U.S. Supreme Court weighs in on key securities class action case

Justices from the nation’s highest court might reasonably be thought of as austere legal masters whose prose is routinely dense and technical in order to deal with the weighty legal topics the tribunal regularly addresses.

That is not always true, though, with U.S. Supreme Court opinions sometimes making clear effort to have a bit of fun with language and spin it loosely to drive home a material point.

Which is precisely what Justice Elena Kagan did in a ruling she penned for a unanimous court recently. Kagan informed readers that, “Congress does not ‘hide elephants in mouseholes.'”

That imagery is simple and certainly rings true, of course, but, because it is a high court utterance, it necessarily pertains to a weighty matter.

What Kagan was addressing was a 1998 congressional amendment giving state and federal courts concurrent jurisdiction over claims brought by claimants alleging violations of American securities laws. That law allows for case removal from a state to a federal court in certain limited instances.

The telecommunications company Cyan has fought long and hard for removal, arguing in its case that the law blocked allegedly aggrieved investors from suing it in a state court.

The Supreme Court heartily disagreed, with Kagan’s “elephant” comment underscoring the court’s aligned view that Congress does not craft technical amendments to existing law to make radical changes that can only be intuited implicitly.

Cyan had fought for removal in a case that the court noted was entirely within the purview of a state court. Ruling otherwise, Kagan wrote, would misconstrue the amendment and bar state courts from hearing even class actions involving relatively few plaintiffs and not addressing securities traded nationally.

The ruling is widely seen as being a key victory for class action claimants in securities fraud litigation seeking to pursue remedies in state courts rather than through an arguably less friendly and more challenging federal process.

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