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Rainero v. Archon Corporation

United States District Court, D. Nevada

September 29, 2014

DAVID RAINERO, Plaintiff,
v.
ARCHON CORPORATION, Defendant.

ORDER

GLORIA M. NAVARRO, Chief District Judge.

Pending before the Court is the case of Rainero v. Archon Corporation, (2:07-cv-1553-GMN-PAL). On September 11, 2014, the Court entered an Order requiring Plaintiff David Rainero to show cause as to why this case should not be dismissed for lack of subject matter jurisdiction. (ECF No. 82). On September 19, 2014, Plaintiff and Defendant, Archon Corporation ("Archon"), each filed a Response. (ECF Nos. 83 & 85). For the reasons stated herein, the Court will dismiss this case without prejudice.

I. BACKGROUND

On August 20, 1993, Archon, then known as "Sahara Gaming Corporation, " created a class of equity securities designated as Exchangeable Redeemable Preferred Stock ("Preferred Stock"). Archon filed a Certificate of Designation for the Preferred Stock with the Nevada Secretary of State on September 30, 1993. (Ex. 1 to Compl., ECF No. 1-4). This certificate stated that Archon had the right to redeem the Preferred Stock, in whole or in part, at any time, upon giving shareholders between thirty and ninety days' notice. ( Id. at 4). The certificate also provided that, upon redemption, shareholders would be entitled to the sum of "$2.14, plus an amount equal to all accrued and unpaid dividends for the then current Dividend Period, through the date of liquidation, dissolution or winding up, plus all prior Dividend Periods, whether or not declared, " for each share of Preferred Stock. ( Id. at 7).

On July 31, 2007, Archon issued a Notice of Redemption to all holders of Preferred Stock announcing that it would "redeem all of the outstanding shares of the Preferred Stock... as of the close of business on August 31, 2007." (Compl. 3:8-12, ECF No. 1). Archon subsequently redeemed the Preferred Stock for a price of $5.241 per share. ( Id. at 3:13-15). Plaintiff claims to have held 9140 shares of Preferred Stock that were redeemed at that time. ( E.g., Pl.'s Br. at 7, ECF No. 83).

The Complaint alleges that, under the terms of the Certificate of Designation, the redemption price should have been $8.49, and he and other shareholders were entitled to receive $3.45 per share more than was paid upon the redemption. (Compl. 2:18-21).

Plaintiff filed this action on November 20, 2007, seeking relief under the terms of the Preferred Stock as set forth in the Certificate of Designation. (Compl.). Plaintiff seeks to represent a class consisting of all holders of Preferred Stock as of August 31, 2007, with the exception of Archon's directors and certain investment groups that litigated their claims separately[1]. ( Id. at 5:15-25).

II. LEGAL STANDARD

Federal courts are courts of limited jurisdiction, possessing only those powers granted by the Constitution and statute. See United States v. Marks, 530 F.3d 799, 810 (9th Cir. 2008). There is a strong presumption against subject matter jurisdiction, and the burden of overcoming this presumption falls upon the party asserting that jurisdiction exists. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).

A court may raise the question of subject matter jurisdiction sua sponte at any time during an action. United States v. Moreno-Morillo, 334 F.3d 819, 830 (9th Cir. 2003). Regardless of who raises the issue, "when a federal court concludes that it lacks subjectmatter jurisdiction, the court must dismiss the complaint in its entirety." Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006).

III. ANALYSIS

Plaintiff argues that the Court has federal question jurisdiction over this case pursuant to 28 U.S.C. § 1331 and diversity jurisdiction pursuant to 28 U.S.C. §§ 1332(d)(1) and (2). The Court will address each of these arguments in turn.

A. Federal Question Jurisdiction

Under 28 U.S.C. § 1331 federal district courts have subject matter jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." Though he admits this action is "based on Nevada contract law, " (Pl.'s Br. at 10), Plaintiff nonetheless asserts that a provision of the Securities Litigation Uniform Standards Act ("SLUSA") renders his claim to be a federal question. To support this contention, Plaintiff quotes 15 U.S.C. § 77p(d)(1)(A), which states "Notwithstanding subsection (b) or (c), a covered class action described in subparagraph (B) of this paragraph that is ...


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