As readers will recall, in August, the U.S. Chamber of Commerce Institute for Legal Reform (ILR) issued a paper entitled “Courting Confusion: Federal Securities Class Actions Don’t Belong in State Courts,” in which the ILR called for Congress to require that all ’33 Act claims must be brought in federal court and authorize the removal
New York State Court Enforces Federal Forum Provision
In an important development affirming the use of federal forum provisions (FFP) to avoid duplicative parallel state court securities lawsuits, a New York state court judge has granted the securities suit defendants’ motion to dismiss based on the FFP in the corporate defendant’s charter. The ruling appears to be the first in New York – indeed, the first outside of California – to enforce an FFP. The New York court’s enforcement of the FFP is a significant step in companies’ efforts to try to avoid the duplicative litigation problems caused by the U.S. Supreme Court’s March 2018 decision in Cyan. A copy of the August 31, 2021 opinion of the New York state court in the Casa Systems case can be found here.
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U.S. Supreme Court Suspends Case Addressing Discovery Stay in State Court ’33 Act Suits
The case pending before the U.S. Supreme Court in which the Court was to consider the applicability of the PSLRA’s discovery stay in state court ’33 Act actions has been suspended by the Court at the parties’ request. The parties apparently have reached a tentative settlement of the underlying matter and jointly requested that the Court hold the matter in abeyance, pending the parties’ efforts to complete settlement documentation.
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Institute for Legal Reform: Congress Should Enact Reforms to Address Cyan
In numerous prior posts, I have noted the problems and inefficiencies that the U.S. Supreme Court’s March 2018 Cyan decision have wrought, such as, for example, the possibility of multiplied parallel litigation (discussed here). There are a host of other issues as well, such as the absence in state court of procedural protections available in federal court; the prevalence in state court of weaker suits; and the pressure that multiple suits puts on defendants to settle, as discussed here. These and other concerns arising from Cyan have led the U.S. Chamber of Commerce’s Institute for Legal Reform (ILR) to issue a new paper entitled “Courting Confusion: Federal Securities Class Actions Don’t Belong in State Courts,” in which the ILR calls for Congress to “close the loophole” by requiring that all 1933 Act claims must be brought in federal court and authorizing the removal to federal court of ’33 Act liability actions filed in state court. The ILR’s August 30, 2021 press release, to which the paper is attached, can be found here.
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Supreme Court Takes Up Discovery Stay Question in State Court Securities Class Action Litigation
In March 2018, when the U.S. Supreme Court held in the Cyan case that state courts retain jurisdiction for securities class action litigation under the ’33 Act, it set up the state courts and state court securities class action litigants for a host of practical problems. The first is that Cyan allowed the possibility of competing sets of plaintiffs’ lawyers to sue the same defendants in parallel state and federal lawsuits, in what can only be called inefficient and wasteful duplicative litigation. The second is that Cyan left unanswered many questions about the procedures applicable in the state court securities litigation, including questions having to do with the applicability of the procedural safeguards under the PSLRA. Among the many procedural questions that state courts now have to wrestle with is whether the PSLRA’s stay of discovery pending a ruling on the defendants’ motion to dismiss applies to state court proceedings.
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Guest Post: The State of the D&O Market: 10 Reasons to Be Cheerful
In the following guest post, Francis Kean provides us with ten reasons to be cheerful notwithstanding the current D&O insurance market. Francis is a Partner, Financial Lines, at McGill and Partners. A version of this article previously was published Insurance Day. I would like to thank Francis for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Francis’s article.
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The Top Ten D&O Stories of 2020
The directors’ and officers’ liability environment is always changing, but 2020 was a particularly eventful year, with important consequences for the D&O insurance marketplace. The past year’s many developments also have significant implications for what may lie ahead in 2021 – and possibly for years to come. I have set out below the Top Ten D&O Stories of 2020, with a focus on the future implications. Please note that on Wednesday, January 13, 2021 at 11:00 AM EST, my colleague Marissa Streckfus and I will be conducting a free, hour-long webinar in which we will discuss The Top Ten D&O Stories of 2020. Registration for the webinar can be found here. I hope you will please join us for the webinar.
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Third California State Court Upholds Enforceability of Federal Forum Provision
A third California state court has ruled that a provision specifying that federal courts are the exclusive forum for the resolution of ‘33 act liability actions is valid and enforceable. This latest decision — in a state court securities class action lawsuit pending against Dropbox — suggests that a broad consensus is emerging in California court to enforce federal forum provisions. But while the Dropbox decision is largely consistent with the prior California state court decisions enforcing FFP, there are certain features of the Dropbox decision that make it noteworthy and interesting in its own right. A copy of the December 4, 2020 decision in the Dropbox case can be found here. A December 8, 2020 memo from the Seyfarth Shaw law firm about the ruling can be found here.
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NY Appellate Court Reverses Trial Court’s Dismissal Denial in State Court Securities Suit
A recent guest post on this site opined that because of the volume of Section 11 litigation being filed in New York state court, New York’s courts “will have a major role in shaping the standards applied in Securities Act litigation going forward.” If that is the case, then the recent New York appellate court ruling reversing a trial court’s dismissal motion denial in a state court Section 11 action could be significant. According to a December 4, 2020 Law360 article (here), the ruling represents the first time the New York appellate division has addressed the merits of a federal ’33 Act claim since the U.S. Supreme Court’s decision in Cyan. The New York appellate court’s December 3, 2020 ruling can be found here.
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State Court Securities Suit Against Uber Dismissed Based on Federal Forum Provision
In reliance on the federal forum provision (FFP) in the company’s corporate charter, a California Superior Court judge has granted the defendants’ motion to dismiss the state court ’33 Act liability action pending against Uber. The ruling represents the second occasion on which a California state court has dismissed a state court ’33 Act liability action in reliance on an FFP in the corporate defendant’s charter, providing further hope that the adoption of FFPs may help companies address the Cyan problem – that is, the possibility of having to face identical ’33 Act liability actions in both state and federal court. The California Superior Court’s November 16, 2020 order in the Uber case can be found here.
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