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The U.S. Supreme Court Hears Argument on Whether State Courts Have Jurisdiction Over Large Securities Class Actions in Light of the Securities Litigation Uniform Standards Act of 1998

Generally when broker-dealers are subject to court jurisdiction, that jurisdiction, based either on diversity or subject matter, places the dispute in federal courts. However, that has not necessarily been the case in class actions. The issue of state versus federal court jurisdiction was argued before the U.S. Supreme Court on November 28, 2017. The Supreme Court heard oral arguments in Cyan, Inc. v. Beaver County Employees Retirement Fund regarding whether states had jurisdiction over “covered class actions” that allege violations of the Securities Act of 1933 (the “33 Act”). Specifically, the Court considered whether an amendment to the 33 Act—the Securities Litigation Uniform Standards Act of 1998 (SLUSA)—precluded states from hearing the vast majority of 33 Act claims. The Court tangled with both sides over Congress’ intent in passing SLUSA and the text of SLUSA, which Justice Alito referred to as “gibberish.”

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