TL;DR: The battle over filing Section 11 lawsuits in state court may be approaching resolution. Multiple California courts have now upheld “Federal Forum Clauses,” which require shareholders to litigate Section 11 claims in Federal court. Judicial validation of such provisions has significant implications for companies going public and for the D&O insurance industry.

TROTS [The Rest of the Story]:

1. Over the last decade, one of the hot topics in securities litigation has been The Forum Wars: may shareholder claims under Section 11 of the Securities Act of 1933 be brought in state and Federal courts, or only in Federal court alone?
2. This post presumes familiarity with the basics of Section 11. For a reader innocent of such familiarity the two Supreme Court decisions cited below (one the United States Supreme Court, the other the Delaware Supreme Court) provide a useful statutory primer. The Section 11 for Dummies version is this: Section 11 gives shareholders a virtually no-fault claim against a public company for material misstatements or omissions in its IPO prospectus. The claims against the company’s directors, and against the underwriters of the offering, are nearly as potent. In the security-plaintiff bar’s armory, the Section 11 claim is a magic bullet.

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