15 U.S.C. § 77p — Additional remedies; limitation on remedies
submitted 93 years ago by ch. 38 to r/title-15-COMMERCE-AND-TRADE · 1,037 words · no verdicts yet
This subchapter's rights add to other legal remedies that already exist. Most large securities class actions under state law must move to federal court. Some specific kinds of class actions, and state enforcement power, are still allowed.
(a) Extra remedies
Except as provided in subsection (b), the rights and remedies this subchapter provides are in addition to any other rights and remedies that exist at law or in equity.
(b) Limits on state-law class actions
No "covered class action" (defined in subsection (f)) based on the statutory or common law of any state may be maintained in state or federal court by a private party alleging: (1) an untrue statement or omission of a material fact connected to buying or selling a "covered security*" (also defined in subsection (f)); or (2) that the defendant used a manipulative or deceptive device or scheme connected to buying or selling a covered security.
(c) Moving these cases to federal court
Any covered class action filed in state court that falls under subsection (b) can be removed to the federal district court for that district, and remains subject to the subsection (b) limits there.
(d) Actions that are still allowed
(1)(A)-(B) A covered class action based on the law of the state where the issuer is incorporated or organized may still be maintained if it involves: (i) the issuer or its affiliate buying or selling securities exclusively from or to holders of the issuer's own equity securities; or (ii) a recommendation, position, or communication made by or for the issuer or its affiliate to its equity holders about voting their securities, responding to a tender or exchange offer, or exercising dissenters' or appraisal rights.
(2)(A)-(B) Nothing in this section stops a state, a political subdivision, or a "state pension plan" (a pension plan a state government, subdivision, agency, or instrumentality establishes and maintains for its own employees) from bringing an action involving a covered security on its own behalf, or as part of a class made up solely of other states, subdivisions, or state pension plans that are all named parties and have authorized joining.
(3) A covered class action that seeks to enforce a contract between an issuer and an indenture trustee may still be maintained by a party to that contract, or a successor to that party.
(4) If a case removed to federal court under subsection (c) turns out to qualify for one of the exceptions in this subsection, the federal court must remand it back to state court.
(e) States keep their own enforcement power
State securities regulators (or any agency or office performing similar functions) keep their power under state law to investigate and bring enforcement actions.
(f) Definitions
(1) "Affiliate of the issuer" means a person* who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the issuer.
(2)(A) "Covered class action" means either: (i) a single lawsuit in which damages are sought on behalf of more than 50 people or prospective class members and common legal or factual questions (ignoring individual reliance issues) outweigh individual ones, or in which named parties seek damages on a representative basis for themselves and other similarly situated people and common questions outweigh individual ones; or (ii) a group of lawsuits filed in, or pending in, the same court, involving common questions, seeking damages for more than 50 people total, that are joined, consolidated, or otherwise proceed as a single action. (B) This does not include a purely derivative action brought by shareholders on a corporation's behalf. (C) A corporation, investment company, pension plan, partnership, or other entity counts as one person or class member — unless it was created just to take part in the lawsuit. (D) None of this affects a state court's discretion over whether to join or consolidate actions filed there.
(3) "Covered security" means a security that meets the standards for a covered security under section 77r(b)(1) or (2) at the time the alleged misrepresentation, omission, or manipulative or deceptive conduct occurred — except this does not include a debt security exempted from registration under SEC rules issued under section 77d(2).
Except as provided in subsection (b), the rights and remedies provided by this subchapter shall be in addition to any and all other rights and remedies that may exist at law or in equity.
No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging—
an untrue statement or omission of a material fact in connection with the purchase or sale of a covered security*; or
that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.
Any covered class action brought in any State court involving a covered security, as set forth in subsection (b), shall be removable to the Federal district court for the district in which the action is pending, and shall be subject to subsection (b).
Notwithstanding subsection (b) or (c), a covered class action described in subparagraph (B) of this paragraph that is based upon the statutory or common law of the State in which the issuer is incorporated (in the case of a corporation) or organized (in the case of any other entity) may be maintained in a State or Federal court by a private party.
A covered class action is described in this subparagraph if it involves—
the purchase or sale of securities by the issuer or an affiliate of the issuer exclusively from or to holders of equity securities of the issuer; or
any recommendation, position, or other communication with respect to the sale of securities of the issuer that—
is made by or on behalf of the issuer or an affiliate of the issuer to holders of equity securities of the issuer; and
concerns decisions of those equity holders with respect to voting their securities, acting in response to a tender or exchange offer, or exercising dissenters’ or appraisal rights.
Notwithstanding any other provision of this section, nothing in this section may be construed to preclude a State or political subdivision thereof or a State pension plan from bringing an action involving a covered security on its own behalf, or as a member of a class comprised solely of other States, political subdivisions, or State pension plans that are named plaintiffs, and that have authorized participation, in such action.
For purposes of this paragraph, the term “State pension plan” means a pension plan established and maintained for its employees by the government of the State or political subdivision thereof, or by any agency or instrumentality thereof.
Notwithstanding subsection (b) or (c), a covered class action that seeks to enforce a contractual agreement between an issuer and an indenture trustee may be maintained in a State or Federal court by a party to the agreement or a successor to such party.
In an action that has been removed from a State court pursuant to subsection (c), if the Federal court determines that the action may be maintained in State court pursuant to this subsection, the Federal court shall remand such action to such State court.
The securities commission (or any agency or office performing like functions) of any State shall retain jurisdiction under the laws of such State to investigate and bring enforcement actions.
For purposes of this section, the following definitions shall apply:
The term “affiliate of the issuer” means a person* that directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with, the issuer.
The term “covered class action” means—
any single lawsuit in which—
damages are sought on behalf of more than 50 persons or prospective class members, and questions of law or fact common to those persons or members of the prospective class, without reference to issues of individualized reliance on an alleged misstatement or omission, predominate over any questions affecting only individual persons or members; or
one or more named parties seek to recover damages on a representative basis on behalf of themselves and other unnamed parties similarly situated, and questions of law or fact common to those persons or members of the prospective class predominate over any questions affecting only individual persons or members; or
any group of lawsuits filed in or pending in the same court and involving common questions of law or fact, in which—
damages are sought on behalf of more than 50 persons; and
the lawsuits are joined, consolidated, or otherwise proceed as a single action for any purpose.
Notwithstanding subparagraph (A), the term “covered class action” does not include an exclusively derivative action brought by one or more shareholders on behalf of a corporation.
For purposes of this paragraph, a corporation, investment company, pension plan, partnership, or other entity, shall be treated as one person or prospective class member, but only if the entity is not established for the purpose of participating in the action.
Nothing in this paragraph shall be construed to affect the discretion of a State court in determining whether actions filed in such court should be joined, consolidated, or otherwise allowed to proceed as a single action.
The term “covered security” means a security that satisfies the standards for a covered security specified in paragraph (1) or (2) of section 77r(b) of this title at the time during which it is alleged that the misrepresentation, omission, or manipulative or deceptive conduct occurred, except that such term shall not include any debt security that is exempt from registration under this subchapter pursuant to rules issued by the Commission under section 77d(2) 1 of this title.
Source credit: (May 27, 1933, ch. 38, title I, § 16, 48 Stat. 84; Pub. L. 105–353, title I, § 101(a)(1), Nov. 3, 1998, 112 Stat. 3227.)
- 1933Enacted · Act of May 27, 1933, ch. 38 · 48 Stat. 84
- 1998Amended · Pub. L. 105-353 · 112 Stat. 3227
A history note hasn’t been published yet. The record shows enactment by ch. 38 on 1933-05-27.
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