Last year, in Important Developments on the Class Action Front, I noted that as a result of the Supreme Court’s decision in Cyan v. Beaver County, 138 S.Ct. 1016(2018), there would be a substantial uptick in the number of state court filings of class actions asserting securities claims under the 1933 Act.  Cyan held that such class actions under the 1933 Act could be brought in state court, and were not removable to federal court.

As Cornerstone Research recently reported in its 2019 Midyear Assessment of Securities Class Action Filings, 61 new 1933 Act cases have been filed since Cyan:  12 federal filings, 23 parallel filings, and 26 filings in state court only.  Almost half of such cases are now filed solely in state court. Notably, New York now has more 1933 Act class actions filed than California, which had historically lead the country in such filings.

As the Cornerstone Assessment observed:

“In addition to large overall litigation volume, plaintiffs continue to shift securities fraud claims against IPOs from federal to state courts”, observed Joseph A. Gundfest, Stanford Law Professor, former SEC Commissioner, and founder to Stanford’s Securities Class Action Clearinghouse.  “Other data show that state courts dismiss fewer of these claims than do federal courts, suggesting that plaintiffs can successfully file weaker claims in state rather than federal court.”

As long as state courts remain a more favorable forum, we can expect the number of such cases filed in New York to continue rising. 

Overall, the number of new federal class action securities fraud cases continued near record levels in 2019.  Plaintiffs filed 198 new federal class action securities fraud lawsuits during the first six months of 2019. Assessment at p.1.

Joe DiBenedetto recently retired from Winston & Strawn LLP, after spending 46 years in its Manhattan office as a capital partner specializing in commercial litigation. He formed JDB Mediation LLC to further develop his mediation and arbitration practice, which is centered in Manhattan and its surrounding counties (including Westchester, Nassau, and Suffolk). Joe DiBenedetto’s experience, training, and other credentials are more fully described at