September 21, 2012

Facebook Begins

One of the first decisions in the Facebook securities litigation addresses a Securities Litigation Uniform Standards Act of 1998 (SLUSA) issue that has been the subject of a longstanding district court split.

Private actions under the Securities Act of 1933 ('33 Act) may be brought in federal or state court. SLUSA was designed, however, to prohibit the bringing of securities class actions based on misrepresentations or deception in state court and provides for the removal of these cases to federal court. In doing so, however, SLUSA specifically limits itself to class actions "based upon the statutory or common law of any State." Which leaves open the question: can plaintiffs bring a '33 Act class action in state court and prevent its removal?

In Lapin v. Facebook, Inc., 2012 WL 3647409 (N.D. Cal. Aug. 23, 2012), the court held that '33 Act class actions are removable. The court found that SLUSA amended the jurisdiction section of the '33 Act by inserting an "except as provided in" SLUSA provision that exempts covered class actions from concurrent jurisdiction (presumably even though '33 Act class actions are brought under federal, not state or common, law). Moreover, this interpretation of the amendment to the jurisdiction section is supported by SLUSA's legislative history, which broadly states that SLUSA's purpose "is to prevent plaintiffs from seeking to evade the protections that Federal law provides against abusive litigation by filing suit in State, rather than in Federal, court."

Holding: Motion to remand denied.

Posted by Lyle Roberts at September 21, 2012 10:13 PM | TrackBack
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