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Tuesday, February 10, 2009

The Class Action Fairness Act and the Securities Act of 1933

I'm not a securities litigator, but given the rise in wage and hour cases being prosecuted in federal court since passage of the so-called "Class Action Fairness Act" ("CAFA") in 2005, I found this article interesting. As reported on
The 7th U.S. Circuit Court of Appeals has made it tougher for plaintiffs to keep securities class actions in state court by holding that the 2005 Class Action Fairness Act's preference for federal jurisdiction trumps the Securities Act of 1933.
The decision, issued on Jan. 5, stems from a disputed real estate investment trust merger and splits with a 9th Circuit interpretation of conflicting terms between the 1933 Act's anti-removal provisions and the Class Action Fairness Act's terms that allow removal of state class actions to federal court.
The 7th Circuit held that an anti-removal provision in Section 22 of the Securities Act of 1933 does not prevent removal when other requirements of the CAFA are met. The CAFA is more recent and thus generally allows removal, despite the 1933 Act bar, so long as terms of the CAFA are met. Katz v. Gerardi, 08-8031 (7th Cir.).
This breaks with a 2008 decision in the 9th Circuit that held that the more specific terms of the 1933 Act, applying to securities cases, can trump the generalized terms of the 2005 act applying to all civil actions, Luther v. Countrywide Home Loans Servicing, 533 F.3d 1031 (9th Cir. 2008).

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