CD: Reflecting on the last 12-18 months, what would you highlight as key trends shaping securities litigation and enforcement? To what extent have you seen an increase in regulatory action?
Gerber: In the US, the last 12-18 months of securities litigation and enforcement have seen significantly higher levels of private securities litigation, but somewhat lower levels of regulatory enforcement activity. On the private litigation side, the increase in activity has largely been driven by a shift by plaintiffs to challenging mergers through federal securities litigation, rather than state law breach of fiduciary duty actions. An additional recent trend in US securities litigation has been a shift of some class actions from federal court, where almost all such actions were previously filed, to state court. This trend has been driven by the Supreme Court’s recent decision in Cyan, Inc. v. Beaver County Employees Retirement Fund, which held that state courts possess jurisdiction over securities class actions asserting certain claims concerning initial public offerings. The result of this trend has been a rise in duplicative litigation in state and federal courts.
Fumerton: One of the most significant trends in the securities litigation space over the past year or so has been the proliferation of putative federal securities class actions filed in state courts. This trend is a result of the Supreme Court’s recent decision in Cyan, which held that state and federal courts have concurrent jurisdiction over claims brought under the Securities Act of 1933 (1933 Act), and thus such claims are not removable to federal court. Defendants in securities litigation are currently grappling with the difficulties of litigating 1933 Act class actions in state courts, which may lack familiarity with federal securities claims and where plaintiffs have argued that the protections for defendants under the Private Securities Litigation Reform Act (PSLRA) do not necessarily apply.
Apr-Jun 2019 issue
Cleary Gottlieb Steen & Hamilton LLP
Debevoise & Plimpton LLP
Freeborn & Peters LLP
Skadden, Arps, Slate, Meagher & Flom LLP
Sullivan & Cromwell LLP