This section contains the nature of the case and procedural background.

P held more than two million shares of stock in Escala Group, Inc., a company traded on the NASDAQ. Between 2006 and 2007, Escala’s share price plummeted and Manning lost most of his investment. P alleges that D facilitated and engaged in naked short sales of Escala stock, in violation of New Jersey law. P asserts that D participated in “short sales when [it] neither possessed, nor had any intention of obtaining[,] sufficient stock” to deliver to buyers. P has alleged a violation of the New Jersey Racketeer Influenced and Corrupt Organizations Act (RICO), New Jersey Criminal Code, and New Jersey Uniform Securities Law. P also alleged violations of the New Jersey common law of negligence, unjust enrichment, and interference with contractual relations. P chose not to bring any claims under federal securities laws or rules. P did reference violations of federal securities law. D removed the case to Federal District Court. D invoked the general federal question statute, §1331, which grants district courts jurisdiction of “all civil actions arising under” federal law. D maintained that the suit belonged in federal court by virtue of §27 of the Exchange Act. That provision grants district courts exclusive jurisdiction of “all suits in equity and actions at law brought to enforce any liability or duty created by [the Exchange Act] or the rules and regulations thereunder.” 15 U. S. C. §78aa(a). P moved to remand the case to state court, arguing that neither statute gave the federal court authority to adjudicate his collection of state-law claims. The court denied P’s motion. The Court of Appeals for the Third Circuit reversed, ordering a remand of the case to state court. It held that 28 U. S. C. §1331, did not confer jurisdiction of the suit, because all P’s claims were “brought under state law” and none “necessarily raised” a federal issue. The Court of Appeals found that §27 covers only those cases involving the Exchange Act that would satisfy the “arising under” test of the federal question statute. It then reasoned that because the District Court lacked jurisdiction over P’s suit under §1331, so too it was not the exclusive forum under §27. D appealed.

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