The U.S. Chamber Institute for Legal Reform writes to Senator Pat Toomey to advocate for legislative action addressing two key issues: the Supreme Court’s Cyan decision and the protection of arbitration in dispute resolution. The letter explains that the Cyan decision created a loophole allowing certain securities class actions under the Securities Act of 1933 to be litigated in state courts, resulting in duplicative lawsuits, increased costs for companies and shareholders, and the avoidance of important federal protections against abusive litigation. The Chamber urges Congress to require all such claims to be brought in federal court or to make them removable to federal court, thereby streamlining litigation and reducing unnecessary expenses.
The letter further highlights the negative impact of state court litigation, noting that state courts often lack the procedural safeguards found in federal courts, such as stricter pleading standards and mandatory stays of discovery. This environment encourages the filing of weaker cases and parallel litigation, which pressures defendants into settlements and increases costs for investors. The Chamber references recent analyses and court decisions, including the Delaware Supreme Court’s ruling that allows companies to require federal jurisdiction for these claims in their bylaws, but emphasizes that a comprehensive legislative fix is needed to address the problem nationwide.
In addition to securities litigation reform, the Chamber calls for vigilant oversight of the SEC and CFPB to prevent unjustified restrictions on arbitration agreements. The letter argues that arbitration is a fair, efficient, and accessible means of resolving disputes, often yielding better outcomes for employees and consumers than traditional litigation. It warns that renewed efforts by regulatory agencies and the plaintiffs’ bar to limit arbitration would undermine these benefits and increase the burden on the court system. The Chamber concludes by offering to provide further information and support for reforms that would improve the securities litigation landscape and protect arbitration as a vital dispute resolution tool.
