Cyan, Inc. v. Beaver County Employees Retirement Fund
583 U.S. 416
SCOTUS2018Background
- The Securities Act of 1933 (§77a et seq.) created private rights to enforce disclosure obligations for securities offerings, granted concurrent jurisdiction to state and federal courts, and barred removal of 1933 Act cases from state court to federal court.
- The Securities Exchange Act of 1934 placed trading claims under exclusive federal jurisdiction. 1995 Reform Act added substantive protections (applying in state and federal courts) and procedural reforms (applying only in federal court), which plaintiffs tried to evade by suing under state law.
- Congress enacted the Securities Litigation Uniform Standards Act of 1998 (SLUSA) to block state-law class-action circumvention. Key 1933 Act amendments: §77p(b) (bars certain state-law "covered class actions" involving a "covered security"), §77p(c) (authorizes removal of those barred state-law class actions), and conforming edits to §77v(a) including the "except clause"—"except as provided in section 77p... with respect to covered class actions."
- Investors (pension funds and an individual) sued Cyan in California state court under the 1933 Act only (no state-law claims) as a damages class action seeking recovery for an IPO misstatement; Cyan moved to dismiss for lack of subject-matter jurisdiction, arguing SLUSA removed state-court jurisdiction for all "covered class actions."
- Lower state courts denied dismissal; Supreme Court granted certiorari to resolve whether SLUSA stripped state courts of jurisdiction over 1933 Act-only "covered class actions" and whether §77p(c) authorizes removal of such federal-law class actions to federal court.
Issues
| Issue | Plaintiff's Argument (Investors) | Defendant's Argument (Cyan) | Held |
|---|---|---|---|
| Whether SLUSA’s §77v(a) "except clause" deprived state courts of jurisdiction over class actions asserting only 1933 Act claims | State courts retain jurisdiction over 1933 Act class actions; §77p only bars state-law class actions | The "except clause" refers to §77p(f)(2) definition of "covered class action" (50+ plaintiffs), so it removes state-court jurisdiction for all sizable class actions regardless of whether claims are federal or state | Held: No. SLUSA did not strip state courts of jurisdiction over 1933 Act–only class actions; §77p addresses state-law class actions and does not displace §77v(a)’s baseline concurrent jurisdiction |
| Whether §77p(c) permits removal of class actions that allege only 1933 Act claims (i.e., federal-law class actions) when they involve conduct like that described in §77p(b) | Investors: §77p(c) does not authorize removal of federal-law class actions; removal is limited to state-law class actions precluded by §77p(b) | Cyan/Government: §77p(c) should be read to permit removal of large class actions involving covered securities when the complaint alleges the types of misconduct described in §77p(b), even if pleaded under federal law | Held: No. §77p(c) removal is limited to the same universe that §77p(b) precludes (state-law covered class actions); federal-law 1933 Act class actions remain nonremovable under §77v(a) except as §77p(c) expressly allows |
| Proper reading of cross-reference "except as provided in section 77p ... with respect to covered class actions" (whether it points only to the definition in §77p(f)(2)) | Investors: The cross-reference points to §77p as a whole and does not convert the §77p(f)(2) definition into a jurisdiction-stripping rule | Cyan: The phrase "covered class actions" should be read via §77p(f)(2) so that any class action seeking damages for 50+ persons is excluded from state jurisdiction | Held: The reference points to §77p as a whole; a definition alone does not "provide" an exception to §77v(a); Congress would have used explicit subsection/paragraph cross-reference if it intended a narrow definitional import |
| Whether purposive/legislative-history arguments can override the statutory text to require federal-court adjudication of 1933 Act class actions | Investors: SLUSA’s purpose was to preclude state-law evasions; that goal is achieved without stripping state courts of jurisdiction over 1933 Act claims | Cyan/Government: To effectuate the Reform Act, Congress must have intended to move large securities class actions to federal court | Held: Purpose/history do not overcome clear statutory text; SLUSA achieved Reform Act goals through the state-law bar and 1934 Act changes without eliminating state-court jurisdiction over 1933 Act class suits |
Key Cases Cited
- United States v. Detroit Timber & Lumber Co., 200 U.S. 321 (general note that syllabi are not part of opinion)
- Kircher v. Putnam Funds Trust, 547 U.S. 633 (interpretation that §77p(c) removal is limited to actions precluded by §77p(b))
- Director of Revenue of Mo. v. CoBank ACB, 531 U.S. 316 (Congress does not effect radical changes through mere conforming amendments)
- Whitman v. American Trucking Assns., Inc., 531 U.S. 457 ("no elephants in mouseholes" principle for major statutory shifts)
- Pinter v. Dahl, 486 U.S. 622 (background on 1933 Act disclosure duties)
- Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (distinction of 1933 Act narrow scope vs. 1934 Act broader trading regulation)
- Marx v. General Revenue Corp., 568 U.S. 371 (Congress sometimes legislates to remove doubt)
- Mims v. Arrow Financial Services, LLC, 565 U.S. 368 (presumption favoring concurrent state-court jurisdiction)
- Tafflin v. Levitt, 493 U.S. 455 (concurrent state-court jurisdiction presumption)
- Lozano v. Montoya Alvarez, 572 U.S. 1 (rules against reading statutes to supply unadopted alternatives)