March 20, 2018
Cyan, Inc. v. Beaver County Employees Retirement Fund, No. 15-1439
Decided March 20, 2018
Today, the Supreme Court held 9-0 that class actions alleging only federal claims under the Securities Act of 1933 may be heard in state court and, if brought in state court, cannot be removed to federal court.
Federal and state courts have traditionally shared jurisdiction over claims under the Securities Act of 1933. After the Private Securities Litigation Reform Act of 1995 (PSLRA) tightened standards for pleading and proving federal securities fraud class actions, plaintiffs began filing those claims in state court. In response, Congress enacted the Securities Litigation Uniform Standards Act of 1998 (SLUSA), which requires certain “covered class actions” alleging state law securities claims to be heard and dismissed in federal court. 15 U.S.C. § 77p(c). But courts were split over whether covered class actions filed in state court that allege only claims under the 1933 Act also must be heard in federal court. In this case, investors in Cyan, Inc. filed a class action in California state court alleging only claims under the 1933 Act. The California courts refused to dismiss the case for lack of subject-matter jurisdiction.
(1) Whether state courts lack subject-matter jurisdiction over class actions that allege only Securities Act of 1933 claims, and
(2) Whether defendants in class actions filed in state court that allege only 1933 Act claims may remove the cases to federal court.
“[W]e will not revise [Congress’s] legislative choice, by reading a conforming amendment and a definition in a most improbable way, in an effort to make the world of securities litigation more consistent or pure.”
Justice Kagan,writing for the Court
SLUSA does not deprive state courts of subject-matter jurisdiction over class actions raising only claims under the 1933 Act and does not authorize defendants to remove such actions to federal court.
What It Means:
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Appellate and Constitutional Law Practice
|Caitlin J. Halligan
|Mark A. Perry
|Nicole A. Saharsky
Related Practice: Securities Litigation
|Brian M. Lutz
|Robert F. Serio
|Meryl L. Young
Related Practice: Class Actions
| Theodore J. Boutrous, Jr.
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