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The U.S. Supreme Court held in a unanimous ruling Thursday that class actions related to securities offerings can be heard in state court.
The high court ruled unanimously in Cyan Inc. et al. v. Beaver County Employees Retirement Fund et al. that amendments to the federal Securities Act of 1933 do not give federal courts exclusive jurisdiction over these cases.
The Securities Act of 1933 created private rights of action related to the enforcement of securities offerings, while the Securities Exchange Act of 1934 regulated subsequent trading, according to the ruling.
In 1995, the Private Securities Litigation Reform Act amended both acts to stem perceived abuse of the class actions in securities litigation and included substantive reforms applicable to both state and federal courts.
It also introduced procedural reforms applicable only in federal court. To avoid these, plaintiffs began filing securities class actions under state law. In response, Congress passed the Securities Litigation Uniform Standards Act of 1998.
The litigation in this case was filed by Mead, Washington-based Cyan, which argued that a clause in the SLUSA stripped state courts of the power to decide claims under the 1933 Act. The California Supreme Court ruled against Cyan, which then appealed to the U.S. Supreme Court.
The high court held that state courts retain concurrent jurisdiction over class action suits alleging violation of the Securities Act of 1933.
“SLUSA did nothing to strip state courts of their longstanding jurisdiction to adjudicate class action alleging only 1933 Act violations,” said the ruling. “Neither did SLUSA authorize removing such suits from state to federal court. We accordingly affirm the judgment below,” the ruling said.
Plaintiffs are looking to the past to find material on which to file class action securities lawsuits, according to sources that track filings.