United State Supreme Court upholds state court jurisdiction over IPO securities class action
Today, the United States Supreme Court issued an opinion upholding the ability of state courts to hear claims filed as class actions related to initial public offering securities fraud. The case arose from an interpretation of the effect of the 1995 Private Securities Litigation Reform Act and the Securities Litigation Uniform Standards Act of 1998.
The plaintiffs purchased shares of stock issued by Cyan, Inc., in an initial public offering. After the stock declined in value, the plaintiff investors brought a damages class action against Cyan in state court, alleging only 1933 Act violations. Plaintiffs did not assert any state law claims but only claims based on federal statutes. Defendant argued the state court did not have jurisdiction over that type of class action due to the effect of Securities Litigation Uniform Standards Act of 1998.
The Supreme Court ruled that plaintiffs could bring this securities claim as a class action in state court, despite alleging only violations of the Securities Act of 1933. Second, the Court ruled that such class action need not be removed from state to federal court. Read the Court’s decision here.