In a unanimous opinion, the Supreme Court resolved the question of whether or not claims that are brought under state law, but allege conduct that would violate the securities laws, must be heard exclusively in federal court. In Merrill Lynch v. Manning, the Court held that such claims do not need to be brought in federal court unless the claims "aris[e] under" federal law.
The plaintiff in Merrill sought relief for manipulative short-selling, but solely under New Jersey state-law causes of action. The defendant sought removal to federal court by invoking Section 27 of the SEA which provides that federal courts "shall have exclusive jurisdiction" over "violations" of the Act and over all suits "brought to enforce any liability or duty created by [the Act]." Since the alleged violations could have been brought under, or at least closely relate to, the securities laws, defendant asserted that the suit should be regarded as being brought to "enforce" the securities laws and thus subject to the "exclusive" jurisdictions of the federal court.
In its opinion, authored by Justice Elena Kagan, the Court interpreted the Section 27 reference of "brought to enforce" as having the same meaning as the "arising under" reference of the general federal question statute (28 U.S.C. § 1331). As a result, the court applied its well-established test for determining whether a case "aris[es] under" federal law. In this instance, the case easily could be brought under state law without a federal cause of action and it is not of the sort that would disturb the balance of federal and state power. Therefore, the Court ruled that the case was not considered to "aris[e] under" federal law and that the defendant could not claim exclusive jurisdiction of the federal court.
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