Thomas J. Hall and Judith A. Archer
It is common for defendants facing parallel securities class actions in New York state court and federal court to seek a stay of the state proceedings. Historically, New York state courts have readily deferred to their federal counterparts, agreeing to stay the state action pending the outcome of the federal action, particularly in circumstances where the state complaint was less comprehensive. Two recent Commercial Division cases, however, suggest this approach may be changing, increasing the risk that securities defendants will face active, concurrent litigation in both state and federal court. This column explores these recent developments.
The ‘Cyan’ Decision
In Cyan v, Beaver County Employees Retirement Fund, 138 S. Ct. 1061, 1069 (2018), the U.S. Supreme Court considered whether the Securities Litigation Uniform Standards Act of 1998 (SLUSA), enacted in 1995, deprived state courts of subject matter jurisdiction over claims under the Securities Act of 1933 (1933 Act). Some courts had interpreted SLUSA to mandate exclusive federal court jurisdiction over the securities class actions asserting only 1933 Act claims, while others found concurrent jurisdiction.
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