In its July 31, 2013 opinion in Dennis v. Hart, the US Court of Appeals for the Ninth Circuit held that a shareholder derivative suit was not removable to federal court merely because the case implicated the "say-on-pay" vote provision of the Dodd-Frank Act. Although the plaintiffs were suing in part because the nominal defendant did not respond to the say-on-pay vote, that is insufficient ground on which to confer federal jurisdiction.

Nominal defendant PICO Holdings, Inc. held a shareholder vote on an executive compensation package that increased pay in May 2011. This vote was required under the "say-on-pay" provision of the Dodd-Frank Act, which requires shareholder votes on executive pay at least once every three years. These votes are non-binding, however, and do not imply or change any fiduciary duties. The shareholders voted against a new compensation package, but the board of directors took no action in response to the vote. Plaintiffs brought two shareholder derivative actions in California state court against PICO and the board under various state law claims. In one of the suits, the plaintiff requested a declaration that the say-on-pay vote rebutted the business judgment surrounding the decision to increase executive compensation. In the other, the plaintiff claimed breach of fiduciary duty in part in association with the failure to respond to the say-on-pay vote.

The defendants removed both cases to federal court. The defendants then moved to dismiss both cases, and both plaintiffs moved to remand. The district court dismissed the claims relating to the say-on-pay vote in both cases, and remanded the cases to state court because the remaining claims did not state a federal law claim or involve a substantial issue of federal law. The plaintiffs appealed the dismissal of the cases, and the defendants cross-appealed the district court's decision to remand rather than dismiss them on the merits.

The Ninth Circuit vacated and remanded the suits. The plaintiffs' complaints alleged state, rather than federal, causes of action. Although they reference the federal say-on-pay requirement, this alone is not sufficient to confer federal jurisdiction. The defendants argued that in enacting Dodd-Frank, Congress intended that say-on-pay votes be merely advisory and not entail any adverse consequences. This argument, however, merely means that the defendants might have a strong federal defense. But a federal defense is also inadequate to confer federal jurisdiction. Because the complaints alleged state law claims, the mere mention of say-on-pay was not enough to remove the cases to federal court.