Term: 2017
Docket: 15-1439
Cyan v. Beaver County Employees Retirement Fund
- Pro
15-1439 CYAN V. BEAVER COUNTY EMPLOYEES DECISION BELOW: unreported CERT. GRANTED 6/27/2017 QUESTION PRESENTED: To curb abusive class-action litigation concerning nationally traded securities, the Private Securities Litigation Reform Act of 1995 ("Reform Act") amended federal securities laws to impose new requirements, including fee limitations, selection criteria for lead plaintiffs, and an automatic stay of discovery pending any motion to dismiss. To prevent plaintiffs from filing class actions in state court and thereby sidestepping the Reform Act, the Securities Litigation Uniform. Standards Act of 1998 ("SLUSA") inter alia amended the Securities Act of 1933 (" '33 Act") to provide that concurrent state-court subject matter jurisdiction over '33 Act claims will continue "except as provided in [Section 16 of the '33 Act] with respect to covered class actions." Section 16, as amended by SLUSA, defines "covered class action" as any damages action on behalf of more than 50 people. This case is undisputedly a "covered class action." Section 16, as amended by SLUSA, also precludes covered class actions alleging state-law securities claims and permits precluded actions to be removed to and dismissed in federal court. No state-law claims were alleged in this case. The question presented - which has split federal district courts in removal cases and thus sidelined federal appeals courts - is: Whether state courts lack subject matter jurisdiction over covered class actions that allege only '33 Act claims. LOWER COURT CASE NUMBER: A146891
The U.S. Supreme Court case Cyan v. Beaver County Employees Retirement Fund in 2017 revolved around the interpretation of the Securities Litigation Uniform Standards Act (SLUSA) and its impact on state court jurisdiction over certain class actions. The plaintiffs, Beaver County Employees Retirement Fund, had purchased shares in Cyan Inc., a telecommunications company that allegedly made misrepresentations about its financial condition. They filed a lawsuit under the Securities Act of 1933 in California State Court against Cyan for these alleged misrepresentations during an initial public offering (IPO). However, Cyan argued that SLUSA stripped state courts of jurisdiction to adjudicate such claims. The Supreme Court unanimously ruled in favor of Beaver County Employees Retirement Fund stating that SLUSA did not strip state courts' ability to decide cases involving securities class actions based solely on federal law violations from the Securities Act of 1933; nor does it empower defendants to remove such suits from state to federal court.
The dissenting opinion in CYAN v. BEAVER COUNTY EMPLOYEES RETIREMENT FUND argued that the majority's interpretation of the Securities Litigation Uniform Standards Act (SLUSA) was incorrect and overly broad. The dissent contended that SLUSA did not strip state courts of jurisdiction over class actions alleging only 1933 Securities Act violations, but rather prevented plaintiffs from circumventing federal procedural requirements by filing such suits in state court. They believed this interpretation better aligned with Congress’s intent to prevent abusive litigation while preserving investors’ ability to bring legitimate claims under federal securities laws. Furthermore, they expressed concern about potential negative consequences of the majority's decision, including increased burden on state courts and decreased uniformity in securities law.
