On December 19, 2018, the Delaware Chancery Court held that a business incorporated in Delaware could not use its corporate charter or bylaws to require that its shareholders bring any securities claims under the Securities Act of 1933 (the “1933 Act”) in federal court. The 1933 Act requires that any person selling or offering securities make certain disclosures through a registration statement approved by the Securities and Exchange Commission and provides a private right of action to securities purchasers to enforce its provisions.
Earlier this year, in Cyan, Inc. v. Beaver Cty. Empls. Ret. Fund, the United States Supreme Court concluded that federal law did not bar state courts from adjudicating class actions alleging only 1933 Act claims. Importantly, it also prohibited the removal of such class actions from state to federal court. As a result of the Supreme Court’s decision in Cyan, if a securities purchaser brings a 1933 Act class action in state court, a defendant corporation will find it difficult to have those federal claims heard in federal court.