<\/p>\n
http:\/\/https:\/\/player.vimeo.com\/video\/264341921<\/a><\/p>\n By Gary M. Brown, Partner, Nelson Mullins Riley & Scarborough LLP <\/strong>(Note: Gary Teaches our SEC Reporting and Practice Skills for Lawyers workshop)<\/strong><\/p>\n <\/p>\n [1]<\/u><\/a> The case must allege untrue statements or omission of material facts in connection with the purchase or sale of a covered security; or that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.<\/p>\n [2]<\/u><\/a> \u201cCovered securities\u201d for these purposes are certain securities that satisfy certain specified standards for federal preemption of state authority under NSMIA (the National Securities Markets Improvement Act) \u2013 i.e., <\/em>exchange listed securities, securities issued by investment companies).<\/p>\n <\/p>\n <\/u><\/p>\n","protected":false},"excerpt":{"rendered":" By Gary M. Brown, Partner, Nelson Mullins Riley & Scarborough LLP (Note: Gary Teaches our SEC Reporting and Practice Skills for Lawyers workshop) On March 20, 2018, the U.S. Supreme Court decided Cyan, Inc. et al. v. Beaver County Employees Retirement Fund. The question in this case was the extent to which SLUSA … Continue reading A Post More for Lawyers – Words Are Important \u201cExcept\u201d When They Are Not<\/span>
\nOn March 20, 2018, the U.S. Supreme Court decided Cyan, Inc. et al. v. Beaver County Employees Retirement Fund<\/em>. The question in this case was the extent to which SLUSA (the Securities Litigation Uniform Standards Act) preempts litigation of claims under the Securities Act of 1933 (the \u201c\u201933 Act\u201d) in state as opposed to federal courts. Short answer \u2013 it doesn\u2019t \u2013 at all.<\/p>\n
\nThe decision is more of a grammatical exercise (and an example of poor Congressional draftsmanship) than it is a work of judicial scholarship. The decision focused on two sections of SLUSA found in section 16 of the \u201933 Act and two sentences in Section 22 (Jurisdiction of Offenses and Suits) of the \u201933 Act.<\/p>\n
\nSections 16(b) and 16(c) provide, respectively, that class actions based on state securities law<\/em> claims[1]<\/u><\/strong><\/a><\/em> in connection with the purchase or sale of \u201ccovered securities\u201d[2]<\/u><\/a> may not be maintained in any state or federal court (the \u201cState Law Bar\u201d) and that any such suit (a class action based on state securities law claims<\/em>) involving a \u201ccovered security,\u201d if brought in state court, is removable to federal court where, presumably it will be dismissed (the \u201cRemovability Provision\u201d).<\/p>\n
\nNOTE \u2013 simply stated, the sections apply to class actions based on state securities law claims<\/p>\n
\nBeaver County\u2019s case, however, was not an action brought in state court based on state law claims \u2013 the case was based upon federal <\/em>law (i.e., <\/em>\u201933 Act claims). But surely Congress meant to restrict litigation of those claims to federal court just like cases under the Securities Exchange Act of 1934 (the \u201c\u201934 Act\u201d) \u2013 right?<\/p>\n
\nWell – Section 22 of the \u201933 Act provides in part that \u201c[Federal] courts . . . shall have jurisdiction of offenses and violations under [the \u201933 Act] . . ., and, concurrent with State . . . courts<\/u>, except as provided in [SLUSA] section 16 with respect to covered class actions<\/em>, of all suits . . . brought to enforce any liability or duty created by [the \u201933 Act]<\/u>. Section 16\u2019s State Law Bar provision, however, applies only to state law claims \u2013 not to claims created by the \u201933 Act. Accordingly, the Supreme Court read the \u201cexcept\u201d clause essentially as a nullity, removing nothing from state court jurisdiction except the ability to hear class actions based on state law claims \u2013 and Beaver County\u2019s case was based on federal <\/em>claims.<\/p>\n
\nNext considered was Section 22\u2019s non-removal provision, which provides that \u201c[e]xcept as provided in [SLUSA] section 16(c<\/em>), no case arising under [the \u201833Act] and brought in any State court . . . shall be removed to [federal] court. . . .\u201d Section 16\u2019s Removability Provision was similarly dealt with as it applied (or did not apply) to Beaver County\u2019s case. Because their case was based on federal <\/em>claims, the Removability Provision simply did not apply \u2013 it again was a nullity and did not affect the Section 20\u2019s prohibition on removal from state court of properly filed \u201833 Act cases.<\/p>\n
\nIs this what Congress intended? Great question \u2013 but, as the Supreme Court pointed out, Congress knows how to create exclusive jurisdiction as it has done with the \u201934 Act. The \u201cexcept\u201d clauses supposedly meant something to the drafters. The Supreme Court, however, could not ascertain the meaning nor was the Court willing to do more than take Congress at its words (which, interestingly enough were referred to as \u201cgibberish\u201d during oral argument).<\/p>\n