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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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: Eighth Circuit on Target on Appeal
In the following guest post, Tim Hoeffner and Paul Ferrillo of the McDermott Will & Emery law firm take a look at the Eighth Circuit’s April 10, 2020 decision in the Target Corporation securities class action lawsuit, in which the appellate court affirmed the lower court’s dismissal of the case. I would like to thank Tim and Paul for allowing me the opportunity to publish their 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 Tim and Paul’s article.
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Guest Post: 2019 Securities Litigation: Key Takeaways and Trends
In the following guest post, Dan Gold, Thad Behrens, Kit Addleman, Emily Westridge Black, Carrie L. Huff, Timothy Newman, Matt McGee, and Odean L. Volker of the Haynes and Boone, LLP law firm review the key developments during 2019 in securities litigation and enforcement, including significant securities related decisions by the Supreme Court and federal appellate courts, key developments in SEC enforcement, and significant rulings in state law fiduciary litigation against directors and officers of public companies. A version of this article previously was published as a Haynes and Boone client alert. I would like to thank the authors for their willingness to allow me to publish their 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 the authors’ article.
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Securities Litigation Reform: Addressing the Class Action Lottery
When Congress enacted the PSLRA in 1995, one of the goals was to try to deter frivolous litigation. As time has passed, it has also become clear that many of the PSLRA’s procedural reforms also created a structure of incentives for plaintiffs’ lawyers. For example, the PSLRA’s most adequate plaintiff requirement created an incentive for plaintiffs’ lawyers to seek to represent institutional investors. However, according to a recent academic study, with the passage of time, some of the incentives have had a distorted impact, as the incentives motivate plaintiffs’ lawyers to try to get hold of a mega-case “lottery ticket” that will produce a jackpot outcome – for the lawyers. These distortions in turn are creating many of the ills we are now seeing the securities class action litigation arena, justifying, according to the academic authors, another round of securities litigation reform.
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Time for Another Round of Securities Class Action Litigation Reform?
In 1995, Congress passed the Private Securities Class Action Reform Act (PLSRA) over President Clinton’s veto in order to try to address perceived securities class action litigation abuses. According to a new report from the U.S. Chamber Institute for Legal Reform entitled “A Rising Threat: The New Class Actions Racket That Harms Investors and the Economy,” despite the PSLRA’s reforms, many of the same abuses that led to the PSLRA’s enactment have returned, and as a result the securities class action system is “spinning out of control.” According to the report, the time has come for Congress to intervene again to curb “abusive practices that enable the filing of unjustified actions.” The Institute’s October 23, 2018 report can be found here.
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Guest Post: The State of Securities Litigation After Cyan
As I noted at the time, on March 20, 2018, the U.S. Supreme Court issued its unanimous decision in Cyan, Inc. v. Beaver County Employees Retirement Fund, holding that state courts retain concurrent jurisdiction for liability actions under the Securities Act of 1933. In the following guest post, Doug Greene, Jessie Gabriel, Marco Molina, and Brian Song of the Baker & Hostetler law firm take a comprehensive look at the decision, including its context and significance. As the authors note, the decision has important implications for companies and their D&O insurers, as well as for claims going forward. I would like to thank the authors for allowing me to publish their 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 the authors’ article.
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U.S. Supreme Court: Notwithstanding SLUSA, State Courts Retain Concurrent Jurisdiction for ’33 Act Claims
In a unanimous March 20, 2018 opinion written by Justice Elena Kagan, the U.S. Supreme Court held that state courts retain concurrent jurisdiction over class action lawsuits alleging only violations of the Securities Act of 1933’s liability provisions and that these state court class action lawsuits are not removable to federal court. The court’s holding resolves a lower court split in the authorities on question of whether or not the Securities Litigation Uniform Standards Act of 1998 (SLUSA) eliminated concurrent state court jurisdiction for these ’33 Act class action lawsuits or made the state court ’33 Act lawsuits removable to federal court.
As discussed below, Court’s ruling is likely to result in an increase in ’33 Act claims in state court, a development that could have unwelcome consequences for corporate defendants and their insurers. The Supreme Court’s March 20, 2018 decision in Cyan, Inc. v. Beaver County Employees Retirement Fund can be found here.
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Addressing the Use of Confidential Witnesses in Securities Litigation
As a result of the PSLRA’s heightened pleading standard and pre-dismissal motion discovery bar, as well as the requirements of cases such as Tellabs, plaintiffs in liability suits under the federal securities laws frequently rely on confidential witnesses. This practice has led to the “confidential witness problem” in securities litigation. In a September 25, 2017 post on The CLS Blue Sky Blog entitled “Confidential Distortion: Dealing with Confidential Witnesses in Securities Litigation” (here), Columbia Law School Professor John Coffee takes a look at the problems that have arisen in connection with confidential witness practices and the ways court have tried to deal with the problems. He then explores some possible “best practices” for courts and parties to use to try to avoid the problems, which I discuss below.
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Supreme Court Agrees to Hear Whether State Courts Retain Jurisdiction for IPO Securities Suits
In a June 27, 2017 order (here), the United States Supreme Court granted the petition of Cyan, Inc. for a writ of certiorari to consider the question of whether or not state courts retain concurrent jurisdiction for liability lawsuits under the ’33 Act, or whether as a result of changes to the relevant statutes under the Securities Litigation Uniform Standards Act of 1998 (SLUSA), state courts lack subject matter jurisdiction over ’33 Act suits. This case will address what has become a significant issue in IPO-related securities class action litigation, particularly in California, which is whether or not the plaintiffs’ state court securities class lawsuits can be removed to federal court or must be remanded back to state court.
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