By: Jordan A. Costa
The American corporate governance disasters that surfaced with
alarming frequency in the fall of 2001 resulted in far more than
headline news of executive malfeasance and the Sarbanes-Oxley
Act. One of the effects of the exposure of corporate
wrongdoing was a mass of lawsuits by investors. Enron alone
gave rise to numerous claims by investors against issuers under the
federal securities laws.
Federal courts have exclusive jurisdiction over civil suits
arising under the Securities Exchange Act of 1934 (the “Exchange
Act”). Consequently, using the Exchange Act’s general
antifraud provisions, section 10(b) and Rule 10b-5, many investors
sought relief in federal court. The same is not true,
however, for actions arising under the express liability provisions
of the Securities Act of 1933 (the “Securities Act”), which
generally apply to an issuer’s sale of securities to
investors. The concurrent jurisdiction provisions of the
Securities Act have always given investors the option of suing in
either federal or state court. While these claims are
predominantly filed in federal court, an increasing number of
plaintiff’s attorneys, for a variety of strategic reasons, are
choosing to file in state rather then federal court. Not
surprisingly, defendants often remove such actions to federal
court.
. . . .
This Note proceeds as follows. Part I provides relevant
background, examining removal under the federal securities laws
generally before exploring the reasons for the passage of SLUSA and
the modification of the removal provision of the Securities
Act. Part II discusses the reported judicial decisions to
date that have addressed the issue of whether SLUSA allows removal
of a Securities Act claim filed alone. Part III suggests that
the removal provision of the Securities Act can be interpreted
without resort to the legislative history of SLUSA, and must be so
interpreted in light of relevant statutory interpretation
precedent. Part IV suggests simple language that SLUSA could
have used to allow for removal of all Securities Act claims.
It then examines the legislative history of SLUSA, and concludes
that while some members of Congress wanted to allow for removal of
all Securities Act claims, Congress as a whole did not.
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