The Private Securities Litigation Reform Act of 1995 (the PSLRA) brought much needed changes to securities litigation and was intended to limit frivolous lawsuits by curious and suspicious plaintiffs. Prior to the PSLRA, plaintiffs could file suit on minimal evidence and then use pretrial discovery to seek proof relating to the original alleged wrongdoing or relating to anything else subsequently discovered, causing a cycle of never-ending litigation. Due to the significant cost of defending these types of suits, defendants often found it cheaper to settle quickly, rather than fight and win. The PSLRA raised the bar for filing a securities claim and mandated that discovery could not proceed while a motion to dismiss is pending, significantly reducing the cost of defending, and possible exposure from, a frivolous suit. The reforms of the PSLRA also helped in supporting the uniformity of the federal securities laws, reducing any incentives for forum shopping.

Recently, securities litigators on the defense side have become concerned that some of the protections of the PSLRA might be vulnerable following the U.S. Supreme Court’s decision in Cyan v. Beaver County Employees Retirement Fund, No. 15-1439, 538 U.S. ____ (2018). In Cyan, the court resolved a split among state and federal courts on whether the Securities Litigation Uniform Standards Act (SLUSA) amendments to the Securities Act of 1933 (the 1933 Act) deprived state courts of jurisdiction over class actions alleging violations under the 1933 Act. The court held, in a unanimous ruling, that “SLUSA did nothing to strip state courts of their longstanding jurisdiction to adjudicate class actions alleging only 1933 Act violations.”