OCBJ article: “The Waning Days of Sunshine in the Securities Class Action Plaintiffs’ Paradise”

October 23, 2017  |   Recent Posts   |     |   Comments Off on OCBJ article: “The Waning Days of Sunshine in the Securities Class Action Plaintiffs’ Paradise”

 

Jennifer Keller, founding partner, and Jesse Gessin, Senior Counsel at Keller/Anderle LLP, have published an article in the October 16, 2017 issue of the “Orange County Business Journal.”

Excerpt from the article, “The Waning Days of Sunshine in the Securities Class Action Plaintiffs’ Paradise”:

Every public company’s general counsel should know that California courts, rather than their federal brethren, are paradise for securities class action plaintiffs.  The number of securities class actions alleging violations of the Securities Act of 1933 (“the ’33 Act”) filed in California state courts has skyrocketed in the last four years – an astronomical increase of fourteen hundred percent.

For a time, abusive state court class action filings were stymied by two federal statutes: the Private Securities Litigation Reform Act of 1995 (“PSLRA”) and the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”).  While the PSLRA implemented substantive changes related to pleading, discovery, liability, class representation and fee awards, the goal of the SLUSA was to preclude ’33 Act cases with fewer than fifty class members from being filed in state courts.  These cases are called “covered” class actions.  After the SLUSA, removal of covered class action securities cases to federal court became the norm.  Yet once in federal court, parties continued to fight over remand to state court.  The rub is that the federal courts have ruled unevenly on whether the state courts had subject matter jurisdiction in the first place.

Then came the California Court of Appeal decision in Luther v. Countrywide Financial Corp., 195 Cal. App. 4th 789 (2011).  Luther was a game-changing decision for securities-focused plaintiff attorneys.  Luther held that state courts have concurrent jurisdiction over some covered class action claims filed under the ‘33 Act.  The California Supreme Court and the United States Supreme Court declined to review Luther, which opened the floodgates.  The numbers are telling. In the twelve years before Luther, class action claims alleging a violation of the ’33 Act were filed in California state court an average of once every two years.  After Luther, the average number of filings increased to more than seven cases annually, including eighteen filed in 2016 alone.

This fall the United States Supreme Court will hear Cyan, Inc. v. Beaver County Employees Retirement Fund, Case No. 15-1439 (May 24, 2016).  Cyan could be the state court “sunset” for the plaintiff securities bar …

Read the article

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