December 10, 2019 Articles

Why We Need a State-Level Private Securities Litigation Reform Act

With class actions arising under the Securities Act of 1933 being filed in state courts with increasing frequency, state legislatures should consider enacting state-level versions of the 1995 act.

By Virginia F. Milstead

A year and a half ago, the U.S. Supreme Court held in Cyan, Inc. v. Beaver County Retirement Fund, 138 S. Ct. 1061 (2018), that state courts have concurrent jurisdiction over class actions arising exclusively under the Securities Act of 1933 and that such actions are not removable to federal court. Since then, the number of Securities Act class actions filed in state court has, as many predicted it would, increased. According to the 2019 Midyear Assessment of Securities Class Action Filings by Cornerstone Research, stockholders filed 13 Securities Act class actions in state courts in 2017 and 34 such actions in 2018, and are projected to file 38 actions by the end of 2019. Most of the actions are filed either in California or, with increasing frequency, in New York state courts. Oftentimes, parallel actions are filed in federal court.

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