Federal Courts. Authority of State Law. Federal Court Not Sitting in County Where Cause of Action Accrued May Obtain Personal Jurisdiction under State Nonresident Motorist Act despite Act's Provision for Local Venue

This Article examines Congress’s decades-long attempt to ensure that securities class action lawsuits of national importance are litigated in federal courts. The intent is limiting strike suits. Congress attempted to curtail strike suits through the enactment of the Private Securities Litigation Reform Act (“PSLRA”). The PSLRA required heightened pleading requirements to ensure the validity of federal securities class actions. Instead of solving the dilemma, plaintiffs circumvented the PSLRA by bringing fraud cases as state law claims. To combat the circumvention of the PSLRA, Congress enacted the Securities Litigation Uniform Standards Act (“SLUSA”). SLUSA federally preempted state law claims based on alleged misrepresentations, untrue statements, or omissions of material facts, requiring them to be brought in federal court. However, SLUSA did not address the concurrent jurisdiction provision of the Securities Act of 1933. This created an anomaly whereby many federal claims under the 1933 Act were brought in state courts, while state fraud claims were required to be brought in federal court. Congress could have addressed this enigma when it enacted the Class Action Fairness Act (“CAFA”). Instead, CAFA, which reformed class actions generally, exempted most securities class actions from its rules. In 2018, the Supreme Court decided Cyan v. Beaver County and allowed 1933 Act claims covered by SLUSA to continue to be brought in state courts. The Court was silent on non-covered securities. This Article recommends how Congress can accomplish its goal of forcing important securities class actions into federal courts.

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Unresolved Business: Federal Corporate Governance Enhancements

10.1093/oso/9780199934546.003.0007 ◽

2018 ◽

Author(s):

Marc I. Steinberg

Keyword(s):

Corporate Governance ◽

Insider Trading ◽

Securities And Exchange Commission ◽

Federal Courts ◽

Professional Conduct ◽

State Law ◽

Federal Law ◽

Tender Offers ◽

Federal Level ◽

Federal Statute

This chapter analyzes and recommends federal corporate governance enhancements that should be implemented. These enhancements, which should be adopted in a measured and directed manner, are necessary to remediate certain deficiencies that currently exist. Consistent therewith, this chapter focuses on several important matters that merit attention, including the undue deference by federal courts to state law, the appropriate application of federal law to tactics undertaken in tender offers, the need for a federal statute encompassing insider trading, and the propriety of more vigorous oversight by the Securities and Exchange Commission (such as with respect to the “current” disclosure regime, the SEC’s Standards of Professional Conduct for Attorneys, and the Commission’s neglecting at times to invoke its statutory resources). Thus, the analysis set forth in this chapter identifies significant deficiencies that currently exist and recommends measures that should be implemented on the federal level to enhance corporate governance standards.

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