Judge Salinger addressed an issue that divides federal district courts: Do state courts have subject matter jurisdiction over covered class actions under the Securities Act of 1933? Judge Salinger answered, in Fortunato v. Akebia Therapeutics, Inc., et al., that state courts have concurrent jurisdiction over these claims.
The issue boils down to whether Congress eliminated state court jurisdiction over larger securities class actions when the Securities Act of 1933 was amended in 1998 by the Securities Litigation Uniform Standards Act (“SLUSA”). Judge Salinger observed that there is a long-standing principal that state courts have concurrent jurisdiction with federal courts. He further observed that state courts are deprived jurisdiction only when Congress expressly calls for federal court exclusivity or there is a necessary implication, based on statutory language or legislative history, that would eliminate state jurisdiction. Judge Salinger ruled that the Securities Act of 1933, as amended by SLUSA, did not contain language that either expressly or impliedly eliminated the jurisdiction of state courts. He further ruled that the law was not enacted to bar state courts from hearing larger class actions under the federal Securities Act.
There is a sharp disagreement among federal districts over this issue. The issue could be resolved by the U.S. Supreme Court, however, which is scheduled to hear oral argument later this month in Cyan, Inc. v. Beaver County Employees Retirement Fund, a case in which the state jurisdiction question has been squarely raised.
Fortunato v. Akebia Therapeutics, Inc., et al.
Date: February 21, 2017
Full decision here.
- Senior Editor, Co-Chair, Business Litigation Practice Group