Cyan, Inc. v. Beaver County Employees' Retirement Fund

Facts of the Case

Provided by Oyez

Since the enactment of the Securities Act of 1933, state courts have had concurrent jurisdiction to decide federal law claims brought under that statute. Congress then passed the Securities Litigation Uniform Standards Act of 1998, which precluded certain state law securities class actions, and amended the 1933 Act to reflect that limitation on state court claims.

Beaver County Employees' Retirement Fund filed a lawsuit in a California superior court asserting claims under the 1933 Act. Cyan Inc. moved to dismiss the claims, arguing that the amended 1933 Act precluded state courts from exercising subject matter jurisdiction over 1933 Act claims entirely. The superior court rejected Cyan's objection to the exercise of jurisdiction. Federal district courts are split as to whether state courts have subject matter jurisdiction over covered class actions that allege only 1933 Act claims.

Questions

Do state courts have subject matter jurisdiction over covered class actions that allege only Securities Act of 1933 claims?

Conclusions

The Securities Litigation Uniform Standards Act of 1998 (SLUSA) does not strip state courts of jurisdiction to hear claims under the Securities Act of 1933, nor does it permit defendants to remove class actions alleging only 1933 Act claims from state to federal court. In a unanimous opinion authored by Justice Elena Kagan, the Court found that the language of SLUSA, which modifies the Securities Act of 1933, leaves the state courts' jurisdiction intact. The background rule of § 77v(a) gives state courts concurrent jurisdiction over all suits “brought to enforce any liability or duty created by” that statute. Section 77p, which bars certain securities class actions based on state law, controls if there is a conflict between § 77v(a) and § 77p, but §77p does nothing to limit state-court jurisdiction over class actions brought under the 1933 Act. The Court also found that the structure and context also support its reading of the provision.

The 1933 Act barred the removal of certain claims from state to federal court. Section 77p(c) of SLUSA modifies the removal ban, permitting the removal of certain class actions to federal court, where they are subject to dismissal. The Court found that the most natural reading of that provision does not alter the ban on removal of class actions alleging only 1933 Act claims.