Andrew J. Ehrlich is partner, Brad S. Karp is partner and chairman, and Audra J. Soloway at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul, Weiss memorandum by Mr. Ehrlich, Mr. Karp, Ms. Soloway, Susanna M. Buergel, Daniel J. Kramer, and Geoffrey R. Chepiga.
In the wake of the Supreme Court’s holding in Cyan, Inc. v. Beaver County Employees Retirement Fund, which held that state courts have concurrent jurisdiction over claims brought under the Securities Act of 1933 (the “Securities Act”), many corporations began adopting a federal forum provision (“FFP”) in their charters, requiring Securities Act claims to be brought in federal court. Those charter provisions have been upheld in a number of California state courts. In a recent decision, a New York court for the first time reached the same conclusion.
On August 31, 2021, a New York State court dismissed claims brought under the Securities Act because the defendant-issuer’s charter contained an FFP requiring Securities Act claims to be brought in federal court. The decision in Hook v. Casa Systems, Inc. [1] is the first in New York—and the first in any state court outside California—to enforce an FFP, and continues a pattern of FFP enforcement that bodes well for corporations that have adopted FFPs to avoid the risk and cost of duplicative Securities Act litigation in state courts. The decision is also notable because it dismissed the Securities Act claims as to all defendants, including the underwriters of Casa’s IPO who were not parties to the corporate charter containing the FFP.
