.” Id. (alteration
added). Under the Southern District of Florida’s Local Rules, counsel is instructed to inform the
court if an action is similar or related to another action or proceeding then pending before the court.
See L.R. 3.8. If appropriate, the court will then transfer the newly-filed action to the judge
presiding over the existing proceedings. See S.D. Fla. Internal Operating Procedures 2.15.00.
A close review of the language of the MDL statute and Panel rules indicates that a
plaintiff’s claims are properly before an MDL court only where the plaintiff has first asserted his
or her claims in a separate action. For example, Section 1407 limits those “actions [which] may
be transferred to any district for coordinated or consolidated pretrial proceedings” to “civil actions
involving one or more common questions of fact [that] are pending in different districts[.]” 28
U.S.C. § 1407(a) (alterations and emphases added); see In re Mortg. Elec. Registration Sys. (Mers)
Litig., No. 09-md-02119, 2016 WL 3931820, at *11 (D. Ariz. July 21, 2016) (“[Section] 1407(a)
indicates that all actions must first be filed and pending before that action may be transferred for
consolidated pretrial proceedings.” (alteration added; citation omitted)).
Similarly, a tag-along action is defined as “a civil action pending in a district court which
involves common questions of fact with either (1) actions on a pending motion to transfer to create
an MDL or (2) actions previously transferred to an existing MDL[.]” J.P.M.L. R. 1.1(h) (alteration
and emphasis added). Both the statute and the Rules thus presuppose the existence of separate
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“civil actions” that are “pending” in different districts prior to consolidation and transfer into an
MDL. The sole exception to Panel action likewise contemplates the filing of a separate, individual
action. See id. 7.2(a) (referring to “potential tag-along actions filed in the transferee district” rather
than directly in an MDL (emphases added)).
As stated, Plaintiffs, Chavez and Jang, did not assert their claims in any separate civil
action. They did not have any separate civil action pending which could have been transferred to
the Court by the JPML, either in the first instance upon creation of the MDL or in a later tag-along
action. Plaintiffs did not file a tag-along action in this District or in any court, for that matter, nor
did they request consolidation or assignment of their claims to the undersigned. In short, Plaintiffs
did not abide by the procedures prescribed in Section 1407 and the JPML Rules for joining this
MDL. See In re Mortg. Elec. Registration Sys., 2016 WL 3931820, at *6 (“[I]t is clear that neither
. . . Section 1407, the Rules of Procedure of the [JPML], nor the Local Rules permit a transferee
court to join a new plaintiff in the MDL when such plaintiff never filed his own case or had his
case transferred to the court by the [JPML].” (alterations added)).
Plaintiffs’ failure to assert their claims in a separate action(s) not only directly contravenes
the procedures set forth by statute and Panel Rules, but it is also inconsistent with the Supreme
Court’s directive that MDL member cases be remanded to their originating courts upon completion
of pretrial proceedings. Section 1407 requires MDL transferee courts, upon the conclusion of
pretrial proceedings, to remand “[e]ach action . . . to the district from which it was transferred[.]”
28 U.S.C. § 1407(a) (alterations added); see also In re FCA US LLC Monostable Elec. Gearshift
Litig., No. 16-md-2744, 2017 WL 6402992, at *3 (E.D. Mich. Mar. 21, 2017) (“Section 1407
makes clear that the role of a transferee court is to act as a judicial caretaker of actions that come
from somewhere else, manage those actions to ready them for trial (or until they are resolved by
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motion or settlement), and then send them back for trial.” (citation omitted)), reconsideration
denied, 2017 WL 6402991 (E.D. Mich. Mar. 23, 2017); In re: Soc’y Ins. Co. Covid-19 Bus.
Interruption Prot. Ins. Litig., MDL No. 2964, 2021 WL 3290962, at *6 (N.D. Ill. Aug. 1, 2021)
(“The MDL statute is clear in its division of labor between the transferor and transferee district
courts, contemplating that the case will originate in its proper home district . . . and then later return
to that district for trial.” (alteration added; citation omitted)).
The Supreme Court emphasized this statutory language in Lexecon and reiterated the
transferee court’s “obligat[ion]” to send all transferred actions back to their originating districts.
Lexecon, 523 U.S. at 34 (alteration added).8 See also id. at 35 (explaining that the statute imposes
an express “remand duty”); id. at 40 (noting the statute’s “straightforward language imposing the
Panel’s responsibility to remand”; quoting the legislative history demonstrating that Congress
intended the remand requirement to be obligatory); In re FCA US, 2017 WL 6402992, at *3
(explaining the Supreme Court in Lexecon held that cases in a Section 1407 MDL “must return”
to their home districts (emphasis in original; citation omitted)).
Thus, both Section 1407 and Lexecon make clear that, “[i]n the unique procedural world
of an MDL, the authority of the transferee court to handle the case . . . ends on conclusion of
pretrial proceedings.” In re Farmers Ins. Exch. Claims Representatives’ Overtime Pay Litig.,
MDL No. 33-1439, 2008 WL 4763029, at *3 (D. Or. Oct. 28, 2008) (alterations added; citing
Lexecon, 523 U.S. at 36–37); see also In re FCA US, 2017 WL 6402992, at *3 (“The transferee
court is without power to take any further action in the individual cases once [pretrial] proceedings
are concluded.” (alteration added; citing Lexecon, 523 U.S. at 28)). This is so because “[c]ases
8 In Lexecon, the Supreme Court held that a transferee district court did not have the authority under section
1404(a) to transfer an individual MDL action from the originating district to itself for trial, because Section
1407 mandates that MDL member cases be remanded at the conclusion of pretrial proceedings. See 523
U.S. at 34–37, 40.
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consolidated for MDL pretrial proceedings ordinarily retain their separate identities” throughout
the MDL process. Gelboim, 574 U.S. at 413 (alteration added; footnote call number omitted).
Indeed, Section 1407 refers to a multitude of individual “actions”; it does not create “any
monolithic multidistrict action[.]” Id. (alteration added; citation, quotation marks, and footnote
call number omitted); see also Lexecon, 523 U.S. at 37 (“Section 1407 [does not] imbu[e]
transferred actions with some new and distinctive . . . character[.]” (alterations added)). MDL
member cases are “intended to resume their independent status once the pretrial stage of litigation
is over.” In re Mortg. Elec. Registration Sys., 2016 WL 3931820, at *8 (citation and quotation
marks omitted). And the obligation to remand “each” transferred action, as set forth in Section
1407 and Lexecon, reflects that intention.
The addition of plaintiffs directly in an MDL tangibly frustrates these principles. Plaintiffs
who assert their claims for the first time in an MDL’s master pleading lack a case capable of
retaining or resuming a separate identity. Moreover, the practice leaves transferee courts without
options at the conclusion of pretrial proceedings, as direct-filed cases do not have a transferor
“home” court to which the transferee court can remand them. See J.P.M.L. R. 1.1(j) (“‘Transferor
district’ is the federal district court where an action was pending prior to its transfer pursuant to
Section 1407, for inclusion in an MDL, and where the Panel may remand that action at or before
the conclusion of pretrial proceedings.” (emphases added)); see also In re Packaged Ice Antitrust
Litig., No. 08-md-1952, 2011 WL 6178891, at *8 (E.D. Mich. Dec. 12, 2011) (“Were the Court to
permit the addition of these [p]laintiffs, the Court would be without options at the time of
remand[.]” (alterations added)); In re: Soc’y Ins. Co., 2021 WL 3290962, at *6 (agreeing with
defendant’s observation that direct filing by new plaintiffs puts “Lexecon rights at stake, given that
there is no obvious transferor court to which to remand those plaintiffs’ claims for trial[,]” and
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requiring new plaintiffs to file actions in their home districts before seeking transfer into the MDL
(alteration added)); In re Farmers Ins. Exch., 2008 WL 4763029, at *3 (claims by new plaintiffs,
which “were not transferred . . . through proper MDL procedures but, rather, were simply added
by fiat, . . . had no ‘home federal court’ to which [the MDL court] could eventually remand them”
(alterations added)); In re Mortg. Elec. Registration Sys., 2016 WL 3931820, at *10 (“This Court
has no ‘home court’ to remand [newly-added plaintiff]’s action to at the conclusion of pretrial
proceedings because [his] claim was never filed in any court nor transferred to this Court by the
[JPML] or by Local Rule.” (alterations added; citation omitted)); In re FCA US, 2017 WL
6402992, at *3 (“[I]n the case of the newly-named plaintiffs who have never filed any lawsuit
anywhere, in any court, there is no ‘transferor court’ from which this Court could inherit its
authority over their claims[,]” and to which the transferee court could remand them. (alterations
added; citation omitted)).
Simply put, the direct addition of new plaintiffs’ claims in an MDL is “at odds” with the
statutory scheme established by Congress. Id. (“The idea that an MDL proceeding is an
environment that can spawn fresh actions by new plaintiffs is at odds with [Section 1407].”
(alteration added)); see also In re Mortg. Elec. Registration Sys., 2016 WL 3931820, at *7 (Adding
new plaintiffs by amendment in an MDL “directly contradicts the appropriate procedures
designated in [Section] 1407 for consolidating cases for pretrial proceedings.” (alteration added;
citation omitted)); In re: Soc’y Ins. Co., 2021 WL 3290962, at *6 (concluding “it is improper to
add new plaintiffs . . . ‘directly’ to [an] MDL” because “[t]he MDL statute is clear” (alterations
added)).
The Court — sitting in its capacity not as an ordinary district court, but as an MDL
transferee court — plainly only has jurisdiction over MDL member cases properly transferred or
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consolidated under Section 1407 and the accompanying JPML Rules. See 28 U.S.C. § 1407(f)
(permitting the Panel to prescribe additional rules). It therefore follows, using elementary logic,
that a transferee court does not have jurisdiction over an action that was never “filed” or
“pending[,]” within the meaning of Section 1407. Id. § 1407(a) (alteration added); J.P.M.L. R.
1.1(h), 1.1(j), 7.1, 7.2(a). It is obvious that an unfiled case does not invoke federal subject matter
jurisdiction in any federal court, let alone an MDL transferee court. See 15 Fed. Prac. & Proc.
Juris. § 3866 (4th ed.) (A transferee judge’s authority “does not extend to . . . un-transferred federal
cases[] or unfiled claims.” (alterations and emphasis added; footnote call number omitted)). In
other words, a transferee court “does not have subject matter jurisdiction to adjudicate an action
that is lacking in original federal jurisdiction.” In re Mortg. Elec. Registration Sys., 2016 WL
3931820, at *8 (citation and quotation marks omitted); see also In re Packaged Ice, 2011 WL
6178891, at *8–9 (Adding new plaintiffs directly to an MDL “ignore[s] basic Article III principles
and . . . bypasse[s] the appropriate MDL process for consolidation of these plaintiffs’ claims.”;
“While an MDL court has ‘substantial discretion’ with regard to consolidated cases, [it does] ‘not
have the power to override the application of substantive legal standards.’ The Court cannot
simply ‘assimilate’ these proposed Plaintiffs’ claims into this MDL action.” (alterations added;
citation omitted)).
The weight of authority further supports the conclusion that an MDL transferee court lacks
subject matter jurisdiction over claims by new plaintiffs asserted for the first time directly in an
MDL proceeding. See In re Mortg. Elec. Registration Sys., 2016 WL 3931820, at *5–11
(dismissing new plaintiff’s claims for lack of subject matter jurisdiction because “[a] plaintiff may
not unilaterally add actions in the MDL that have not been pending in federal court elsewhere or
which were not transferred to the transferee court through the MDL process” (alteration added;
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citation omitted; collecting cases)); In re Farmers Ins. Exch., 2008 WL 4763029, at *5 (“I have
discovered no authority for this court, as an MDL transferee court, to exercise subject matter
jurisdiction over state law claims not transferred by the MDL Panel and [therefore] over which
this court lacks original jurisdiction.” (alteration added)); In re Packaged Ice, 2011 WL 6178891,
at *8–9; In re EpiPen (Epinephrine Injection, USP) Mktg., Sales Pracs. & Antitrust Litig., 17-md-
2785, 2021 WL 2585065, at *76–77 (D. Kan. June 23, 2021), reconsideration denied, 2021 WL
4948269, at *12–13 (D. Kan. Oct. 25, 2021); see also In re: Soc’y Ins. Co., 2021 WL 3290962, at
*6 (“The Court has also not been able to find persuasive caselaw that explains precisely, with
regard to statutory and precedential authority, how plaintiffs may be added ‘directly’ to an
MDL[.]” (alteration added)); In re FCA US, 2017 WL 6402992, at *2–4.9 The Court agrees with
the analyses undertaken in these cases and finds that it lacks subject matter jurisdiction over
Plaintiffs, Chavez and Jang’s claims.
Plaintiffs cite In re Takata Airbag Products Liability Litigation, 379 F. Supp. 3d 1333 (S.D.
Fla. 2019), to support their addition of new plaintiffs directly into the MDL. There, at first glance,
the transferee court appears to have permitted direct filing, in the same manner Plaintiffs, Chavez
and Jang, seek to do in this case. See id. at 1336–37, 1338. But, as Defendant points out (see
Reply 34), a closer look at the record reveals that the plaintiffs who allegedly “direct-filed” in
Takata were actually added via amendment to an existing — separate — underlying civil action
(S.D. Fla., Case No. 14-cv-24009). See In re FCA US, 2017 WL 6402992, at *3 (“None of the
cases cited by the plaintiffs endorsed attempts by parties to add newly-named individual plaintiffs
9 Cf. In re KBR, Inc., 736 F. Supp. 2d 954, 978 (D. Md. 2010) (striking consolidated MDL complaint where
plaintiffs added new plaintiffs “nowhere to be found in the original forty-three . . . complaints Plaintiffs
filed in this action”); In re Motor Fuel Temperature Sales Pracs. Litig., No. 07-md-1840, 2008 WL
7708967, at * 3–4 (D. Kan. Nov. 18, 2008) (denying motion to amend consolidated complaint to add new
plaintiffs, or to add new plaintiffs in the underlying cases already consolidated in the MDL but permitting
them to file new cases in the underlying jurisdictions).
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without explicitly making them parties to a specific, underlying, properly-transferred case.”). By
contrast, Chavez and Jang are not affiliated with an underlying civil case number in this District,
let alone a proper home district.
In addition, the cases relied on by the Takata court are inapposite. See Takata, 379 F. Supp.
3d at 1338–39. For example, the plaintiffs in Heartland Payment Systems did not file directly into
the MDL, as Plaintiffs here have attempted to do. Rather, they filed their own separate suit in the
Southern District of Texas, asserting diversity jurisdiction, and then moved to consolidate their
suit with actions already consolidated and transferred to that district by the JPML, under Panel
Rule 7.2(a). See In re Heartland Payment Sys., Inc. Customer Data Sec. Breach Litig., MDL No.
2046, 2011 WL 1232352, at *4 (S.D. Tex. Mar. 31, 2011).
Likewise, in In re Managed Care Litigation, one case (Humana) was filed in the Southern
District of Florida, and six others were transferred from the Southern District of Mississippi by the
JPML to this District for consolidation with the Humana case. See 150 F. Supp. 2d 1330, 1334
(S.D. Fla. 2001). “Apparently[,] each [Southern District of Mississippi] [p]laintiff filed [an
amended] complaint directly [in the Southern District of Florida] in anticipation of [their] case[s]
being transferred from the Southern District of Mississippi . . . by the MDL Panel.” Id. at 1336
n.5 (alterations added). Nothing in the opinion, however, suggests those plaintiffs attempted to
add new plaintiffs in their amended complaints. See id. Because the amended complaints merely
“reiterat[ed]” the allegations of the original transferred complaints, the court declined to dismiss
them on that basis. Id. (alteration added).
Unlike the present situation, each of the purportedly “direct-filed” complaints in these cases
had its own separate case number and retained its identity throughout the MDL. Thus, although
the Takata court relies on these cases in support of permitting the addition of new plaintiffs directly
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in an MDL, neither case actually stands for that proposition or contemplates “direct filing” in the
manner Plaintiffs have done here.10
The Takata court also cites In re Vioxx Products Liability Litigation, 478 F. Supp. 2d 897
(E.D. La. 2007). In Vioxx, the court entered a direct filing order — an entirely separate procedure
whereby the defendant waived venue objections on the stipulation that, when pretrial proceedings
concluded, the court would remand direct-filed cases (by plaintiffs who did not reside in the
transferee district) to a federal district court of proper venue under 28 U.S.C. section 1404(a). See
In re Vioxx, 478 F. Supp. 2d at 903–04, 904 n.2. Similarly, Plaintiffs cite Wahl v. General Electric
Company, 786 F.3d 491 (6th Cir. 2015), in support of direct filing, but the plaintiffs in that case
also direct filed only because the MDL court implemented a direct filing order. See id. at 493.11
This procedure, purely a creature of stipulation or other agreement, is irrelevant in this case, where
the parties have neither stipulated to nor requested entry of a direct filing order, and the Court has
not entered one.
Finally, Plaintiffs argue their direct-filed claims should be allowed to proceed in this MDL
for efficiency’s sake. (See Resp. 25 (stating that direct filing avoids “the seemingly inefficient
step of filing-and-transfer from the JPML” (citation and quotation marks omitted)); id. 26 (arguing
MDLs are “designed to increase efficiency,” and direct filing “eliminate[s] the delays associated
with transfer of cases into an MDL proceeding” (alteration added; citation omitted))). Plaintiffs
perceive Defendant’s subject matter jurisdiction argument as “little more than a stall tactic that
would result in the identical outcome of adding [P]laintiffs Jang and Chavez’s tort claims to a
10 Takata and the cases it cites are also distinguishable because, in each case, the defendants challenged
(and the court addressed) personal jurisdiction, not subject matter jurisdiction.
11 On appeal, the Sixth Circuit did not address the propriety of direct filing, either by order, stipulation, or
fiat. See generally Wahl, 786 F.3d 491.
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consolidated action before this MDL Court, but only after wasting time and judicial resources.”
(Id. 27 (alteration added; footnote call number omitted)).
What Plaintiffs appear to ignore is that direct filing, although presumably efficient for
plaintiffs on the front end, creates accumulating inefficiencies for the Court and the parties to
address on the back end. Specifically, were the Court to permit direct filing, it would then, at the
conclusion of pretrial proceedings, be tasked with conducting a series of mini-trials in order to
determine the proper venue for remand. Such a consequence unquestionably defeats the supposed
purpose of direct filing: efficiency.
As they all but admit, Plaintiffs “are simply trying to make an end run around the proper
procedural framework that governs MDL proceedings, and to avoid the necessary prerequisites of
initiating a civil action or actions in some suitable federal district court . . . , and then seeking
transfer and consolidation through the appropriate channels[.]” In re FCA US, 2017 WL 6402992,
at *4 (alterations added). But contrary to Plaintiffs’ opinion — and as Defendant correctly points
out — the requirement that plaintiffs in an MDL have filed a separate action prior to consolidation
and transfer “is not a mere procedural nicety.” (Mot. 23). “Federal courts are courts of limited
jurisdiction[,]” Kokkonen, 511 U.S. at 377 (alteration added); and as the Court has explained,
failure to assert claims in a separate action prior to consolidation in an MDL deprives a transferee
court of subject matter jurisdiction over those claims. Absent subject matter jurisdiction, the Court
is powerless to proceed. See Underwriters at Lloyd’s, London v. Osting-Schwinn, 613 F.3d 1079,
1092 (11th Cir. 2010) (citing Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 410 (11th Cir.
1999)); see also In re Packaged Ice, 2011 WL 6178891, at *9 (rejecting plaintiffs’ argument that
they “thought they were achieving efficiencies” by direct filing and “making it easier for everyone”
because in doing so, they “ignored basic Article III principles” (quotation marks omitted)).
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IV.
CONCLUSION
Accordingly, it is ORDERED AND ADJUDGED that Defendant, Apex Clearing
Corporation’s Rule 12 Motion to Dismiss Plaintiffs’ Amended Consolidated Other Broker Tranche
Class Action Complaint [ECF No. 422] is GRANTED. The Amended Consolidated Class Action
Complaint [ECF No. 410] is DISMISSED without prejudice. If Plaintiffs, Chavez and Jang,
wish to assert their claims in this MDL, they must follow the proper procedures for doing so.
Plaintiffs in the Other Broker Tranche of this Multidistrict Litigation have until February
14, 2022 to file a final amended complaint.
DONE AND ORDERED in Miami, Florida, this 10th day of January, 2022.
________________________________________
CECILIA M. ALTONAGA
CHIEF UNITED STATES DISTRICT JUDGE
cc:
counsel of record
Pro Se Plaintiffs
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