Petition For Certiorari Is Filed Asking The United States Supreme Court To Clarify The Scope of State Court Jurisdiction Over Class Actions Asserting Securities Act Claims
12/12/2016On December 6, 2016, FireEye, Inc. (“FireEye”), a cybersecurity company, filed a petition for writ of certiorari with the United States Supreme Court concerning the scope of state court jurisdiction over “covered class actions” under the Securities Act of 1933, as amended by the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”). Petition for Writ of Certiorari, FireEye, Inc. v. Sup. Ct. of Cal. (U.S. Dec. 6, 2016).
Plaintiffs in FireEye filed a securities class action in California state court alleging that the registration statements filed in connection with FireEye’s initial public offering in September 2013 and secondary offering in February 2014 contained materially misleading statements regarding its cybersecurity products and technology. FireEye and several of the defendant directors and executives moved to dismiss the complaint for lack of subject matter jurisdiction on the basis that SLUSA deprived the California state court of jurisdiction over putative class actions asserting claims under the Securities Act. The trial court denied the motion, and both California appellate courts declined to hear an appeal. This writ of certiorari followed.
FireEye’s petition follows the petition filed by Cyan, Inc. (“Cyan”) in May of this year on the same issue. (Both FireEye and Cyan are represented by the same attorneys.) Similar to Cyan, FireEye argues that state court jurisdiction over class actions asserting only claims under the Securities Act effectively “endorse[s] the forum-shopping that SLUSA was intended to stop.” In its petition, FireEye noted that federal district courts in removal cases have been divided over SLUSA’s effect on state courts’ concurrent jurisdiction under the Securities Act, with forty-four courts holding that state courts have subject matter jurisdiction and eleven holding that state courts lack subject matter jurisdiction. FireEye also explained that—following the California appellate court’s decision in Luther v. Countrywide Financial Corp., 195 Cal. App. 4th 789 (2011), the only state appeals court to have directly ruled on this issue—state court filings of Securities Act class actions have significantly increased, particularly in California where such filings have spiked by more than 1600 percent. FireEye requests guidance from the Supreme Court to prevent courts from “remain[ing] in disarray with no end in sight.”
If granted, the petitions could provide some much needed clarity on SLUSA’s effect on state court jurisdiction over Securities Act claims by answering whether state courts remain proper venues for covered class actions.