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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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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sup ct 3In 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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priya
Priya Cherian Huskins

One of the more interesting current issues in the securities litigation arena is the question of whether or not the concurrent jurisdiction provisions in the ’33 Act continue to afford state court jurisdiction for Section 11 securities class action lawsuits, or whether the Securities Litigation Uniform Standards Act of 1998 (SLUSA) superseded these provisions. As I noted in a recent post, a corporate defendant recently filed a petition for writ of certiorari with the U.S. Supreme Court to try to get the Court to take up this question. In the following guest post, Priya Cherian Huskins, of Woodruff-Sawyer & Co. examines three different “solutions” that have been proposed to address the ongoing question regarding concurrent state court jurisdiction for Section 11 class action lawsuits. One of the three proposed solutions in the cert petition recently filed with the U.S. Supreme Court, while the other two suggested solutions involve different alternative approaches, including one suggested by Stanford Law Professor Joseph Grundfest.
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sup ct 5As a consequence of increased IPO activity during the period 2013-15, IPO-related securities class action litigation has picked up as well, as I noted in my year-end review of 2015 securities class action litigation. An interesting aspect of this IPO-related litigation has been that much of it has been filed in state court, particularly in California state court, as detailed in a recent guest post on this site. Defendants in these suits can attempt to remove the state court lawsuits to federal court, but because of ongoing questions about whether or not SLUSA eliminated state court jurisdiction for class action lawsuits under the ’33 Act, some federal courts have remanded the federal actions back to state court. Because remand rulings are not appealable, defendants may find themselves consigned to litigating the plaintiffs’ federal securities class action lawsuit in state court, a jurisdiction in which plaintiffs potentially enjoy a number of advantages.

As the numbers of these state court class action lawsuits under federal law has mounted in recent months, defendants (particularly those sued in California state court) have continued to try to extricate themselves from the state court forum and transfer their cases to federal court. In some instances, defendants find themselves obliged to defend these state court lawsuits while also defending parallel or even identical federal court lawsuits raising essentially the same allegations.

A recent petition for writ of certiorari filed with the U.S. Supreme Court by Cyan,Inc. seeks to have the Court address these recurring questions and to specifically address the question of whether or not the Securities Litigation Uniform Standards Act of 1998 (SLUSA) eliminated concurrent state court jurisdiction for class action lawsuits filed under the ’33 Act. While it remains to be seen whether or not the Supreme Court will take up the case, Cyan’s petition at least potentially offers the prospect for a resolution that could eliminate the continuing phenomenon of state court class action lawsuits alleging claims under the ’33 Act. A copy of Cyan’s May 25, 2016 petition for writ of certiorari can be found here.
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supct2014The state law fraud claims of certain victims of the Stanford Ponzi scheme against various law firms and brokerage firms are not precluded under the Securities Litigation Uniform Standards Act (“SLUSA”) and plaintiffs therefore may pursue their state law class actions against the defendants, according to a February 26, 2014 decision from the U.S. Supreme