On March 20, 2018, the United States Supreme Court issued a unanimous decision in Cyan, Inc. v. Beaver County Employees Retirement Fund. Cyan resolves a nearly two-decades-long split among state and federal courts concerning state courts' jurisdiction over securities class actions that exclusively allege claims under federal law, specifically, the Securities Act of 1933 (the “1933 Act”). Among other things, the 1933 Act bestows private rights of action on certain purchasers in securities offerings. However, since the passage of the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”), federal and state courts across the country have disagreed about SLUSA’s jurisdictional impact with respect to 1933 Act claims. Some courts heldthat, after SLUSA, federal courts have exclusive jurisdiction over class actions asserting only 1933 Act claims. Other courts, by contrast, concluded that SLUSA left intact state courts’ concurrent jurisdiction over such actions.
In a 9-0 opinion penned by Justice Elena Kagan, the Supreme Court in Cyan held that state and federal courts have concurrent jurisdiction over class actions alleging only 1933 Act claims and that such claims are not removable to federal court. This is a significant development for public companies engaging in securities offerings (and their directors and officers), underwriters, and investors who purchase in such offerings. It will also impact their respective advisors, including attorneys who practice in this area, and affect the allocation of judicial resources necessary to adjudicate such class actions.
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