Supreme Court Upholds Right to Bring Securities Act Class Actions in State Court

On March 20, 2018, in Cyan, Inc. v. Beaver County Employees Retirement Fund, the U.S. Supreme Court unanimously held that state courts retain jurisdiction over class actions brought under the Securities Act of 1933.  The decision resolves a split among the lower courts and protects pending class actions from removal.

In the wake of the Great Depression, the Securities Act of 1933 created private rights of action for purchasers in securities offerings.  Section 22(a) of the Act provided concurrent jurisdiction in state and federal court and that such claims brought in state court are not subject to removal to federal court.  With the enactment of the Securities Litigation Uniform Standards Act of 1998 (SLUSA), which required that “covered” class actions be brought in federal court, some courts held that federal courts have exclusive jurisdiction over class actions under the ’33 Act. 

In its 9-0 opinion authored by Justice Kagan, the Court resolved the split, holding: “SLUSA did nothing to strip state courts of their longstanding jurisdiction to adjudicate class actions alleging only 1933 Act violations.  Neither did SLUSA authorize removing such suits from state to federal court.”  As a result of this important ruling, class action complaints alleging only Securities Act claims may be filed in the forum of the plaintiff’s choice and will not be subject to dismissal or removal on jurisdictional grounds.