Cyan, Inc. et al. v. Beaver County Employees Retirement Fund
Issues
Can state courts adjudicate “covered class actions” that allege claims only under the Securities Act of 1933?
The Supreme Court will determine whether state courts can hear claims filed solely under the Securities Act of 1933 as “covered class actions.” The case arises out of a decrease in Cyan, Inc.’s stock prices, which led investors, including the Beaver County Employees Retirement Fund, to sue as a class in state court for alleged disclosure violations. Cyan argues that California state courts could not hear this case, because the Securities Act’s legislative history and existing regulatory structure suggests that Congress intended for all class actions filed under the Securities Act to be tried in federal courts. Beaver, on the other hand, claims that Congress intended to give state and federal courts concurrent jurisdiction—i.e., both state and federal courts can hear this case. The stakes of the case are also in dispute: organizations supporting Cyan claim that a Beaver victory would promote inconsistent Securities Act decisions in federal and state courts, encourage forum shopping, and harm the capital markets. Beaver’s supporters disagree, asserting that the effects of a decision in its favor would be minimal.
Questions as Framed for the Court by the Parties
Whether state courts lack subject-matter jurisdiction over “covered class actions,” 15 U.S.C. § 77v(a), that allege only claims under the Securities Act of 1933.
Congress enacted the Securities Act of 1933 (“Securities Act”) to regulate the securities industry after the 1929 stock market crash. Brief for Petitioners, Cyan, Inc., et al. at 2. The Securities Act allows securities acquirers to sue securities issuers if the issuers fail to comply with their obligations under the Securities Act. Id.
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Additional Resources
- Arthur H. Aufses, Supreme Court to Determine State Court Jurisdiction of Class Actions Under Securities Act of 1933, Kramer Levin (July 5, 2017).
- Jordan Eth, Joel Haims, Mark Foster, James Beha, and Robert Cortez Webb, High Court Takes Up Forum Shopping in Securities Cases, Law 360 (July 6, 2017).
- Gregory Silbert, Stacy Nettleton, Melanie A. Conroy, and Ellen Shapiro, Cyan and the Future of Federal Securities Class Action Claims in State Court, Weil, Gotshal & Manges LLP (June 2, 2017).