Serena P. Hallowell discusses the U.S. Supreme Court Case, Cyan Inc. v. Beaver Cty. Emp. Ret. Fund
In a case that turns on the meaning of 1998 amendments to the 1933 Securities Act intended to deter abusive class lawsuits, Cyan Inc., a high-technology company, was sued by a pension fund for allegedly making material misstatements in securities offering documents (Cyan Inc. v. Beaver Cty. Emp. Ret. Fund, U.S., No. 15-1439, oral argument 11/28/17). The suit was filed in California state court but alleged only ’33 Act violations.
Cyan moved to dismiss, saying the complaint should have been filed in federal district court. The trial court denied Cyan’s motion, an intermediate appeals court affirmed, and the California Supreme Court declined to review the decisions.
Earlier this year, Labaton Sucharow LLP partner Serena P. Hallowell, who represents institutional investors not involved in this case, predicted that the pension fund will prevail before the high court as well. Just because the 1998 law provided for state law claims to be precluded in federal court, it doesn’t mean lawmakers intended that Securities Act claims be litigated only in federal court, she told Bloomberg Law. “If anything, an analysis of Congress’ silence says the opposite.”
That result would be good news for shareholders, who generally view state courts as friendlier venues for securities law actions.