Securities Class Actions, Securities Act, Securities Litigation
The Supreme Court’s decision in Cyan, Inc. v. Beaver County Employees Retirement Fund† preserved the Securities Act of 1933’s bar on removing securities class actions brought in state court to federal court. The unanimous ruling cut against a nearly quarter-century long trend of pushing securities class action litigation to the federal courts. Cyan was resolved purely through statutory interpretation, leaving many of the underlying policy questions to be resolved by state courts and in future rulings.
This Note examines the intention of the drafters of the Securities Act of 1933 in designing a disclosure-focused regulatory scheme with a private right of action to protect the integrity of the financial markets. As such private litigation grew in quantity and dollar amount through the class action mechanism, Congress attempted to limit such actions by raising various procedural and substantive requirements in federal courts in successive reform legislation. These reforms made state courts a more attractive venue for securities class actions, raising concerns about forum shopping, conflicting rulings, and possible chilling effects on future Initial Public Offerings of securities due to this uncertainty.
With the Cyan ruling, investors and their advocates have retained the ability to litigate claims brought solely under the Securities Act of 1933 in state courts. The significance of this relatively narrow class of securities lawsuits, primarily affecting IPO-related litigation, remains to be seen.
B. John Torabi, The Cyan Decision and its Impact on State-Level Securities Class Actions, 26 Fordham J. Corp. & Fin. L. 253 (2021).