Friday, July 12, 2019
Michael Klausner, Jason Hegland, Carin LeVine, and Sarah Leonard have posted State Section 11 Litigation in the Post-Cyan Environment on SSRN with the following abstract:
In Cyan, Inc. v. Beaver County Employees Retirement Fund, decided roughly a year ago, the Supreme Court interpreted the Securities Litigation Uniform Standards Act of 1998 (SLUSA) to allow state courts to hear cases under Section 11 of the Securities Act. The result has been a dramatic increase in the filing of Section 11 cases in state court, for which there is often a parallel case brought in federal court against the same defendant based on the same allegations. To understand the practical implications of Cyan, we analyze data on Section 11 cases filed since 2011, a point at which several circuits had ruled that Section 11 cases could be brought in state court. Our key findings are the following: state courts have dismissed Section 11 cases at less than half the rate of federal courts; when parallel cases are filed in state and federal court against the same defendant, settlements occurred over 80% of the time; even if a federal case is dismissed, a parallel state case will often settle.