On March 20, 2018, the U.S. Supreme Court issued a unanimous decision in Cyan, Inc. et al. v. Beaver County Employees Retirement Fund et al., No. 15-1439 (the “Cyan Opinion”), finding that the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) did not alter the longstanding provisions of the Securities Act of 1933 (the “1933 Act”) granting concurrent federal and state court jurisdiction over lawsuits alleging violations of the 1933 Act.
The Cyan Opinion is a key victory for potential plaintiffs seeking to file proposed class actions for violations of the 1933 Act. These claims include, for example, alleged violations of Section 11 of the 1933 Act for materially false and/or misleading statements in connection with a registration statement. Shareholders often assert these claims in connection with initial or secondary public offerings of securities where it is later established the representations in the registration statement were untrue. The ability of plaintiffs to decide the best forum for these claims, as between state and federal court, is vindicated by the Cyan Opinion. The Cyan Opinion also affirms that state court class actions alleging violations of the 1933 Act are not removable by defendants to federal court.
As Justice Kagan writes in the opinion: “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.” The Cyan Opinion gives plaintiffs suing for 1933 Act claims the green light to master the first and most pivotal decision to be made in any litigation, in what forum should the action be commenced.