The U.S. Court of Appeals for the Third Circuit has issued two interesting decisions.
(1) The Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) pre-empts certain class actions based upon state law that allege a misrepresentation in connection with the purchase or sale of nationally traded securities. In In re Lord Abbett Mutual Funds Fee Litig., 2009 WL 117002 (3rd Cir. Jan. 20, 2009), the court considered whether Congress intended SLUSA to pre-empt the entire case or just the offending state-law claim(s). The court found that that nothing in the language or legislative history of SLUSA “mandate[s] dismissal of an action in its entirety where the action includes only some pre-empted claims.” Moreover, interpreting SLUSA in this manner would have little practical effect: “plaintiffs could simply bring two or more actions in order to avoid having all of their claims dismissed – one action with the potentially pre-empted state law claims and one or more with the remaining claims.”
(2) In Alaska Electrical Pension Fund v. Pharmacia Corp., 2009 WL 213095 (3rd Cir. Jan. 30, 2009), the court had an opportunity to apply its Merck decision on inquiry notice and the statute of limitations. The court found that “investors are not put on inquiry notice of fraud when, in the context of this case, an apparently legitimate scientific dispute arises between the FDA and a pharmaceutical company.” Instead, to find the existence of inquiry notice the court required “some reason to suspect that defendants did not genuinely believe the accuracy of their statements.”