March 20, 2018

The U.S. Supreme Court on Tuesday showed it could cut a direct path through difficult statutory language when it ruled that investors could keep bringing certain securities class actions in state courts — and issued a decision that defense attorneys warned will cause a flood of new shareholder suits before state judges around the country.

The 9-0 decision in Cyan Inc. v. Beaver County Employees Retirement Fund found the justices roundly rejecting the former telecommunications company's arguments that a 1998 law had precluded investors from bringing certain securities class actions anywhere but in federal court.

In doing so, the high court showed that statutory language that had confounded its members during oral arguments in November — language that two justices deemed "gibberish" — would not be an issue when deciding what Congress did or, rather, did not intend to do when it passed the Securities Litigation Uniform Standards Act of 1998.

Specifically, there was no proof that Congress had suddenly decided, in 1998, to cut off shareholders from bringing the type of class actions they'd been bringing for 65 years after the passage of the Securities Act of 1933, Justice Elena Kagan wrote in her 24-page opinion.

The decision was hailed by the plaintiffs bar as restoring certainty to the rights afforded to investors signed into law eight decades ago.

Daniel Sommers, co-chair of the Securities Litigation practice at Cohen Milstein Sellers & Toll PLLC, said among other things the decision will make it clear that '33 Act plaintiffs have the ultimate say in where their lawsuits are filed.

"Investors won't have to litigate this time-consuming and distracting issue about whether the case was filed in the right venue," he said.

There were a few surprises in Tuesday's decision. The fact that the decision was unanimous was unexpected.

Attorneys noted that the unanimity probably is a reflection of the way Justice Kagan wrote the opinion. In dismantling Cyan's argument before the court, the liberal jurist relied on the plain language of the statute and rejected Cyan's invitations to interpret congressional intent and the legislative history of the SLUSA statute.

In other words, she deployed the tools of conservative justices to get to her decision, said Sommers of Cohen Milstein. That probably helped her win support across the bench.

"The unanimous opinion was written in a way that it could bring into the fold all of the justices," Sommers said.

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