Casa: New York court joins other state courts in dismissing securities law claims in favor of federal forum provision


As we have discussed in previous customer alerts (see here and here), in the wake of the Delaware Supreme Court decision in Salzberg vs. Sciabacucci (Salzberg), 227 A.3d 102 (Del. 2020), several California State courts have dismissed claims against issuers and their directors and officers made under the Securities Act of 1933 (the Securities Act) in favor of federal forum selection provisions (FFP) in certificates of incorporation or articles of incorporation issuer-defendants. More recently, in Hook v. Casa Systems, Inc., n ° 654548/2019, 2021 WL 3884063 (NY Sup. Ct. August 30, 2021), a new York the court reached a similar result, so there is now a precedent for the enforcement of FFPs in the two jurisdictions in which the vast majority of state court Securities Act claims have traditionally been brought.


As we explained earlier, many companies planning IPOs or side offerings have started including FFPs in their certificates of incorporation or articles of incorporation following the listing. Supreme Court of the United States decision in Cyan, Inc. vs. Beaver Cty. Emps. Ret. Funds, 138 S. Ct. 1061, 1069 (2018), which confirmed a plaintiff’s ability to bring actions under securities law in state or federal courts. The FFPs, which require that all complaints asserting claims under securities laws be brought to federal district court, were designed to avoid potentially costly and duplicative litigation with federal and state courts and preserve the benefits of litigating before a federal judiciary experienced in securities matters. In Salzberg, the Delaware Supreme Court ruled that the FFPs are apparently valid and enforceable, and do not violate federal law or policy. However, the court recognized the possibility that sister states could nonetheless declare PFFs invalid if the courts of those states determined that their application would be “unreasonable and unfair” or “contravene.[] a strong public policy of the body where the action is brought.

After the Salzberg decision, at least four California state court rulings dismissed claims under securities law in favor of FFPs.1 In particular, in the Uber In that case, the court dismissed claims under the Securities Act against the underwriters in addition to those brought against the issuer. More recently, in Volonte c. Domo, Inc., No. 190401778, 2021 WL 1960296, at * 6 (Utah Dist. Ct. April 13, 2021), a Utah a state court also dismissed the Securities Act claims against the issuer and the underwriters in favor of the FFP in the issuer’s articles.

The Casa Systems Decision

In the first case in new York examine the applicability of FFPs afterSalzberg, in Casa Systems, the court enforced the FFP and dismissed the Securities Act claims brought against the issuer, underwriters and defendants allegedly controlling persons. Contrary to California decisions, all of which analyzed whether FFPs were only enforceable under California law, the court of Casa Systems found this because Casa Systems was a Delaware company, the internal affairs doctrine applied and the Salzberg This decision therefore controlled the question of the opposability of the FFP. The court then determined that while the home affairs doctrine did not apply, the application of the FFP was equally reasonable under new York law, and that the plaintiffs’ arguments that the application of the FFP violated the commerce clause and the supremacy clause were in vain.2

With respect to the Underwriters and the Controlling Defendants, the court held that (i) under both new York and Delaware law, non-signatories may be bound by or apply a forum selection clause, and (ii) the language of the FFP applies broadly to any complaint alleging claims under the Securities Act, including against claims under the Securities Act. non-signatories.


Even if Casa Systems do not engage others new York courts and appeals are possible, the court’s analysis follows what has become a clear trend in rulings by state courts, now including courts in the two states in which the vast majority of Securities Act cases of state courts are filed.


1 In addition to Catering robotics, Uber and Drop box cases addressed in our previous customer alerts, in december 2020, the same judge who allowed the motion to dismiss Drop box granted a similar motion to dismiss in a case against Sonim Technologies Inc., in which she incorporated her Drop box decision by reference.

2 A separate Securities Act case was brought against Casa Systems in Massachusetts state court. In that case, Shen v. Casa Sys., Inc., n ° SUCV2019-3204-BLS2, 2020 WL 8839637 (Mass. Super. January 11, 2020), the Massachusetts court refused to determine whether Massachusetts Where Delaware applied to the enforceability of the FFP because it was a new question of law which had not been considered by a Massachusetts Court of Appeal, and instead dismissed the complaint on the merits.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

Sir Arthur Aufsès IIIKramer Levin Naftalis & Frankel LLP
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