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The U.S. Supreme Court said June 27 that it will hear a dispute over whether certain class securities-fraud suits can only be brought in federal court ( Cyan Inc. v. Beaver Cty. Emp. Ret. Fund, U.S., No. 15-1439, cert granted 6/27/17 ).High-technology company Cyan Inc. is challenging a California state court’s refusal to dismiss class claims under the 1933 Securities Act that it made material misstatements in securities offerings.
The case is “very important” given the lack of consensus among lower courts about whether class actions alleging solely ’33 Act violations can only be brought in federal court, New York lawyer Jack Yoskowitz, Seward & Kissel LLP, who represents clients in securities regulatory matters, told Bloomberg BNA.
“A decision here either way would resolve those differences once and for all,” Yoskowitz said.
Cyan says that under the Securities Litigation Uniform Standards Act the case can only be brought in federal court because it alleges only ’33 Act violations. The trial court refused to dismiss the complaint, an intermediate appeals court affirmed and the California Supreme Court declined to review the decision.The Solicitor General, which was asked by the Supreme Court for its views, suggested that the justices grant the petition to ensure that SLUSA is applied “uniformly throughout the nation.” Although the state trial court correctly held that SLUSA didn’t divest it of authority over the suit, review is warranted given the “confusion in the lower courts,” the Solicitor General said.
The high court separately denied review of a hedge fund’s petition to revive a $200 million action (SRM Master Fund LP v. Bear Stearns Cos. LLC, No. 16-372, denied 6/27/17).
In the case, SRM Global opted out of a $275 million settlement based on Bear Stearns’ 2008 collapse and filed a separate action. The district court dismissed the complaint, and the U.S. Court of Appeals for the Second Circuit affirmed, saying the ’33 Act’s statute of repose wasn’t tolled by a pending class action.
On June 26 , the justices issued an opinion in an unrelated case saying that investors who opt out of class litigation have three years to file their own suit.
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