In a break with the past few years’ precedent of focusing on when a class action can be brought, with one exception, the 2014 Supreme Court now narrowed in on whether a plaintiff’s class action claims can be tried in state or federal court and under state or federal law. And while the Court made it easier for defendants to remove class actions to federal court, it held that in two instances class actions and mass actions can remain in state court or seek damages solely for violations of state law.
Understanding the circumstances under which these cases arose and the reasons behind the Court’s decisions will be important to general counsel and stakeholders at companies in a variety of industries, including insurance, banking, manufacturing, energy, and many other areas where the validity of class actions is being ascertained. The decisions will also impact legal strategy employed when companies respond to class actions.
Takeaways from the term’s decisions include:
- Affirmation that individuals and entities providing advice on investing in unsecured securities are subject to class actions under state securities law;
- Clarification on the qualifications for mass action under the Class Action Fairness Act (“CAFA”), and limitations on a company’s opportunity to remove an action to federal court;
- Class action defendants now only need to make a plausible allegation that the amount in controversy exceeds CAFA’s $5 million threshold to remove actions from state to federal courts, which simplifies and lessens costs for the removal process; and
- Expansion in when defendants may offer evidence that alleged public misrepresentations did not affect stock prices, which can be used to defeat class certification in securities fraud class actions.
For an in-depth examination of each case’s history and its importance to your business concerns, please click here