SECURITIES LITIGATION: MAPPING A STRATEGY FOR DEFENDING AGAINST FRAUD CLAIMS
CD: What key trends do you believe are shaping the securities litigation landscape? To what extent has there been an uptick in the number of fraud-related cases?
Johnson: A significant trend currently shaping the securities litigation landscape is the rise of securities class actions filed in state courts. As a result of the US Supreme Court’s decision in Cyan, Inc. v. Beaver County Employees Retirement Fund, it is now settled law that state and federal courts have concurrent jurisdiction over claims brought under the Securities Act of 1933. The Cyan decision has led to an increase in the number of state court securities cases filed over the last year, although we are only now beginning to see how some of those cases are playing out. For example, in 2019, the Connecticut Superior Court in Pitney Bowes and the New York Supreme Court in Everquote held that the Private Securities Litigation Reform Act’s (PSLRA’s) mandatory discovery stay pending a motion to dismiss applied to the Section ‘33 claim filed in state court. These decisions are important victories for defendants who faced the threat of immediate, and costly, fact discovery before having the opportunity to test the allegations of the complaint through a motion to dismiss. It remains to be seen if other state courts will follow the reasoning of the Connecticut and New York courts but it seems likely that plaintiffs will continue to pursue state court actions as a means to pressure defendants for the early resolution of claims given the uncertainties of litigating these complex cases in state courts.
Jan-Mar 2020 issue
Debevoise & Plimpton LLP
Kirkland & Ellis LLP
Skadden, Arps, Slate, Meagher & Flom LLP