There is a growing district court split over whether plaintiffs can bring a securities class action pursuant to the Securities Act of 1933 (“’33 Act”) in state court. As a general matter, claims under the ’33 Act may be brought in federal or state court.
Securities class actions, however, are subject to a number of special rules. The Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) is designed to prohibit the bringing of securities class actions in state court and provides for their removal to federal court. SLUSA only applies to class actions “based upon the statutory or common law of any State.” The drafters were focused on plaintiffs who wanted to avoid the heightened pleading standards of the PSLRA by bringing the equivalent of Rule 10b-5 claims (for which federal courts have exclusive jurisdiction) in state court under state law.
In In re Tyco Int’l, Ltd. Multidistrict Litig., 2004 WL 1403009 (D.N.H. June 21, 2004), the court addressed motions to remand to state court seven of the 47 cases that had been consolidated for pretrial proceedings. The seven cases are all based exclusively on the ’33 Act. The court found that although SLUSA would prohibit the bringing of a securities class action in state court alleging both ’33 Act claims and state law claims, it does not, as a matter of statutory construction, apply to securities class actions based exclusively on the ’33 Act.
Holding: Motions to remand granted.
Quote of note: “SLUSA’s legislative history supports the view that Congress attempted to prevent plaintiffs from circumventing the PSLRA by ‘enact[ing] national standards for securities class action lawsuits involving nationally traded securities,’ rather than by making federal courts the exclusive forum for Securities Act class actions alleging fraud.”