October 9, 2008

The Battle of the Acronyms

As a general matter, claims under the Securities Act of 1933 ("'33 Act") may be brought in federal or state court. Some federal courts, however, have held that the Securities Litigation Uniform Standards Act of 1998 ("SLUSA") creates a removal exception for '33 Act securities class actions involving "covered securities" (i.e., securities sold on a national exchange) that are brought in state court. But, you might ask, what about '33 Act securities class actions that do not involve covered securities?

Ask and you shall receive an answer. In New Jersey Carpenters Vacation Fund v. Harborview Mortgage Loan Trust, 2008 WL 4369840 (S.D.N.Y. Sept. 24, 2008), the court considered whether the removal provision of the Class Action Fairness Act of 2005 ("CAFA") applied to a '33 Act securities class action involving large, mortgage-related bond offerings. The plaintiffs alleged that there were misrepresentations in the offering documents. The court concluded that (a) CAFA applies to all securities class actions except those specifically excluded by the statute; and (b) the exceptions in CAFA for class actions relating to covered securities, corporate governance, and security-related rights and duties were intended to ensure that CAFA did not encroach upon SLUSA and were inapplicable in the instant case. Accordingly, the court held that "[s]ince CAFA's main provision trumps [the '33 Act's jurisdiction provision], and no exception applies, remand of the case must be denied."

Holding: Plaintiff's motion to remand denied. (Note that the Ninth Circuit reached the opposite conclusion in Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031 (9th Cir. 2008) earlier this year.)

Posted by Lyle Roberts at October 9, 2008 4:36 PM | TrackBack
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