The US Supreme Court [official website] ruled [opinion, PDF] unanimously Monday in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Manning [SCOTUSblog materials] that a securities fraud case may proceed in state court. In an opinion authored by Justice Elena Kagan, the court decided that the jurisdictional test under Section 27 of the Securities Exchange Act of 1934 [text, PDF] “is the same as the one used to decide if a case ‘arises under’ a federal law.” Kagan wrote:

Section 27 provides exclusive federal jurisdiction of the same class of cases as “arise under” the Exchange Act for purposes of §1331 [text]. The text of §27, most naturally read, supports that rule. This Court has adopted the same view in two prior cases. And that reading of the statute pro­motes the twin goals, important in interpreting jurisdic­tional grants, of respecting state courts and providing administrable standards.

Justice Clarence Thomas filed a concurring opinion, joined by Justice Sonia Sotomayor.

Monday’s ruling resolves the circuit split on whether Section 27 provides federal jurisdiction over state-law claims based on violations or desired enforcement of the act. The US Courts of Appeal for the Fifth and Ninth Circuits have held that the act does provide federal jurisdiction, while the Second and Third Circuits have held that it does not. The court heard oral arguments in the case in December after granting certiorari [JURIST reports] last June.