March 20, 2018

Supreme Court Decides Cyan, Inc. v. Beaver County Employees Retirement Fund

On March 20, 2018, the Supreme Court decided Cyan, Inc. v. Beaver County Employees Retirement Fund, No. 15-1439, unanimously holding that the Securities Litigation Uniform Standards Act of 1998 (SLUSA) does not remove state courts’ jurisdiction over claims brought under the Securities Act of 1933, even when raised in class actions, and it prohibits the removal of those cases to federal court.

Congress enacted SLUSA to curb perceived abuses in securities litigation. In relevant part, SLUSA precludes “covered class actions” brought under state law and allows the removal of such class actions to federal court to guarantee their dismissal. Except for authorizing removal in this circumstance, SLUSA otherwise preserves the original provisions of the 1933 Act prohibiting the removal of securities claims brought in state court under federal law.

The Cyan Court considered whether (1) SLUSA strips state courts of their jurisdiction over “covered class actions” raising only federal claims under the 1933 Act, and (2) such claims may be removed to federal court.

The Supreme Court answered both questions in the negative. As to state courts’ jurisdiction, the Court found that “SLUSA’s text, read most straightforwardly, leaves in place state courts’ jurisdiction over 1933 Act claims, including when brought in class actions.” Given this clear textual result, the Court said, “Cyan would need some monster arguments” based on legislative purpose and history to overcome the text, and its arguments came “nowhere close to that level.” As to defendants’ ability to remove class actions raising 1933 Act claims to federal court, the Court held that the removal provision applies to only “covered class actions,” which are “state-law class actions.” The Government’s argument to the contrary “distorts SLUSA’s text because it thinks Congress simply must have wanted 1933 Act class actions to be litigated in federal court.” But the Court held that it had “no license to disregard clear language based on an intuition” that Congress wanted something else.

Justice Kagan delivered the unanimous opinion of the Court.

Download Opinion of the Court.

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