Justices Cut Through 'Gibberish' To Uphold Shareholder Suits

Law360
March 22, 2018

U.S. Supreme Court delivers polarizing decision in Cyan Inc. v. Beaver County Employees Retirement Fund

On the heels of Justice Elena Kagan’s 24-page opinion regarding certain class actions, the Supreme Court reached a unanimous decision allowing investors to keep bringing these types of securities actions in state courts.

Originally mentioned during oral arguments in November, Cyan cited the Securities Litigation Uniform Standards Act of 1998 as grounds for the preclusion of certain securities class actions in state courts. Then confused by language two justices recently deemed “gibberish,” the justices now believe that the exclusion was not Congress’ intention when passing the legislation in 1998.

The decision left the plaintiffs and defendants bars on opposite ends of the spectrum. Law360 reached out to Labaton Sucharow partner, David Goldsmith, who praised the court’s decision saying, “[it] a statutory right investors [have] had for the 65 years before SLUSA was enacted, and still have today.”

Defense lawyers believe that it will lead to headaches caused by an influx of securities suits in state courts across the nation, save for one saving grace. “Justice Kagan also wrote that the Public Securities Litigation Reform Act of 1995 contains ‘substantive’ protections for defendants that apply no matter where a securities suit is filed.”