Cyan, Inc. v. Beaver County Employees Retirement Fund

Background

Investors, three pension funds and an individual, bought shares in Cyan, Inc.’s initial public offering and sued in California state court, saying Cyan’s offering documents contained material misstatements under the Securities Act of 1933. They brought only federal 1933 Act claims as a damages class action. Cyan argued SLUSA’s new language stripped state courts of power to hear “covered class actions” and moved to dismiss for lack of jurisdiction. The state courts denied that motion, and the Supreme Court agreed to decide whether SLUSA removed state-court jurisdiction and whether defendants could remove such suits to federal court.

Reasoning

The Court focused on the text of SLUSA and its conforming amendment to the 1933 Act’s jurisdiction clause. It concluded the “except clause” points to section 77p as a whole, and §77p(b) bars only state-law class actions; it does not take away state courts’ power to hear class suits that rely solely on the 1933 Act. The Court also held §77p(c)’s removal rule authorizes removal only of the state-law class actions that §77p(b) precludes. The Court rejected arguments based on legislative purpose and history and relied on structure, precedent, and the practical scope of SLUSA.

Real world impact

The decision leaves state courts free to adjudicate class actions asserting only 1933 Act claims. Defendants cannot remove those federal-only 1933 Act class suits to federal court under SLUSA. SLUSA continues to bar state-law class actions about nationally traded securities and permits removal and dismissal of those state-law suits.