583 U.S. ____ (2018)
BEAVER COUNTY EMPLOYEES RETIREMENT FUND ET AL. CYAN, INC., ET AL.
November 28, 2017
OF CERTIORARI TO THE COURT OF APPEAL OF CALIFORNIA, FIRST
In the wake of the 1929 stock market crash, Congress enacted
two laws, in successive years, to promote honest practices in
the securities markets. The Securities Act of 1933 (1933 Act)
creates private rights of action to aid the enforcement of
obligations pertaining to securities offerings. The Act
authorizes both federal and state courts to exercise
jurisdiction over those private suits and, more unusually,
bars the removal of such suits from state to federal court.
The Securities Exchange Act of 1934 (1934 Act), which
regulates not the original issuance of securities but all
their subsequent trading, is also enforceable through private
rights of action. But all suits brought under the 1934 Act
fall within the exclusive jurisdiction of the federal courts.
In 1995, the Private Securities Litigation Reform Act (Reform
Act) amended both Acts, in order to stem perceived abuses of
the class-action vehicle in securities litigation. The Reform
Act included both substantive reforms, applicable in state
and federal court alike, and procedural reforms, applicable
only in federal court. Rather than face these new obstacles,
plaintiffs began filing securities class actions under state
To prevent this end run around the Reform Act, Congress
passed the Securities Litigation Uniform Standards Act of
1998 (SLUSA), whose amendments to the 1933 Act are at issue
in this case. As relevant here, those amendments include two
operative provisions, two associated definitions, and two
First, 15 U.S.C. §77p(b) completely disallows (in both
state and federal courts) "covered class actions"
alleging dishonest practices "in connection with the
purchase or sale of a covered security." According to
SLUSAs definitions, the term "covered class action"
means a class action in which "damages are sought on
behalf of more than 50 persons." §77p(f)(2). And
the term "covered security" refers to a security
listed on a national stock exchange. §77p(f)(3). Next,
§77p(c) provides for the removal of certain class
actions to federal court, where they are subject to
dismissal. Finally, SLUSA's "conforming
amendments" add two new phrases to §77v(a), the
1933 Act's jurisdictional provision. The first creates an
exception to §77v(a)'s general removal bar through
the language "[e]xcept as provided in section
77p(c)." The other-the key provision in this
case-expresses a caveat to the general rule that state and
federal courts have concurrent jurisdiction over all claims
to enforce the 1933 Act. With this conforming amendment,
§77v(a) now provides that state and federal courts shall
have concurrent jurisdiction, "except as provided in
section 77p . . . with respect to covered class
actions." The Court refers to this provision as the
Respondents, three pension funds and an individual
(Investors), purchased shares of stock in petitioner Cyan,
Inc., in an initial public offering. After the stock declined
in value, the Investors brought a damages class action
against Cyan in state court, alleging 1933 Act violations.
They did not assert any claims based on state law. Cyan moved
to dismiss for lack of subject matter jurisdiction, arguing
that SLUSA's "except clause" stripped state
courts of power to adjudicate 1933 Act claims in
"covered class actions." The Investors maintained
that SLUSA left intact state courts' jurisdiction over
all suits- including "covered class
actions"-alleging only 1933 Act claims. The state courts
agreed with the Investors and denied Cyan's motion to
dismiss. This Court granted certiorari to decide whether
SLUSA deprived state courts of jurisdiction over
"covered class actions" asserting only 1933 Act
claims. The Court also addresses a related question raised by
the federal Government as amicus curiae and
addressed by the parties in briefing and argument: whether
SLUSA enabled defendants to remove 1933 Act class actions
from state to federal court for adjudication.
1. SLUSA did nothing to strip state courts of their
longstanding jurisdiction to adjudicate class actions brought
under the 1933 Act. Pp. 7-18.
(a) SLUSA's text, read most straightforwardly, leaves
this jurisdiction intact. The background rule of
§77v(a)-in place since the 1933 Act's passage-gives
state courts concurrent jurisdiction over all suits
"brought to enforce any liability or duty created
by" that statute. And the except clause-"except as
provided in section 77p of this title with respect to covered
class actions"-ensures that in any case in which
§77v(a) and §77p conflict, §77p will control.
The critical question for this case is therefore whether
§77p limits state-court jurisdiction over class actions
brought under the 1933 Act. It does not. Section 77p bars
certain securities class actions based on state law
but it says nothing, and so does nothing, to deprive state
courts of jurisdiction over class actions based on
federal law. That means §77v(a)'s
background rule-under which a state court may hear the
Investors' 1933 Act suit-continues to govern.
Cyan argues that the except clause's reference to
"covered class actions" points the reader to
§77p(f)(2), which defines that term to mean a suit
seeking damages on behalf of more than fifty persons- without
mentioning anything about whether the suit is based on state
or federal law. But that view cannot be squared with the
except clause's wording for two independent reasons.
First, the except clause points to "section 77p" as
a whole-not to paragraph 77p(f)(2). Had Congress intended to
refer to § 77p (f)(2)'s definition alone, it
presumably would have done so. See NLRB v. SW General,
Inc., 580 U.S. ___, ___. Second, a definition, like
§77p(f)(2), does not "provide!]" an
"except[ion], " but instead gives meaning to a
term-and Congress well knows the difference between those two
functions. Not one of the 30-plus provisions in the 1933 and
1934 Acts using the phrase "except as provided in . .
." cross-references a definition.
Structure and context also support the Court's reading of
the except clause. Because Cyan treats the broad definition
of "covered class action" as altering
§77v(a)'s jurisdictional grant, its construction
would prevent state courts from deciding any 1933 Act class
suits seeking damages for more than fifty plaintiffs, thus
stripping state courts of jurisdiction over suits about
securities raising no particular national interest. That
result is out of line with SLUSA's overall scope.
Moreover, it is highly unlikely that Congress upended the
65-year practice of state courts' adjudicating all manner
of 1933 Act cases (including class actions) by way of a mere
conforming amendment. See Director of Revenue of Mo. v.
CoBank ACB, 531 U.S. 316, 324. Pp. 8-12.
(b) Cyan's reliance on legislative purpose and history is
unavailing. Pp. 12-18.
(1) Cyan insists that the only way for SLUSA to serve the
Reform Act's objectives was by divesting state courts of
jurisdiction over all sizable 1933 Act class actions.
Specifically, it claims that its reading is necessary to
prevent plaintiffs from circumventing the Reform Act's
procedural measures, which apply only in federal court, by
bringing 1933 Act class actions in state court.
But Cyan ignores a different way in which SLUSA served the
Reform Act's objectives-which the Court's view of the
statute fully effects. The Reform Act included substantive
sections protecting defendants in suits brought under the
federal securities laws. Plaintiffs circumvented those
provisions by bringing their complaints of securities
misconduct under state law instead. Hence emerged SLUSA's
bar on state-law class actions (and its removal provision to
ensure their dismissal)-which guaranteed that the Reform
Act's heightened substantive standards would govern all
future securities class litigation. SLUSA's preamble
states that the statute is designed "to limit the
conduct of securities class actions under state law, and for
other purposes, " 112 Stat. 3227, and this Court has
underscored, over and over, SLUSA's "purpose to
preclude certain vexing state-law class actions."
Kircher v. Putnam Funds Trust, 547 U.S. 633, 645, n.
12. That object-which SLUSA's text actually reflects-does
not depend on stripping state courts of jurisdiction over
1933 Act class suits, as Cyan proposes. For wherever those
suits go forward, the Reform Act's substantive
protections necessarily apply.
SLUSA also went a good distance toward ensuring that federal
courts would play the principal role in adjudicating
securities class actions by means of its revisions to the
1934 Act. Because federal courts have exclusive
jurisdiction over 1934 Act claims, forcing plaintiffs to
bring class actions under the 1934 statute instead of state
law also forced them to file in federal court. Pp. 12-15.
(2) Cyan finally argues that the except clause would serve no
purpose at all unless it works as Cyan says. But Congress
could have envisioned the except clause as the ultimate
fail-safe device, designed to safeguard §77p's
class-action bar come whatever might. Congress has been known
to legislate in that hyper-vigilant way, to "remov[e]
any doubt" as to things not particularly doubtful in the
first instance. Marx v. General Revenue Corp., 568
U.S. 371, 383-384. If ever it had reason to legislate in that
fashion, it was in SLUSA-whose very impetus lay in the
success of class action attorneys in "bypass[ing] . . .
the Reform Act." Kircher, 547 U.S., at 636. And
regardless of any uncertainty surrounding Congress's
reasons for drafting the except clause, there is no sound
basis for giving that clause a broader reading than its
language can bear, especially in light of the dramatic change
such an interpretation would work in the 1933 Act's
jurisdictional framework. Pp. 15-18.
2. SLUSA does not permit defendants to remove class actions
alleging only 1933 Act claims from state to federal court.
The Government argues that §77p(c) allows defendants to
remove 1933 Act class actions to federal court as long as
they allege the kinds of misconduct listed in §77p(b).
But most naturally read, §77p(c) refutes, not supports,
the Government's view. Section 77p(c) allows for removal
of "[a]ny covered class action brought in any State
court involving a covered security, as set forth in
subsection (b)." The covered class ac- tions "set
forth" in §77p(b) are state-law class actions
alleging securities misconduct. Federal-law suits are not
"class action[s] ... as set forth in subsection
(b)." Thus, they remain subject to the 1933 Act's
removal ban. This Court has held as much, concluding that
§§77p(b) and 77p(c) apply to the exact same
universe of class actions. Kircher, 547 U.S., at
643-644. The "straightforward reading" of those two
provisions is that removal under §77p(c) is
"limited to those [actions] precluded by the terms of
subsection (b)." Id., at 643. Pp. 18-24.
case presents two questions about the Securities Litigation
Uniform Standards Act of 1998 (SLUSA), 112 Stat. 3227. First,
did SLUSA strip state courts of jurisdiction over class
actions alleging violations of only the Securities Act of
1933 (1933 Act), 48 Stat. 74, as amended, 15 U.S.C. §77a
et seq.? And second, even if not, did SLUSA empower
defendants to remove such actions from state to federal
court? We answer both questions no.
wake of the 1929 stock market crash, Congress enacted two
laws, in successive years, to promote honest practices in the
securities markets. The 1933 Act required companies offering
securities to the public to make "full and fair
disclosure" of relevant information. Pinter v.
Dahl, 486 U.S. 622, 646 (1988). And to aid enforcement
of those obligations, the statute created private rights of
action. Congress authorized both federal and state courts to
exercise jurisdiction over those private suits. See
§22(a), 48 Stat. 86 ("The district courts of the
United States . . . shall have jurisdiction concurrent with
State and Territorial courts, of all suits in equity and
actions at law brought to enforce any liability or duty
created by this title"). More unusually, Congress also
barred the removal of such actions from state to federal
court. Id., at 87 ("No case arising under this
title and brought in any State court of competent
jurisdiction shall be removed to any court of the United
States"). So if a plaintiff chose to bring a 1933 Act
suit in state court, the defendant could not change the
next foray, the Securities Exchange Act of 1934 (1934 Act),
operated differently. See 48 Stat. 881, as amended, 15 U.S.C.
§78a et seq. That statute regulated not the
original issuance of securities but instead all their
subsequent trading, most commonly on national stock
exchanges. See Blue Chip Stamps v. Manor Drug
Stores, 421 U.S. 723, 752 (1975). The 1934 Act, this
Court held, could also be enforced through private rights of
action. See id., at 730, and n. 4. But Congress
determined that all those suits should fall within the
"exclusive jurisdiction" of the federal courts.
§27, 48 Stat. 902-903. So a plaintiff could never go to
state court to litigate a 1934 Act claim.
1995, the Private Securities Litigation Reform Act (Reform
Act), 109 Stat. 737, amended both the 1933 and the 1934
statutes in mostly identical ways. Congress passed the Reform
Act principally to stem "perceived abuses of the
class-action vehicle in litigation involving nationally
traded securities." Merrill Lynch, Pierce, Fenner
& Smith Inc. v. Dabit, 547 U.S. 71, 81 (2006). Some
of the Reform Act's provisions made substantive changes
to the 1933 and 1934 laws, and applied even when a 1933 Act
suit was brought in state court. For instance, the statute
created a "safe harbor" from federal liability for
certain "forward-looking statements" made by
company officials. 15 U.S.C. §77z-2 (1933 Act);
§78u-5 (1934 Act). Other Reform Act provisions modified
the procedures used in litigating securities actions, and
applied only when such a suit was brought in federal court.
To take one example, the statute required a lead plaintiff in
any class action brought under the Federal Rules of Civil
Procedure to file a sworn certification stating, among other
things, that he had not purchased the relevant security
"at the direction of plaintiff's counsel."
§77z-1(a)(2)(A)(ii) (1933 Act); §78u-4(a)(2)(A)(ii)
Reform Act fell prey to the law of "unintended
consequence[s]." Dabit, 547 U.S., at 82. As
this Court previously described the problem: "Rather
than face the obstacles set in their path by the Reform Act,
plaintiffs and their representatives began bringing class
actions under state law." Ibid. That
"phenomenon was a novel one"-and an unwelcome one
as well. Ibid. To prevent plaintiffs from
circumventing the Reform Act, Congress again undertook to
modify both securities laws.
result was SLUSA, whose amendments to the 1933 Act are at
issue in this case. Those amendments include, as relevant
here, two operative provisions, two associated definitions,
and two "conforming amendments" to the 1933
law's jurisdictional section. 112 Stat. 3230.
(SLUSA's amendments to the 1934 Act include essentially
the same operative provisions and definitions. See
Dabit, 547 U.S., at 82, n. 6. But Congress decided
that the 1934 law's exclusive jurisdiction provision
needed no conforming amendments.) The added material-now
found in §§77p and 77v(a) and set out in full in
this opinion's appendix- goes as follows.
§77p(b) altogether prohibits certain securities class
actions based on state law. That provision-which we sometimes
(and somewhat prosaically) refer to as the state-law
"No covered class action based upon the statutory or
common law of any State . . . may be maintained in any State
or Federal court by any private party alleging- "
(1) an untrue statement or omission of a material fact in
connection with the purchase or sale of a covered security;
"(2) that the defendant used or employed any
manipulative or deceptive device or contrivance in connection
with the purchase or sale of a covered security."
to SLUSA's definitions, the term "covered class
action" means a class action in which "damages are
sought on behalf of more than 50 persons."
§77p(f)(2). And the term "covered security"
refers to a security listed on a national stock exchange.
§77p(f)(3) (cross-referencing §77r(b)). So taken
all in all, §77p(b) completely disallows (in both state
and federal courts) sizable class actions that are founded on
state law and allege dishonest practices respecting a
nationally traded security's purchase or sale.
§77p(c) provides for the removal of certain class
actions to federal court, as well as ...