Securities Regulation Daily Wrap Up, BROKER-DEALERS—U.S.: Federal jurisdiction should cover case involving ’34 Act breach, cert petition argues, (Oct 16, 2025)

By Anne Sherry, J.D.

Two justices raised warnings that are now being realized, the petitioner argues.

A petition for certiorari asks the Supreme Court to revisit its 2016 holding that Exchange Act Section 27, which places lawsuits brought to enforce the Act and its rules in federal court, establishes the same jurisdictional test as the "arising under" test of the general federal question statute. Justices Thomas and Sotomayor warned that this rule could exclude from federal courts lawsuits enforcing Exchange Act liabilities, which is what happened to the petitioner (Petition for Writ of Certiorari, AST & Science LLC v. Delclaux Partners S.A., No. 25-433 (Oct. 7, 2025)).

The underlying action is one for breach of a finders-fee arrangement between the parties. The respondent allegedly acted beyond the scope of a “finder” into broker-dealer territory, thus breaching its contractual obligation to take no action requiring registration under federal securities law without becoming registered. The Eleventh Circuit reversed a district court judgment in favor of the petitioner, holding that federal jurisdiction was lacking because the federal issue was not “substantial”—one of the required prongs of Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308 (2005).

In its cert petition, the petitioner argues that because its breach of contract claim depended on issues of federal law, the case fell squarely under Section 27. “If left to stand, the Eleventh Circuit’s decision will shut out from the federal courts a lawsuit that clearly invokes the Exchange Act and turns on its application and construction,” the petitioner writes.

The petition asks the Supreme Court to revisit Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, 578 U.S. 374 (2016), which the Eleventh Circuit mentioned only once, in a footnote stating that Manning required the same jurisdictional test as that set forth in Grable.

Justices Thomas and Sotomayor predicted the outcome of the petitioner’s case, it argues, recognizing in their Manning concurrence the possibility that by applying factors of the Grable test having nothing to do with whether a claim is brought to enforce a liability or a duty created by the Exchange Act, a court may find federal jurisdiction lacking even where a plaintiff cannot get all the relief sought without proving an Exchange Act violation.

Being in this situation itself, the petitioner urged the Court to revisit Manning and either limit its holding or overrule it with respect to the requirement that courts must apply the Grable test in Section 27 cases. Alternatively, the Court could provide further guidance on how the Grable test should be administered in cases like the petitioner’s.

In Manning, the concurring justices proposed that Section 27 should confer federal jurisdiction if the complaint alleges claims that necessarily depend on establishing a violation of an Exchange Act requirement. The petitioner says that this rule is faithful to Section 27’s plain meaning, comports with traditional canons of statutory interpretation by considering different language to have different meanings, and results in a more practical and administrable outcome.

The case is No. 25-433.

Attorneys: John Russell Fitzgerald (Foley & Lardner LLP) for AST & Science LLC. Bethany J. M. Pandher (Greenberg Traurig, LLP) for Delclaux Partners SA.

Companies: AST & Science LLC; Delclaux Partners SA

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