Cyan Inc. v. Beaver County Employees Retirement Fund: U.S. Supreme Court Holds That State Courts Have Jurisdiction Over Class Actions Brought Under the Securities Act of 1933; Decision Has Important Implications for Securities Class Actions Filed in State Court Asserting Solely Federal Claims

Sullivan & Cromwell LLP - March 21, 2018

In Cyan Inc. v. Beaver County Employees Retirement Fund (March 20, 2018), the U.S. Supreme Court held that (i) state courts have jurisdiction over class actions alleging violations of only the Securities Act of 1933 (“1933 Act”), and (ii) defendants are not permitted to remove such actions from state court to federal court. The decision resolves a split among state and federal courts about whether the Securities Litigation Uniform Standards Act (“SLUSA”) amendments to the 1933 Act deprived state courts of jurisdiction over 1933 Act class actions. In a unanimous ruling, the Supreme Court held that “SLUSA did nothing to strip state courts of their longstanding jurisdiction to adjudicate class actions alleging only 1933 Act violations.” As a result of the decision, plaintiffs likely will continue to file suit strategically in state courts where they can try to circumvent some of the procedural restrictions of the Private Securities Litigation Reform Act (“Reform Act”) and be subject to more plaintiff-friendly state courts and procedural standards.