Amicus Curiae Brief — Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, 136 S. Ct. 1562 (2016) (No. 14-1132)

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OFFICE OF THE CLERK

IN THE

Supreme Court of the United

MERRILL LYNCH, PIERCE, FENNER & SMITH, INCORPO.

RATED; KNIGHT CAPITAL AMERICAS L.P., FORMERLY

KNOWN AS KNIGHT EQUITY MARKETS L.P.; UBS SECURI-

TIES LLC; E*TRADE CAPITAL MARKETS LLC; NATIONAL

FINANCIAL SERVICES LLC; AND CITADEL DERIVATIVES

GrRovuP LLC,

Petitioners,

GREG MANNING; CLAES ARNRUP; POSILJONEN AB;

POSILJONEN AS; SVEABORG HANDEL AS; FLYGEXPO AB;

AND LONDRINA HOLDING LTD.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Third Circuit

BRIEF FOR NORTH AMERICAN SECURITIES

ADMINISTRATORS ASSOCIATION AS AMICUS

CURIAE IN SUPPORT OF RESPONDENTS

Anne-Valerie Mirko David T. Goldberg

North American Counsel of Record

Securities Administrators Donahue & Goldberg, LLP

Association 99 Hudson Street, 8th Floor

750 First Street, NE New York, NY 10013

Suite 1140 (212) 334-8813

Washington, DC 20002 davd@donahuegoldberg.com

Daniel R. Ortiz

University of Virginia

School of Law

Supreme Court

Litigation Clinic

580 Massie Road

Charlottesville, VA 22903

Attorneys for Amicus Curiae

TABLE OF CONTENTS

SET E DRIAL R SEAMED

INTEREST OF AMICUS CURIAE ..............00:00+

INTRODUCTION AND

SUMMARY OF ARGUMENT..................:ccccceeees

I. The Federalism-Protecting Rules That

Govern Interpretation of Jurisdictional

Statutes Apply Fully To Section 27 ...............

Il. The Jurisdiction Section 27 Confers

on Federal Courts (and Withdraws from

State Courts) Is Limited To Claims

Created By the Exchange Act ........................

A. The Text, Structure, and Enactment

History of Section 27 Contradict

Petitioners’ Proposed Rule.......................

B. Congress Did Not Intend, and Section 27

Does Not State, a “Test” For Federal

Jurisdiction of State Law Claims.................

C. Other Rules Governing the Interpretation

of Jurisdictional Statutes Reinforce the

Restrained Construction of Section 27

III. Section 27, Properly Construed, Both

Promotes Greater Interpretive Uniformity

and Respects the Exchange Act’s

Textually-Expressed Preservation of

ae emtmnneneiaedl 28

ERS ce ae Dee AS Ty ee PRE KR MRO! 34

TABLE OF AUTHORITIES

Cases

Am. Well Works v. Layne & Bowler Co.,

GR Fs ee Ce cctiecnttnsieritetinsiideiiaseiemaiins 3, 19

Baldwin v. Fenimore, 89 P. 2d 883 (Kan. 1939) ...... 20

Beneficial Natl Bank v. Anderson,

OTIS. 5 IN a vricisss seater eee 22

BT Sec. Corp. v.

W.R. Huff Asset Mgmt. Co.,

891 So.3d 310 (Ala. BOOS)...........0cccccsccccsesesccesesee 32

Buethe v. Britt Airlines, Inc.,

74O F.2d 1336 (7th Cir. 19B4) ....cccccccccccccesecessoees 28

Caterpillar, Inc. v. Williams,

3: } |. Se 22, 31

Consumers Imp. Co. v. Zosenjo,

a a Be iietdentiervntdsitigcteciemiaaiina 13

Dahl v. Charles Schwab & Co.,

545 N.W.2d 918 (Minn. 1996) ...........0......000000002. 32

Decrert v. Independence Shares Corp.,

BRE Pk Gee GI ttentntietesscitomissinniniinimnaa 14

Diamond Multimedia Sys., Inc. v.

Superior Court, 968 P.2d 539 (Cal. 1999)..........32

ill

El Paso Natural Gas Co. v. Neztsosie,

ET ee 31

The Fair v. Kohler Die & Specialty Co.,

ae 22

Franchise Tax Bd. v. Constr.

Laborers Vacation Trust, 463 U.S. 1 (1983)...... 23

Gateway 2000, Inc. v. Cyrix Corp.,

942 F. Supp. 985 (D. N.J. 1996) ..................0...0.. 22

Grable & Sons Metal Prods., Inc. v.

Darue Eng'g & Mfg.,

NE 2, 24, 26

Griffen v. Cole, 131 P.2d 989 (Ariz. 1942)................ 19

Guice v. Charles Schwab & Co.,

674 N.E.2d 282 (N.Y. 1996)..................c000-seeeeeeee 33

Gunn v. Minton, 133 S. Ct. 1059 (2013)...........000..... 33

Hathorn v. Lovorn, 457 U.S. 255 (1982)............. 10, 12

Healy v. Ratta, 292 U.S. 263 (1924) ..............cccccccceee )

Holmes Grp., Inc. v. Vornado Air

Circulation Sys., Inc.,

EE 8, 9, 22

Hough v. Hough, 242 P.2d 162 (Okla. 1952)............ 20

Kokkonen v. Guardian Life Ins. Co.,

a 26

Leroy v. Great W. United Corp.,

Ee es Oe iiiicccntciictniascinntenntonial 15, 29, 30

Marrese v. American Academy

of Orthopaedic Surgeons,

a i icictininiitiiniccitianitaticetinnsnsindecni 26

Matsushita Elec. Indus. Co. v. Epstein,

516 U.S. 367 (1996)...........c.c-000+- 7, 11, 21, 27, 30

McAuliffe v. W. States Imp. Co.,

651 N.E.2d 957 (Ohio 1995) ..................c0..ceee-eeee 20

Moore v. Sims, 442 U.S. 415 (1979)............cccc:ceeeeeees 32

NASDAQ OMX Grp., Inc. vy. UBS Sec., LLC,

770 F.3d 1010 (2d Cir. 2014)................seescceeeeeees 24

Nanopierce Techs., Inc. v.

Depository Trust & Clearing Corp.,

Re ee ls SE ccceterintnascdetimtecdiiinebsanseciones 33

New York v. United States, 505 U.S. 144 (1992)........ a

Nimick v. Mingo Iron Works Co.,

3 ED eno 20

Ongstad v. Piper Jaffray & Co.,

755 N.W.2d 877 (N.D. 2008)..............ccccccccccceceees 33

Orman v. Charles Schwab & Co.,

GBB N.E.26 620 (TE. 1907).......ccc.cccccsccesccesccscesecess 32

Ohio ex. rel. Popovici v. Agler,

I le 10

Pan Am. Petroleum Corp. v. Superior Court,

I I eee passim

Raygor v. Regents of Univ. of Minn.,

gf RE SE es ee 8, 10

City of Rexburg v. Madison Cnty.,

964 P.2d 838 (Idaho 1988)....................ccececeeeeeeee 20

Rodriguez v. United States, 480 U.S. 522 (1987).....29

Romero v. Int’ Terminal Operating Co.,

ee ee I cicciraciscttescnndenibiichonpnmtiiannmtsniae passim

Royal Ins. Co. v. Roadarmel,

ibe | | & Sern 20

Shamrock Oil & Gas Corp. v. Sheets,

I sal 8

Shearson/American Express, Inc. v. McMahon,

I 31, 32

Sheets v. Graco, Inc.,

kk 20

Smith v. Cremins, 308 F.2d 187 (9th Cir. 1962)......20

Solid Waste Agency v. U.S.

Army Corps of Eng’rs, 531 U.S. 159 (2001) ........ a

Tafflin v. Levitt,

I ed passim

Tarble’s Case, 80 U.S. 397 (1871) ............:ccccccseceeeeeeees 9

Torrealba v. Kesmetis, 178 P.3d 716 (Nev. 2008) ....20

Tumey v. Ohio, 273 U.S. 510 (1927) .......ce.ce.-seeseee0ee 32

United States v. Bass, 404 U.S. 336 (1971)................ fe)

Wilko v. Swan, 346 U.S. 427 (1953) ................ccccceeee 32

Will v. Calvert Fire Ins. Co., 437 U.S. 655 (1978)....27

Wilson v. Guaranteed Sec. Co.,

272 P. 946, 949 (Utah 1928).......0...... eee eee 20

Wyeth v. Levine, 555 U.S. 555 (2009) ...............ceeeeeee 29

Yellow Freight Sys., Inc. v.

Donnelly, 494 U.S. 820 (1990)..........0.0...0.... 11, 12

Statutes and Legislative Materials

Securities Litigation Uniform Standards

Act of 1998, Pub. L. 105-353,

| | eee 30

I IN itsitincsinitceniniasncicphsonanioscectsicleigit 19

OE I iiieiinciacnsicicastcntiesiit 5, 6. 14, 17

I BI a cecececstersnintniontricssinienisiutatstanicarci 5

OE aaa eee eRe 5, 16

I ctenininintintctnienneiensictennninmonaivenianmiii 5

I caiteniitdsenennnsaciiceinticnctenteenacme 11, 12, 33

er e rsticiseritintsnntnieennepnenicieninnacioninniaiane 10

es TE BE teteiesicicsnintetnadinibsemtinsinneinenimennennsinni 32

nas Oe Ue tnsiicsicciaciiticcniiecnaais hectic aheiinsnitiiniial 30

Se te SENET cbiieniieilicemiinicitcinhdeininneiibineidensinbiannl passim

Se es eT hitch cceseitasinpieinspniabiabiniaribiatannataniniaiateniie 2

es 11

ee Oe I i iiitnnetsinnnninineniinnnesinnnansianiiintn 11

42 U.S.C. § 2014 (iH) .........eccccececcecesseceseccececsesessececeees 31

ls Oe sctitccviniesinsisenmnmniicinemsnnicvemnmee’ 30

S. Rep. No. 792, 73rd Cong. 2d. Sess. (1934) ........... 18

TE Camm. Rac. GOBD (IGBA)....ccccosccccsccesesccccsescccccccsesess 15

ee, Be Be Ce rccesienicecnccensinincinnnsennenenetinnnin 15

Legislative History of the Securities Act

of 1933 and Securities Exchange Act

of 1934 (comp. by J.S. Ellenberger &

EERE I TIRE RCae manne Ne 15, 16

Vill

Other Materials

13 Charles Alan Wright & Arthur R. Miller,

Federal Practice and Procedure

nena 9

69A Am. Jur. 2d Securities

Regulation—Federal § 999 (2015)...................... 29

25 Words and Phrases (Perm. ed. 2008) .................. 20

Jonathan R. Macey & Geoffrey P. Miller,

Origins of the Blue Sky Laws,

» FS S| | Sa enenennener 31

Uniform Law Commission, Securities Act Summary,

available at

http://www.uniformlaws.org/ActSummary.

aspx?title=Securities%20Act....................22..0000+ 33

STATEMENT OF INTEREST’

Formed in 1919, the North American Securities

Administrators Association, Inc. (“NASAA”), is a

nonprofit organization devoted to protecting investors

from fraud and abuse in the offer and sale of

securities. Its 67 members include the securities

regulators in Canada, Mexico, all 50 States, the

District of Columbia, the United States Virgin

Islands, and Puerto Rico.

NASAA members’ responsibilities include

registering certain types of securities offerings;

licensing the firms and agents who offer and sell

securities or provide investment advice; and

administering, interpreting, and enforcing their

States’ laws addressing fraud and misconduct in the

securities markets.

The important and salutary role these laws play

has been recognized by this Court and Congress,

including in provisions of the Securities Act of 1933

and the Securities Exchange Act of 1934 that

explicitly affirm the jurisdiction of state securities

regulators and make clear that “rights and remedies”

available under federal] law are “in addition to” those

which States provide. This dual regulatory system

protects investors, and, by deterring and detecting

fraud and abusive conduct, promotes the strength and

integrity of the Nation’s securities markets. NASAA

* Pursuant to Rule 37.6, counsel certifies that this brief was

not authored in whole or in part by counsel for any party and

that no person or entity other than amicus or counsel made a

monetary contribution to its preparation or submission. Counsel

for all parties have consented to its filing.

and its members have a vital interest in the proper

interpretation of rules governing the relationship

between federal and state securities regulation and

have participated as amicus curiae in numerous cases

in this Court and others where such questions are at

issue.

This case implicates matters of direct concern to

NASAA and its members. The same reasons that

have impelled Congress to affirm state governments’

historic power to enact and enforce their own laws in

this field strongly support upholding state courts’ role

in interpreting and applying those laws and

adjudicating suits claiming relief under state law

when they are violated.

INTRODUCTION AND SUMMARY OF

ARGUMENT

This case, fundamentally, is about federalism—

and about state courts’ sovereign power to adjudicate

cases that arise under their own laws.

There is no disagreement that, as a result of

Congress's enactment of Section 27 of the Exchange

Act, federal courts have jurisdiction over suits that

seek relief for any violation of that statute or its

implementing regulations, irrespective of tie amount

in controversy or citizenship of the parties, and that

such jurisdiction is exclusive. Federal courts also

have jurisdiction over state law claims that arise out

of the same transaction or occurrence as Exchange

Act claims, 28 U.S.C. § 1367; and they have original

(concurrent) jurisdiction over certain cases that allege

only state law causes of action but nonetheless

“belong{] in a federal court,” based on substantial and

disputed Exchange Act issues. Grable & Sons Metal

Prods., Inc. v. Darue Eng’g & Manuf., 545 U.S. 308,

315 (2005).

Petitioners here urge this Court to extend federal

jurisdiction—and exclusive federal jurisdiction—

further still, to a broad and ill-defined set of cases

whose common characteristic is that they fail both the

traditional “creation” test, see American Well Works

v. Layne & Bowler Co., 241 U.S. 257, 260 (1916), and

the Grable test, based on the presence of factual

allegations of Exchange Act violations, the potential

that a state court might “even consider[]” Exchange

Act issues in adjudicating state law liability, Pet. Br.

22, or because the state duty the plaintiff seeks to

enforce parallels too closely an Exchange Act rule.

There are myriad, compelling reasons why the

Court should refuse petitioners’ extraordinary

proposal.

I. First, the “deeply felt and _ traditional

reluctance” with which courts must approach every

invitation to broadly read federal jurisdiction statutes

applies with maximal force here. Romero v. Int'l

Terminal Operating Co., 358 U.S. 354, 379 (1959).

The regime petitioners propose defies the rule that

jurisdictional statutes must be construed with “due

regard for the*** federal system” and for the

rightful place of the States. Ibid. Petitioners’

startling suggestion that this principle is somehow

confined to cases interpreting Section 1331—and does

not apply to the statutory interpretation question

here—is gravely mistaken. This rule of construction

is a specific application of general principles that

govern every claim that Congress meant to

significantly alter the state-federal balance, and the

Court repeatedly has relied on it in cases considering

pleas for exclusive federal jurisdiction and ones

concerning the scope of exclusive jurisdiction that

Congress indisputably granted. Indeed, what

distinguishes this case from those prior decisions,

which rejected pleas for lack of evidence of an

unmistakable congressional intent, is that those cases

concerned authority to adjudicate particular federal

causes of action; petitioners ask the Court here to hold

that Congress withdrew from the courts of the States

the power to adjudicate cases seeking relief under

their own laws.

II. The text, structure, and enactment history of

Section 27 do not support petitioners’ claim.

Petitioners are quite right that Section 27 is

jurisdiction-conferring. When Congress provided that

federal courts “shall have exclusive jurisdiction of all

violations * * *” Congress made clear that federal

courts would adjudicate “all” suits enforcing the

Exchange Act, without having to satisfy the amount-

in-controversy requirement under 28 U.S.C. § 1331.

But petitioners are quite wrong about the scope of

the jurisdiction Section 27 confers—and denies state

courts. Petitioners submit that a Congress intent on

conferring exclusive federal jurisdiction over state

law claims and _ “repudiating the limitations

established under Section 1331 would be expected to

use language different from the “arising under”

formulation, as Section 27 does. But a legislature so

motivated would not possibly pursue that purpose by

enacting the language codified in Section 27—-which

is, petitioners concede, narrower than that in Section

1331; which does not hint at any state-displacing

purpose and was “taken practically verbatim” from a

provision enacted the previous year that gave state

courts a species of exclusive jurisdiction over federal

claims; and which uses “created by [federal law]”

language that not only evokes the historic “creation”

test for federal jurisdiction but that in fact had long

been given just that interpretation.

Petitioners’ proposal, ostensibly derived from the

“plain” words of the statute, comes eight decades after

Section 27 was enacted and more than a half-century

after this Court construed the essentially identical

jurisdictional provision of the Natural Gas Act,

concluding that the departure from “arising under”

language was not meant to repudiate the rules for

determining jurisdiction developed under the general

federal question statute.! And their central premise

is refuted in the U.S. Code itself: In the jurisdictional

provision of the Securities Act, 15 U.S.C. § 77v(a),

Congress used as synonyms the two phrases

petitioners insist it could only have meant to express

a “material|] differen[{ce].” Pet. Br. 17.

Whether or not petitioners show that the words of

Section 27 could be understood (by someone

unfamiliar with the statutory context and this Court’s

governing precedents) as extending to cases that arise

under state laws, their brief does not describe, and

Section 27 does not state, a “clear” “jurisdictional!

test,” Pet. Br. 2—or any “test.” Petitioners assure the

Court that their regime would retain certain familiar

jurisdictional rules developed under Section 1331

1 The “jurisdiction of violations * * * and actions * * * to

enforce any liability or duty created by” language common to

these two statutes also appears in provisions of the Federal

Power Act, 16 U.S.C. § 825p; the Connally Hot Oil Act, 15 U.S.C.

§ 715i(c); and the Securities Act of 1933, 15 U.S.C. § 77v(a).

(such as that federal defenses do not support federal

jurisdiction) while jettisoning others (e.g., the rule

that factual allegations that would entitle the

plaintiff to unsought federal relief do not make his

case “federal”). But litigants and courts seeking to

determine which settled principles do and do not

govern under “Section 27” would have nowhere to

look. It is therefore incorrect that petitioners’ blank-

slate “rule” is more administrable than the Grable

multi-factor test. The Grable rule may produce close

or uncertain cases, but, unlike petitioners’ proposal,

it produces an overwhelming number of clear results,

identifying many disputes that all agree do not belong

in federal court.

Considerations of “sound judicial policy’ and

regard for the statute’s place in the “mosaic of federal

jurisdiction laws,” Romero, 358 U.S. at 379-380,

confirm what the text, structure, and history of

Section 27 already indicate: Only cases satisfying the

“creation” test fall within the exclusive jurisdiction

Section 27 creates, with state law claims being heard

in federal courts only to the extent they belong there,

under Section 1331. Unlike the novel and ill-defined

regime petitioners urge the Court to launch, this

construction preserves the limited character of

federal jurisdiction; it ensures that parties know with

considerable certainty which cases will get into

federal court; it minimizes friction and complexity

inherent in multi-forum litigation; and it sensibly

allocates judicial responsibility, such that cases

raising important and disputed state law questions

remain within state courts’ jurisdiction, while cases

raising more substantial and disputed federal ones

may (but need not be) heard in federal court.

Ill. The policy interests petitioners advance and

the “premises” they ascribe to the 1934 Act do not

support their extraordinary proposal. There is no

question that Section 27 promotes “greater

uniformity” in the interpretation of the Exchange Act,

see Pet. Br. 24 (quoting Matsushita Elec. Indus. Co.

v. Epstein, 516 U.S. 367, 383 (1996)), consistently

with the 73rd Congress’s desire to speed the

development of a stable and uniform body of law

under a novel federal statute enacted in response to

an unprecedented economic crisis. But the Exchange

Act did not pursue uniformity at all costs: The

provision immediately adjacent to Section 27

affirmatively recognizes the importance of state

regulation in this field, rather than a strictly uniform

federal rule. Section 27’s broad venue rule increases

the likelihood of diverse federal court interpretations,

and, petitioners themselves acknowledge (while

casting aspersions on state courts’ expertise) that

Congress trusted those courts to interpret and apply

the Exchange Act when raised as a preemption

defense. The claimed costs to interpretive uniformity

of upholding state courts’ historic authority could not

possibly justify the disruptive and _ textually

unsupported regime sought here. But in any event,

such costs are, for reasons this Court’s decisions

explain, truly negligible.

ARGUMENT

I. The Federalism-Protecting Rules That

Govern Interpretation of Jurisdictional

Statutes Apply Fully To Section 27

Petitioners cannot seriously deny that the

jurisdictional regime they ask the Court to impose

under Section 27, whereby claims that arise

exclusively under state law would be subject to

federal courts’ exclusive jurisdiction, represents a

sharp departure from the historical allocation of

judicial responsibility. And they point to no evidence

that the 73rd Congress actually considered the

implications for the State-federal balance of the

extraordinary, if not literally unprecedented, rule

petitioners urge and then made a deliberate choice to

oust state courts.

Petitioners instead argue that the absence of any

clear congressional directive is of no moment, because

this Court’s precedents calling for “due regard for the

interests of the federal system” and expressing

“deeply felt * * * reluctance * * * to expand the

jurisdiction of the federal courts through a broad

reading of jurisdictional statutes,” Romero, 358 U.S.

at 379, do not “ha[ve] anything to do with § 27,” Pet.

Br. 36, and relate only to the broadly-worded general

federal question provision at issue in Romero. Ibid.

That is mistaken.

The opinion in Romero itself addressed “the

interpretation of judiciary legislation” generally, see

358 U.S. at 379 (noting that history of such

interpretation “teaches the duty to reject treating

such statutes as a wooden set of self-sufficient words”)

(emphasis added), and federalism principles have

played a central role in decisions construing a vast

array of jurisdictional statutes. See Holmes Grp., Inc.

v. Vornado Air Circulation Sys., Inc., 535 U.S. 826,

832 (2002) (appellate jurisdiction of Federal Circuit);

Raygor v. Regents of Univ. of Minn., 534 U.S. 533

(2002) (supplemental jurisdiction); Shamrock Oil &

Gas Corp. v. Sheets, 313 U.S. 100, 109 (1941) (removal

statute); Healy v. Ratta, 292 U.S. 263, 270 (1934)

(amount-in-controversy requirement).

These principles reflect important practical

realities and considerations of “sound judicial policy,”

Romero, 358 U.S. at 376, relating to the workloads of

the state and federal courts, their respective

expertise, and the need for efficient dispute

resolution. But they fundamentally express respect

for the sovereignty and “rightful independence of

state governments.” Holmes, 535 U.S. at 832. See

New York v. United States, 505 U.S. 144, 157 (1992)

(“Our task would be the same even if one could prove

that federalism secured no advantages to anyone.”).

How States’ “laws shall be enacted; how they shall be

carried into execution; and in what tribunals,” are

historic incidents of their sovereignty, Tarble’s Case,

80 U.S. 397, 407 (1871) (emphasis added); and “a

federal court’s entertaining a case that is not within

its subject matter jurisdiction is no mere technical

violation; it is nothing less than an unconstitutional

usurpation of state judicial power.” 13 Charles Alan

Wright & Arthur R. Miller, Federal Practice and

Procedure § 3522 (3d ed. 1998).

The principles articulated in Romero and like

cases about jurisdictional statutes are in fact a

particular application of more general rules requiring

that all federal statutes be construed to “avoid * * *

significant constitutional and federalism questions,”

Solid Waste Agency v. U.S. Army Corps of Eng’rs, 531

U.S. 159, 160-161 (2001), and that the proponent of

an interpretation that would disturb the state-federal

balance identify a clear statement showing that

Congress “in fact faced” the federalism consequences,

United States v. Bass, 404 U.S. 336, 349 (1971), and

intended them. See Raygor, 534 U.S. at 543 (“When

Congress intends to alter the usual constitutional

balance between the States and the Federal

Government, it must make its intention to do so

unmistakably clear in the language of the statute.”)

(internal quotations omitted).

This Court has repeatedly applied these

principles when presented with assertions that

classes of suits are subject to the exclusive jurisdiction

of federal courts, including in cases where statutory

text made explicit that Congress meant for some

disputes to proceed only in federal court. Thus, in

Ohio ex. rel. Popovici v. Agler, 280 U.S. 379 (1930), the

Court addressed a statute providing that federal

courts’ jurisdiction over “all suits and proceedings

against * * * consuls or vice consuls,” was “exclusive

of the courts of the several States,” id. At 382-383

(quoting 28 U.S.C. § 371 (1926)), and held it did not

divest the courts of Ohio of jurisdiction over a divorce

proceeding against the Vice-Consul of Romania,

because this “pretty sweeping” language should be

read in the light of States’ longstanding responsibility

for adjudicating divorces. Jd. at 383. The Court held

in Hathorn v. Lovorn, 457 U.S. 255 (1982), that “even

a finding of exclusive federal jurisdiction over claims

arising under a federal statute usually will not

prevent a state court from deciding a question

collaterally[,]” id. at 268 (internal quotation omitted),

concluding that a state court had the power (and

responsibility) to decide whether a proposed change

in voting procedures was “covered” for purposes of

Section 5 of the Voting Rights Act, even though

Congress was assumed to have vested federal courts

with exclusive jurisdiction to decide Section 5

coverage disputes. Jbid. (discussing 42 U.S.C.

§§ 1973c and 1973)(f)). And in Matsushita, the Court

addressed the provision at issue here, holding that a

state court’s consideration— in the course of assessing

the fairness of a class action settiement—of claims

that avowedly sought relief under the Exchange Act

did not run afoul of Section 27’s exclusivity directive.

See 516 U.S. at 387.

Federalism principles have played an especially

prominent role in cases where litigants have

presented pleas for exclusive federal court jurisdiction

over certain federal claims. In Yellow Freight System,

Inc. v. Donnelly, 494 U.S. 820 (1990), the Court

invoked the “system of dual sovereignty” and the

“presumptive{] competen[ce]” of state courts, id. at

823, to reject a contention that Title VII claims could

not be litigated in those courts, notwithstanding a

“persuasive showing,” supported with explicit

statutory text, “that most legislators, judges, and

administrators *** involved in the enactment,

amendment, enforcement, and interpretation” of that

statute “expected that such litigation would be

processed exclusively in federal courts.” Jd. at 826.

And in Tafflin v. Levitt, 493 U.S. 455 (1990), the

Court’s consideration of the contention that Congress

had withdrawn state courts’ power to adjudicate civil

RICO cases “beg{a]n with the axiom that, under our

federal system, the States possess sovereignty

concurrent with that of the Federal Government.” /d.

at 458.

Tafflin is especially instructive, because the plea

for exclusivity the Court rejected was based on a

federal statute, 18 U.S.C. § 3231, which reserves

exclusively to federal courts jurisdiction of federal

criminal offenses, reflecting the “need for uniformity

and consistency of federal criminal law,” 493 U.S. at

465, and on the fact that adjudicating federal RICO

suits would “require[]” state courts “to construe the

federal crimes that constitute predicate acts.” Id. at

464. The Court held that Section 3231 did not support

exclusive jurisdiction, because the RICO claims

plaintiffs would litigate in state court, while requiring

determination of federal law, were “not [themselves]

‘offenses against the laws of the United States,’ and

[would] not result in the imposition of [federal]

criminal sanctions,” ibid. (quoting Section 3231)—and

because the practical effect for decisional uniformity

would be “negligible,” id. at 465. See pp. 33—34, infra.

The burden ¢. petitioners here is necessarily far

more demanding than in those cases. Unlike in

Yellow Freight or Hathorn, the class of cases at issue

here are not ones that have long been or were

expected to be litigated in federal forums, let alone

exclusively there. (And Tafflin, unlike this case,

involved the practical certainty, not a remote

“possibility,” that the “exclusive” federal statute

would supply an ingredient in the state court’s

ultimate determination, see Resp. Br. at 23). But

most important, each of those decisions insisted upon

“unmistakable,” “explicit,” and “clear,” evidence that

Congress meant to withdraw from state courts their

power to decide federal law causes of action. What

petitioners ask here strikes far closer at the core of

the States’ sovereignty, denying their courts the

power to adjudicate disputes that seek relief only

under their own laws.

Il. The Jurisdiction Section 27 Confers on

Federal Courts (and Withdraws from State

Courts) Is Limited To Claims Created By the

Exchange Act

A. The Text, Structure, and Enactment History

of Section 27 Contradict Petitioners’

Proposed Rule

Petitioners do not point to anything in the

circumstances of Section 27’s enactment history that

suggests that Congress made a considered judgment

to divest state courts of their historic power to hear

state law claims. (The immediately adjacent provision

of the 1934 Act expressly saves those causes of action

from preemption, see pp. 29-30, infra). Nor do they

point to any support in the legal background that

supports their interpretation, and they acknowledge

that this Court’s most directly relevant precedent,

Pan American, which specifically addressed the

relationship between the statutory language and

Section 1331, presents grave difficulties for their

thesis. See Pet. Br. 38-39.

Rather, petitioners stake their argument on the

text of the statute, first arguing that Section 27

should be understood as “jurisdiction conferring,”

pointing to Congress’s use of “shall have jurisdiction”

language, and then asserting that: (1) Congress’s use

of language “conspicuously different” from the

familiar Section 1331 “arising under” formulation,

Pet. Br. 35 (quoting Consumers Imp. Co. v. Zosenjo,

320 U.S. 249, 253 (1943)); (2) its commitment to

exclusive federal court adjudication; and (3) the

“unambiguous” meaning of the “violations” and

“[suits] to enforce * * * duties created by [the Act]”

language together establish that Section 27 enacted

petitioners’ broad and unusual regime.

Petitioners are quite right that Section 27 is a

grant of jurisdiction independent of that conferred by

Section 1331. By enacting the “shall have * * *

jurisdiction” language in Section 27—and in

provisions of other contemporary statutes, see note 1,

supra—the 73rd Congress plainly did grant federal

courts jurisdiction over certain suits that would

otherwise have been subject to state court

adjudication under the federal question statute: i.e.,

ones raising Exchange Act claims that did not meet

the then-governing amount-in-controversy

requirement. See Deckert v. Independence Shares

Corp., 311 U.S. 282, 289-290 (1940) (quoting 15

U.S.C. § 717v(a) and holding that “the Securities Act

confer[red] jurisdiction of the suit * * * irrespective of

the amount in controversy,” because “[t]his is plainly

a suit to enforce a liability or duty created by the

Act”).

But, as the precedents discussed in Part I

instruct, the fact that Congress intended for some

exclusive jurisdiction does not say anything about the

scope of jurisdiction it conferred on the federal courts

and meant to deny the States. It is more than

plausible that Congress chose to provide a federal

forum for “any” and “all” suits raising Exchange Act

(or Natural Gas Act, see Pan American) claims, by

relieving plaintiffs of the need to establish—and

courts of the need to determine—that Section 1331’s

$3,000 amount-in-controversy requirement was

satisfied, without further intending to divest state

courts of their power to hear cases seeking only state

law relief.?

1. The fact that Congress employed the “violations

* * * and actions to enforce * * * duties created by”

language in Section 27, instead of “arising under,”

does not in itself establish, as petitioners insist, that

Congress chose that formulation for “the purpose” of

“accomplish[ing]” the diminution of state court

jurisdiction they urge. Pet. Br. 35 (emphasis added).

That language was “taken practically verbatim

out of the Securities Act [of 1933],” 6 Legislative

History of the Securities Act of 1933 and Securities

Exchange Act of 19346577 (comp. by J.S. Ellenberger

& E. Mahar 1973) (“Leg. Hist.”), and Congress’s

decision to provide for exclusive, rather than

concurrent, jurisdiction over Exchange Act claims

was made at the very last stages of the law’s

enactment, without any recorded debate, see 78 Cong.

Rec. 78 Cong. Rec. 8099, 9939 (1934), foreclosing any

suggestion that Congress faced up to the disruption of

the state-federal balance petitioners’ interpretation

would work. See Tafflin, 493 U.S. at 461 (refusing to

find exclusive jurisdiction over federal claim when

there was “no evidence that Congress even considered

[that]”). But see Pet. Br. 18 (asserting that “the core

2 Although the language and context support that Section

27 was meant to confer jurisdiction, the bulk of the provision’s

text (and that of siblings in other statutes) address matters of

venue and service of process, i.e., which federal courts would

have jurisdiction. Congress answered that question broadly and

in ways that were ground-breaking. See Leroy v. Great W.

United Corp., 443 U.S. 173, 188 (1979).

purpose of § 27 was to ensure that such cases are

adjudicated exclusively by federal courts”).

Moreover, the method that petitioners say

Congress “chose” to bring about this extraordinary

jurisdictional regime is, to say the very least,

startlingly indirect. Had the 73rd Congress meant to

extend jurisdiction to cases beyond the outer bounds

of Section 1331, it seems unlikely it would have opted

for language that is, by petitioners’ admission, less

encompassing than “arising under.” See Pet. Br. 17.

This Court’s 1961 opinion in Pan American said

that identical language in 15 U.S.C. § 717u, the

jurisdiction provision of the Natural Gas Act, should

not be interpreted as expressing an intent to deviate

from the rules developed under Section 1331 for

determining federal jurisdiction. See Pan Am.

Petroleum Corp. v. Superior Court, 366 U.S. 656, 665

n.2 (1961). Petitioners strain to minimize that

decision’s significance, noting, inter alia, that the

Court’s conclusion relied “solely” on the Natural Gas

Act’s legislative history and that the Exchange Act’s

legislative history contains no comparable

explanation of Section 27. Pet. Br. 39. It would be

re.narkable, however, for the Court to accord different

meaning to identically worded, contemporaneously-

enacted provisions, based on differences in the

3 As the Exchange Act worked its way through Congress,

the few mentions of Section 27 described it as “merely provi[ding]

for the jurisdiction of the courts for violation of the act,” 6 Leg.

Hist. at 6577 (emphasis added), or, somewhat more expansively,

as vesting federal courts with “jurisdiction of offenses and

violations of any provision of the bill, and also of suits brought to

enforce any liability or duty created by it.” Id. at 6640.

measures’ committee reports—and all the more so to

justify different constructions based on the absence of

certain language from the legislative history of one of

the statutes. But petitioners’ argument asks still

more: They invite the Court to infer from these

differing committee reports that the same Congress

used essentially identical (“jurisdiction of

violations * * * *”) language to accomplish

diametrically opposite purposes, effecting a dramatic

break from the jurisdictional! status quo in Section 27

of the Exchange Act while codifying developed

“arising under” principles in Section 22 of the Natural

Gas Act.4

In fact, the U.S. Code itself definitively refutes the

assumption that Section 27’s particular language

should be taken as a repudiation of the familiar

“arising under” jurisprudence. As _ respondents

highlight, the parallel provision of the Securities Act

from which Congress adopted the Section 27 language

“practically verbatim,” see p. 15, supra, plainly uses

the phrases “violations * * * [and] suits to enforce

duties * * * created by [the Act]” and “cases arising

under [the Act]” as interchangeable equivalents.

Resp. Br. 36 ‘discussing and quoting 15 U.S.C. §

77v(a)).

2. Nor does the fact that Congress opted for

exclusive jurisdiction in Section 27, see Pet. Br. 37,

mean that a uniformity-promoting purpose may be

* As explained below, petitioners’ further claim, that Pan

American endorsed “only” the well-pleaded complaint rule (and

in particular, the sub-principle that a federal law defense does

not establish federal jurisdiction), creates even more serious

difficulties for their argument. See pp. 21-23, infra.

imputed to the provision’s “shall have jurisdiction of

violations * * * and suits * * * to enforce” language.

That very language appears’ in_ other

contemporaneously-enacted provisions for which no

such uniformity focus can be claimed, including ones

conferring concurrent jurisdiction and some, such as

15 U.S.C. § 77v(a), that quite unusually prohibit

removal from state court of cases that raise only

federal law questions.

3. Petitioners’ textual argument therefore reduces

to assertions that the words of Section 27 themselves

express a “plain” and “unambiguous” intent to

withdraw from state courts power to hear cases

seeking relief exclusively under their own laws. This

claimed “plain meaning” entirely eluded this Court

(and the litigants) in Pan American, and in numerous

other decisions where Section 27 has been described

as conferring jurisdiction of cases “arising under the

Exchange Act.” See Resp. Br. 38 (collecting cases);

Romero, 358 U.S. at 379 (observing that judicial

“reluctance” to adopt “a broad reading of {a}

jurisdictional statute{] * * * must be even more

forcefully felt when the expansion is proposed, for the

first time, eighty-three years after the jurisdiction has

been conferred”). Congress itself described the

provision in vanilla terms that gave no hint of any

disruptive intent. The Senate Report’s final section-

by-section summary described Section 27 as

establishing that “/e/nforcement of the act is confined

* * * to United States courts,” S. Rep. No. 792, 73rd

Cong. 2d. Sess. 23 (1934) (emphasis added), without

any mention of the need to seize jurisdiction of state

law suits that might call for consideration of an

Exchange Act provision or regulation.

In point of fact, petitioners’ regime is not

especially plausible even as a matter of literal

meaning. Congress’s grant of ‘jurisdiction of

violations” of the Exchange Act is not naturally, let

alone “plainly,” Pet. Br. 27, read as divesting state

courts of authority to decide cases where a complaint

mentions that a federal law or regulation was broken

(including referencing determinations by another

judicial or regulatory body of past violations), but that

does not ask the court to grant relief for those

violations. See Resp. Br. 20. Section 27’s other

references to “violation[s],” in its language addressing

venue, confirm that natural understanding. Under

Section 27, a New Jersey investor seeking to enjoin an

Exchange Act violation could not hail the defendant

into Massachusetts federal court by seeding his

complaint with allegations referencing prior

“violation[s]” harming Bay State investors. In this

case (and many others petitioners would sweep into

federal court), proof of state law violations is both

necessary and sufficient for recovery.

Likewise, the statute’s reference to actions “to

enforce a duty or liability created by [federal

securities law]” does not call to mind a suit whose

object is enforcement of duties imposed under state

law. In fact, that phrase, while a relative rarity in the

U.S. Code and the U.S. Reports, had an accepted legal

meaning at the time the 1933 and 1934 Acts were

passed, one that tracks the historic “creation” test for

federal jurisdiction. See Am. Well Works, 241 U.S. at

260. State courts nationwide have long held that a

suit is one to “enforce[] a liability created by [a

statute]” only where the plaintiffs claim owes its

existence to that statute. The Arizona Supreme

Court, for example, has held that “[t]he term ‘liability

created by statute’ [means] * * * a liability that comes

into being solely by statute” and had “no existence

prior to the enactment creating it.” Griffen v. Cole,

131 P.2d 989, 991 (1942). Other decisions are to the

same effect: “the test is whether liability would exist

absent the statute in question.” Royal Ins. Co. v.

Roadarmel, 11 P.3d 105, 108 (Mont. 2000). See Smith

v. Cremins, 308 F.2d 187, 189-190 (9th Cir. 1962)

(same, applying California law).®

B. Congress Did Not Intend, and Section 27

Does Not State, a “Test” For Exclusive

Federal Jurisdiction of State Law Claims

Petitioners’ claims to have unearthed a novel

jurisdictional “test” (one they pronounce satisfied in

this case) is, on closer examination, an assertion that

the words in Section 27 could be understood (by

someone unfamiliar with this Court’s jurisdiction

precedents and the statutory context) to encompass a

case, for example, where the complaint’s factual

allegations reference defendants’ past Exchange Act

violations, even though liability would require proof

that standards prescribed by state law were violated.

5 Indeed, as a compendium of words and phrases attests,

cases adopting this canonical formulation could fill the rest. of

this brief. See 25 Words and Phrases 71-77 (Perm. ed. 2008).

See, e.g., Nimick v. Mingo Iron Works Co., 25 W. Va. 184, 194

(1884); Wilson v. Guaranteed Sec. Co., 272 P. 946, 949 (Utah

1928); Baldwin v. Fenimore, 89 P. 2d 883 (Kan. 1939); Hough v.

Hough, 242 P.2d 162, 163 (Okla. 1952); Sheets v. Graco, Inc., 292

N.W.2d 63, 70 (N.D. 1980); City of Rexburg v. Madison Cnty., 964

P.2d 838, 842 (Idaho 1988); McAuliffe v. W. States Imp. Co., 651

N.E.2d 957, 960 (Ohio 1995); Torrealba v. Kesmetis, 178 P.3d

716, 722 (Nev. 2008).

But that same linguistic possibility was present

in Pan American. The suit held outside exclusive

federal jurisdiction there sought to recover from the

defendant moneys alleged (and ultimately held) to

have been collected “in violation” of the Natural Gas

Act. See 366 U.S. at 662, 666. And this

indeterminacy arises when attempting to apply

petitioners’ “test” to the facts in other cases. While

petitioners say that statutory “plain language”

disables state courts from “even consider{[ing]”

whether the Exchange Act was violated, Pet. Br. 22,

this Court held in Matsushita that consideration was

not within Section 27’s ambit. See 516 U.S. at 385.6

Petitioners’ claim of an alternative “rule” is

undone, to a significant extent, by their efforts to

salvage some consistency between their proposal and

Pan American. They insist (Br. 38) that this Court’s

decision should be read as “only” endorsing the well-

pleaded complaint rule, which they equate with the

principle that preemption and other federal law

defenses do not confer federal jurisdiction.

But as the Pan American opinion itself stresses,

there is much more to the well-pleaded complaint rule

than the proposition that federal defenses are

insufficient.? The central thrust of the doctrine is

6 See also 516 U.S. at 382 & n.7 (describing complaint

alleging that defendants wrongly exposed the corporation “to

liability under the federal securities laws” as one as “asserting

purely state law causes of action” for Section 27 purposes)

(emphasis added).

7 Pan American was hardly a classic preemption-defense

case: The plaintiffs invoked federal law, contending that a prior

decision holding (federally) unlawful a rate previously paid,

that federal jurisdiction should be determined by the

authority under which the plaintiff chooses to seek

relief, not by the facts that his complaint alleges: “A

plaintiff asserting facts that may invoke either

Federal or state jurisdiction may choose to limit the

claim to one based solely upon state law and proceed

in state court.” Gateway 2000, Inc. v. Cyrix Corp., 942

F. Supp. 985, 990 (D. N.J. 1996); accord Beneficial

Nat! Bank v. Anderson, 539 U.S. 1, 12 (2003) (federal

jurisdiction may not be sustained even where facts

alleged in support of _ state-law _ relief

“would only support a federal claim”). Pan American

was emphatic on this point, explaining that it was

“immaterial * * * that the plaintiff could have elected

to proceed on a federal ground. If the plaintiff decides

not to invoke a federal right, his claim belongs in a

state court.” 366 U.S. at 663 (emphasis added)

(citation omitted); accord, e.g., The Fair v. Kohler Die

& Specialty Co., 228 U.S. 22, 25 (1913) (“Of course,

the party » ho brings a suit is master to ¢-tide what

law he will rely upon.”).

By jettisoning this integral component of tiue well-

pleaded complaint rule—that the plaintiff, as

“master” of the case, “may avoid federal jurisdiction

by exclusive reliance on state law,” Beneficial, 539

U.S. at 12 (quoting Caterpillar, Inc. v. Williams, 482

U.S. 386, 392 (1987))}—petitioners’ proposed rule

would defeat the well-pleaded complaint doctrine’s

central purpose of ensuring that threshold

jurisdictional determinations are certain and easily

made. See Holmes, 535 U.S. at 832. The husk of the

entitled them to a contractual recovery. See 366 U.S. at 660-

661.

rule petitioners would retain under Section 27 (out of

ostensible fidelity to the Pan American precedent)

would make no sense. Were Congress as distrustful

of “non-expert” state court interpretation as

petitioners insist (see Br. 26), it would be exceedingly

strange to leave preemption cases, where the

meaning of Exchange Act is sometimes “the only

question truly at issue,” to state courts, Caterpillar,

482 US. at 389, while assigning exclusively to federal

tribunals cases that raise no more than the possibility

of a disputed federal question.

In fact, the very common preemption-defense fact-

pattern highlights that petitioners’ regime is neither

“simple” nor grounded in any “clear” language in

Section 27’s text. Under longstanding precedent, the

well-pleaded complaint rule controls where the

plaintiff anticipates a preemption plea: “[A] federal

court does not have original jurisdiction over a case in

which the complaint presents a state-law cause of

action, but also asserts * * * that a federal defense the

defendant may raise is not sufficient to defeat the

claim.” Franchise Tax Bd. v. Constr. Laborers

Vacation Trust, 463 U.S. 1, 10 (1983) (citations

omitted). But on petitioners’ account, it would seem

“plain” that a complaint’s assertion that a defendant

did not in fact comply with a concededly preemptive

federal enactment (and therefore could not defeat

recovery) would be an allegation of “a violation”

sufficient to oust a state court of jurisdiction.®

8 That principle is by no means the only important and

familiar jurisdictional rule that petitioners would sweep into

limbo. The vitality of the principle that a suit alleging a violation

of a state law rule that incorporates or merely parallels a federal

Petitioners nonetheless claim (Br. 34) that their

“test” is “simple’ and “easily administrable,”

contrasting it to the “complicated,” “multi-factor”

Grable test. That is plainly not so. Petitioners do not

propose to supplant the Grable test for federal

jurisdiction, but rather to supplement it. Under their

proposal, in cases where an issue under the Exchange

Act or its statutory relatives are or might be raised (or

might have been), a district court could not remand

before having considered all three bases for assuming

jurisdiction— the canonical “creation” test, the Grable

balancing test, and petitioners’ Section 27 “test.”

But even in direct comparison, the Grable test is

much more certain and predictable than is

petitioners’. To be sure, there are cases where the

expected outcome of the Grable balancing is

uncertain; but that should not obscure the large

number of cases (virtually all cases arising under

state law) where the Grable rule makes immediately

clear that a federal forum is not available.

Petitioners’ untested proposal, in contrast, leaves

courts and litigants guessing as to which cases are

strong or weak candidates for federal jurisdiction.

The text of Section 27 says nothing at all about which

black-letter jurisdictional rules still operate and

which ones (on petitioners’ view) are swept aside, and

parties seeking to litigate state law claims in state

court would have no idea what facts, circumstances,

standard—as many state securities laws do—does not raise a

federal question, see NASDAQ OMX Urp., Inc. v. UBS Sec.,

LLC, 770 F.3d 1010, 1022 n.7 (2d Cir. 2014), would likewise be

jeopardized, if, as petitioners suggest, the presence of state law

complaint allegations that track a federal rule (or that “nearly”

do, Pet. Br. 9) triggered exclusive federal jurisdiction.

or allegations risk triggering exclusive federal

jurisdiction. (The only truly unambiguous signal]

petitioners send is to keep state court complaints as

bare-bones as possible.).

C. Other Rules Governing the Interpretation of

Jurisdictional Statutes Reinforce the

Restrained Construction of Section 27

The Grable rule in fact highlights how out of line

with the existing “mosaic” of federal jurisdiction rules

petitioners’ regime would be. Romero, 358 U.S. at

379. The Grable doctrine, while more cumbersome

than the creation test, operates as a safety valve,

recognizing that there are particular state law cases

where particular federal interests—a including

Exchange Act interests—support (concurrent) federal

jurisdiction. But that doctrine, unlike petitioners’

proposed regime, places the burden on the party

invoking federal jurisdiction and shows explicit

regard for state sovereignty, providing a built-in

federalism “veto” even for cases that hinge on

resolution of substantial federal questions. Grable,

545 U.S. at 313. Petitioners propose to supplement

this scalpel approach with a meat-axe rule that places

within exclusive federal jurisdiction state law cases

with the weakest claims of a federal ingredient.

Nor are these the only important ways in which

petitioners’ proposed rule deviates from “sound

judicial policy,” Romero, 358 U.S. at 379. As noted,

the only truly certain consequence of adopting

petitioners’ proposal is that there would be less

pleading, a result that would adversely affect

securities industry interests, as well as those of

investors. Injured investors intent on obtaining state

law relief from a state court and on avoiding

protracted jurisdictional litigation would have reason

to say as little as possible in their complaints, thereby

depriving defendants, state judges, and federal courts

deciding removal petitions of important information

about what was at stake (and inevitably triggering

disputes as to whether diverse “heightened pleading”

requirements had been met).

At the same time it would improperly deny those

who prefer to litigate in state courts the power to

make that choice (by foregoing federal relief, see p. 22,

supra), petitioners’ regime would also make it

improbably easy for a plaintiff who wanted her case

in federal court to get there. Petitioners’ brief

proceeds as if their proposal is relevant only to

defendants in securities cases; but Section 27, the

provision their rule ostensibly implements, concerns

original, not removal, jurisdiction. Under their rule,

a plaintiffs merely adding Exchange Act allegations

that are uncontested or unnecessary to resolving the

parties’ dispute would entitle her to litigate state law

claims in a federal forum. The historic “burden of

establishing * * * [federal] jurisdiction,” Kokkonen v.

Guardian Life Ins. Co., 511 U.S. 375, 377 (1994),

would be tantamount to pushing on an open door,

forcing district courts to fashion entirely new rules for

identifying and combatting inappropriate invocations

of the newly minted “Section 27” jurisdiction.

Moreover, rules like petitioners’ proposal, which

broaden the categories of claims subject to exclusive,

rather than concurrent, jurisdiction increase the

complexity, inefficiency, and potential unfairness of

litigation. In Marrese v. American Academy of

Orthopaedic Surgeons, 470 U.S. 373 (1985), for

example, the Court was required to decide whether a

state court judgment precluded the plaintiff from

pursuing federal antitrust claims that could not have

been adjudicated in that first proceeding, ultimately

concluding that the federal claims were precluded

because they were sufficiently similar to ones

actionable under state law. Jd. at 375-377. Under

petitioners’ proposal, plaintiffs intent on litigating

state claims in a state forum would likely have to

maintain separate cases, with all the expense and

complexity that such litigation entails. See Will v.

Calvert Fire Ins. Co., 437 U.S. 655 (1978) (considering

appropriateness of staying proceedings when

Exchange Act and state law suits are proceeding

concurrently). Indeed, this Court’s decision in

Matsushita rejected an expansive understanding of

Section 27, in part to mitigate these complexities and

enable parties in cases that straddle state and federal

courts to reach mutually acceptable settlements. 516

U.S. at 385-386.

Whether or not petitioners’ regime would open

litigation floodgates, it would significantly expand the

number of cases and alter the character of cases that

come within federal courts’ jurisdiction. Not only

would petitioners’ rule mean that almost any case

involving securities, natural gas, or electricity in

which one party or the other desires federal

jurisdiction would get to federal court, but the

presence of a single (state law) claim that passed

petitioners’ “test” would trigger supplemental

jurisdiction over state law claims “pendant” to that

one.

And adopting petitioners’ proposal would severely

limit state regulators’ ability to enforce their States’

own securities laws. Many such state laws parallel

their federal counterparts, often reflecting conscious

efforts at coordination and almost invariably making

compliance easier. But a rule that overrode—or even

merely unsettled—the principle that such parallels do

not make a state claim federal, see, e.g., Buethe v.

Britt Airlines, Inc., 749 F.2d 1235, 1238-1239 (7th

Cir. 1984)—would embolden respondents in state

administrative and enforcement actions, who are

rarely in a rush to reach a merits adjudication, to seek

removal to federal court in almost every case. That

would, by dramatically increasing the time and

money that such governmental enforcement actions

would consume, hamstring States’ ability to enforce

their own laws.

State courts are experts in interpreting and

applying their own laws, and abstract sovereignty

principles aside, a regime that required federal courts

to decide cases raising close or difficult state law

questions—based on the presence in a complaint of a

tangential federal issue—would impair the quality of

judicial decision-making and hinder States’ ability to

promote and control the development of their own

legal rules.

III.Section 27, Properly Construed, Both

Promotes Greater Interpretive Uniformity

and Respects the Exchange Act’s Textually-

Expressed Preservation of State Authority

Petitioners’ most sustained argument for their

rule is not from statutory text or precedent or norms

governing interpretation of jurisdictional statutes,

but rather from “purposes” and “premises” that they

ascribe to Section 27 and to the Exchange Act

generally. Petitioners highlight that the Act was

supported by congressional findings of a compelling

need for national action and then discuss the genera!

efficiency benefits of unitary regulation and uniform

interpretation—in the service of an argument that

Section 27 should be read in light of an overriding

congressional purpose to eliminate even the

possibility of diverse interpretation by (non-expert)

state judges.

The serious problems with such arguments are

well known: “Purposes” are not enacted through the

Constitution’s law-making process, see Wyeth v.

Levine, 555 U.S. 555, 587 (2009) (Thomas, J.,

concurring in the judgment), and “no legislation

pursues its purposes at all costs.” Rodriguez v. United

States, 480 U.S. 522, 525-526 (1987). But the

evidence here shows that the purposes and premises

petitioners ascribe to Section 27 were not Congress’s

actual ones.

To begin, although petitioners mix together

claims about’ regulatory non-uniformity—the

prospect that an actor might be accountable to 51

different sovereigns—and ones about interpretive

non-uniformity, t.e., the possibility that the same

federal law will be differently applied in different

jurisdictions, it is undeniable that Congress intended

and expressly approved dual, rather than unitary,

securities regulation. The Exchange Act provision

immediately next to Section 27 was enacted “to

protect * * * state authority,” Leroy v. Great W. United

Corp., 443 U.S. 173, 182 (1979), and to “leave the

States with as much leeway to regulate securities

transactions as the Supremacy Clause would allow

them,” id. at 182 n.13. It announces that “the rights

and remedies [the Act] provided” are “in addition to”

those under state law and explicitly affirms “the

jurisdiction of the securities commission * * * of any

State.” 15 U.S.C. § 77bb(a). See 69A Am. Jur. 2d

Securities Regulation—Federal § 999 (2015)

(describing this provision as “mak[ing] it absolutely

clear that Congress was not preempting the field”).

Congress repeatedly has affirmed its view that “State

securities regulation is of continuing importance,

together with the Federal regulation of securities, to

protect investors and promote strong financial

markets.” Securities Litigation Uniform Standards

Act of 1998, Pub. L. 105-353, 112 Stat 3227 § 2(4).

And while the grant of exclusive jurisdiction in

Section 27 surely was meant to promote “greater

uniformity,” Matsushita, 516 U.S. at 385, and jump-

start development of a body of precedent under a

brand-new federal statute, petitioners’ suggestions

that the 73rd Congress sought to avoid at all costs the

possibility that an Exchange Act issue might be

considered by a “non-expert” state court judge lack

plausibility.

Congress did not even pursue federal court

uniformity single-mindedly. Section 27 itself includes

expansive rules for venue and service of process, see

Leroy, 443 U.S. at 188 (describing “the underlying

policy of § 27 to confer venue in a wide variety of

districts in order to ease the task of enforcement of

federal securities law[s]”). That regime stands in

contrast to ones enacted under statutes where

uniform, expert interpretation is manifestly of

paramount importance. See, e.g., 28 U.S.C. § 1295

(granting the Federal Circuit exclusive jurisdiction

over final decisions in, among others, patent cases);

42 U.S.C. § 7607(b)(1) (judicial review of “any * * *

nationally applicable [EPA] regulation[]” may be

pursued only in the D.C. Circuit). See Tafflin, 493

U.S. at 465 (recognizing the decisional “inconsistency”

that the “multimembered, multi-tiered federal

judicial system * * * creates”).

Overheated claims of congressional doubts of

state court competence cannot be reconciled with the

reality that the same Congress expressly prevented

federal courts from hearing suits under the Securities

Act that were first filed in state court, nor with state

courts’ unchallenged (Pet. Br. 17) authority to

adjudicate Exchange Act preemption questions,

which entail resolving “highly technical and complex,”

id. 25, often dispositive, Exchange Act questions.

Congress rejected complete preemption, as well as

field preemption, under the Act. Cf. Caterpillar, 482

U.S. at 393; see also El Paso Natural Gas Co. v.

Neztsosie, 526 U.S. 473 (1999) (applying 42 U.S.C. §

2014(bh), which provides for federal court resolution

of Price-Anderson Act preemption defenses). Indeed,

for all the talk of state courts’ “non-expert[ise],” Pet.

Br. 25—26, in 1934 many of those tribunals had more

experience adjudicating securities disputes than did

their federal counterparts. See Jonathan R. Macey &

Geoffrey P. Miller, Origin of the Blue Sky Laws, 70

Tex. L. Rev. 347 (1991) (detailing early-twentieth-

century state securities regulation).

And had Congress determined that federal court

resolution of every Exchange Act issue were vitally

necessary for interpretative uniformity—and that

uniformity itself was of transcendent importance—

that judgment would have precluded the decision in

Shearson/American Express, Inc. v. McMahon, 482

U.S. 220 (1987), in which the Court recognized that

arbitral tribunals are “readily capable” of handling

Exchange Act claims, notwithstanding their “factual

and legal complexit[y].” Jd. at 232. Indeed, the most

relevant difference between state court and arbitral

determination is that state court decisions

erroneously interpreting federal law are within

federal courts’ power to correct. Compare 28 U.S.C.

§ 1257 and Tafflin, 493 U.S. at 464465 with

McMahon, 482 U.S. at 231 (discussing Wilko v. Swan,

346 U.S. 427, 436-437 (1953)). This Court, rejecting

exclusive jurisdiction in TJafflin, invoked that very

“anomally}”: Arguments “that state courts are

incompetent to adjudicate civil RICO suits,” the Court

explained, lost all force after McMahon had rejected

that “RICO claims are too complex to be subject to

arbitration.” 493 U.S. at 466 (quoting 482 U.S. at

239).

To the extent petitioners’ arguments ask the

Court to presume that state judges are systematically

susceptible to “inflammatory” oor _ erroneous

arguments where federal law is at issue, Pet. Br. 26,

or otherwise cannot be relied upon to “hold the

balance nice, clear, and true,” Tumey v. Ohio, 273 U.S.

510, 532 (1927), they not only defy repeated

admonitions of this Court, see, e.g., Moore v. Sims,

442 U.S. 415, 430 (1979), and judgments Congress

expressed in the 1934 Act, but they ignore empirical

reality. State courts are capable of addressing the

issue of federal preemption in complex securities law

cases. See, e.g., BT Sec. Corp. v. W.R. Hujf Asset

Mgmt. Co., 891 So.2d 310, 316 (Ala. 2004); Diamond

Multimedia Sys., Inc. v. Superior Court, 968 P.2d 539,

559-560 (Cal. 1999); Orman v. Charles Schwab &

Co., 688 N.E.2d 620, 626 (Ill. 1997); Dahl v. Charles

Schwab & Co., 545 N.W.2d 918, 926 (Minn.

1996); Nanopierce Techs., Inc. v. Depository Trust &

Clearing Corp., 168 P.3d 73, 85 (Nev.

2007); Guice v. Charles Schwab & Co., 674 N.E.2d

282, 292 (N.Y. 1996); Ongstad v. Piper Jaffray & Co.,

755 N.W.2d 877, 878-879 (N.D. 2008). See generally

Gunn v. Minton, 133 S. Ct. 1059, 1067 (2013) (“state

courts can be expected to hew closely to * * * pertinent

federal precedents’”).?

Almost everything else that needs to be said in

answer to petitioners’ drumbeat “uniformity”

assertions was said by this Court in Tafflin, which

responded to “predict[{ions]” that permitting state

courts “to interpret federal criminal statutes” as

predicates for federal RICO liability would impair

“the orderly and uniform development of federal

criminal law.” 493 U.S. at 464. While recognizing

that the “need for uniformity and consistency” was

important and textually expressed, see pp. 11-12,

9 If anything, the uniformity concerns that may have

animated the grant of exclusive jurisdiction have likely ebbed

since 1934. When the Exchange Act was first passed, there was

reason for concern that state courts, including in States whose

laws had supplied the model for certain of the Act’s provisions,

might not give the federal enactment independent meaning. But

more than eight decades of SEC enforcement and federal

jur'sprudence, including a robust body of federal preemption

case law, surely have dampened concern that state courts would

confuse state standards with federal ones, and States

themselves have adopted uniform laws, fashioned and modified

in light of significant developments under federal statutes. See

Uniform Law Commission, Securities Act Summary, available at

http://www.uniformlaws.org/ActSummary.aspx’title=Securities

%20Act (explaining that Uniform Securities Act, promulgated in

1956, has been adopted by 37 jurisdictions, including New

Jersey).

supra (discussing 18 U.S.C. § 3231)}—the Court

concluded “that state court adjudication of civil RICO

actions will, in practice, have at most a negligible

effect on * * * uniform interpretation,” noting, inter

alia, that federal courts “would not be bound by state

court interpretations of the federal offenses

constituting RICO’s predicate acts,” while state

courts would “be guided by federal court

interpretations” and subject to correction on review.

See 493 U.S. at 464-465. Accord Pan American, 366

U.S. at 665-66 (highlighting that exclusive

jurisdiction is not the only means for securing

adequate uniformity).

CONCLUSION

The text of Section 27, read according to the rules

governing the interpretation of jurisdictional

statutes, establishes that Congress did not sweep

away fundamental, settled rules _ allocating

responsibility between federal and state courts.

Rather, the provision ensured that every cause of

action created by the Exchange Act—be it civil or

criminal, brought by a government agency or private

party, for an affirmative violation of a rule or a failure

to comply with a duty—would be litigated in federal

court, regardless of the amount in controversy. But

Congress did not divest state courts of their

jurisdiction over state law violations. This case,

which seeks only to enforce duties created by New

Jersey law, belongs in the courts of that State.

The judgment of the court of appeals should be

affirmed.

Respectfully submitted,

ANNE- VALERIE MIRKO

North American

Securities Administrators

Association

750 First Street, NE

Suite 1140

Washington, DC 20002

DAVID T. GOLDBERG

Counsel of Record

Donahue & Goldberg, LLP

99 Hudson Street 8th Floor

New York, NY 10013

(212) 334-8813

davd@donahuegoldberg.com

DANIEL R. ORTIZ