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CALIFORNIA CORPORATE & SECURITIES LAW

Is Certiorari A Possibility For SLUSA Question Not Addressed By Any Federal Circuit Court?

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 the trial court, 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.”  Recently, I noted that the defendants in a subsequent case have sought review of the question of whether state courts lack subject matter jurisdiction over covered class actions that allege claims only under the Securities Act of 1933.  Cyan, Inc. v. Beaver County Employees Retirement Fund et al., S. Ct. No. 15-1439.

The odds of the Supreme Court actually accepting the petition are slim (especially since this is a business law issue), the court generally will not grant certiorari without requesting a response from the opposing party.  Thus, the petitioners may take some hope from the fact that the Justices last week made that request.  Already, two amici have filed briefs.  The Securities Industry and Financial Markets Association, the U.S. Chamber of Commerce and the National Venture Capital Association have filed a brief supporting review, arguing:

Allowing securities class actions alleging exclusively federal securities claims to proceed in state court is an incongruous result that
turns SLUSA on its head. There can be no rationale for such a result, and Congress certainly did not intend it.

Eight law professors have also filed an amicus brief also supporting review.  They point out that despite numerous district court cases addressing the issue, there are no circuit court decisions. Because remand orders are not appealable, it is unlikely that the issue will be addressed by the federal circuit courts.

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