In Luther v. Countrywide Financial Corp., 195 Cal. App. 4th 789 (2011), the trial court ruled that state courts do not enjoy concurrent jurisdiction when a class action meeting the definition of a “covered class action” under the Securities Litigation Uniform Standards Act of 1998 (aka “SLUSA”) did not involve a “covered security” as also defined by SLUSA (the definitions of both these terms can be found in Section 16(f) of the ’33 Act). The Court of Appeal reversed, holding that “an intent to prevent certain class actions does not tell us that this class action, or all securities class actions must be brought in federal court.” At the time, I observed:
The holding in Luther opens the state courthouse door to class action plaintiffs with ’33 Act claims when the securities involved do not meet the definition of “covered securities”. It remains to be seen whether plaintiffs will rush in and whether other courts will agree that the door is open.
Five years later, we have some answers. First, the plaintiffs bar did rush in. According to a recent petition for certiorari filed with the U.S. Supreme Court yesterday (emphasis in the original):
In the 12 years between SLUSA and Countrywide, only 6 class actions alleging Section 11 claims were filed in California state courts – an average of one case every two years. In the 5 years after Countrywide, at least 38 class actions alleging Section 11 claims were filed in California state courts – an average of more than seven cases every year. Fourteen were filed in 2015 alone.
Second, the courts are not in agreement. According to the same petition:
Federal district courts in removal cases have divided bitterly over the question presented. Because of the procedural roadblocks to review of remand orders, federal appeals courts are unlikely to rule on, let alone resolve, the conflict. Absent this Court’s guidance, the district courts will remain in disarray with no end in sight.
The petition was filed by Boris Feldman and his team at Wilson Sonsini Goodrich & Rosati in Cyan, Inc. v. Beaver County Employees Retirement Fund et al.