Over the past three years, the number of initial public offerings (IPO) has been consistently rising. In 2014 alone, IPO activity increased 27 percent from the previous year, reaching the highest level since the end of the dot-com era in 2000. Unsurprisingly, this expanded IPO activity has led to an increase in litigation under Section 11 of the Securities Act of 1933, which imposes liability for material misstatements or omissions in registration statements. Underlying this general uptick in Section 11 filings has been a recent spate of Section 11 class actions filed in California state court rather than federal court.
This article provides a bit of background and answers the following: Why are so many Section 11 cases being filed in California state courts, and what implications of proceeding in state rather than federal court?