Choice of Forum in Securities Class Actions: Confronting "Reform" of the Securities Act of 1933

The article addresses the wave of federal legislative reform since the mid-1990s aimed at reducing forum shopping by plaintiffs in securities class actions. In particular, the article examines the direct conflict between section 22(a) of the Securities Act of 1933 (1933 Act), which prohibits defendants from removing 1933 Act cases from state court to federal court, and the Class Action Fairness Act of 2005 (CAFA), which permits removal of high-dollar class actions involving diverse parties. The article shows how this statutory conflict has produced a recent split between the Seventh and Ninth Circuit Courts of Appeals. In July 2008, the Ninth Circuit affirmed a district court's remand order and held that the 1933 Act's bar on removal trumps CAFA. In contrast, in January 2009, the Seventh Circuit rejected the reasoning of the Ninth Circuit and held that CAFA's removal provisions supersede the 1933 Act. The article critiques these decisions, as well as several district court and appellate opinions from the Second Circuit that support the Seventh Circuit's viewpoint. The article examines the underlying policy considerations, and sets forth steps Congress and the courts may take to clarify federal jurisdiction in the midst of an upsurge in securities class actions stemming from the mortgage-backed securities crisis.