Wednesday, April 08, 2009

Seventh Circuit Rules on Conflict between CAFA and the Securities Act

The ABA's Litigation News is reporting on a Seventh Circuit decision that speaks to the seemingly conflicting removal provisions of the Class Action Fairness Act and the Securities Act:

The Seventh Circuit’s recent decision in Katz v. Gerardi [PDF], regarding the removal of class action Securities Act claims brought in state court, has raised questions about the intersection between Section 22(a) of the Securities Act of 1933 and the Class Action Fairness Act of 2005 (CAFA) (28 U.S. § 1332(d)(2)).

The dispute in Katz arose from a real estate investment trust merger. The issue was “whether §22(a) insulates all claims under the 1933 Act from removal under the 2005 Act.”

The Seventh Circuit found that “Section 22(a) and the 2005 Act are incompatible; one or the other must yield,” and it held that Section 22 of the 1933 Act does not prevent removal when the requirements of CAFA are met. Instead, “securities class actions covered by the 2005 Act are removable, subject to exceptions in §1332(d)(9) and §1453(d).”

The full article is available here.


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