Forum
U.S. Supreme Court
Case Status
Decided
Docket Number
04-1371
Term
2005 Term
Oral Argument Date
January 18, 2006
Questions Presented
Whether, as the Seventh Circuit held in direct conflict with the decision below, SLUSA preempts state law class action claims based upon allegedly fraudulent statements or omissions brought solely on behalf of persons who were induced thereby to hold or retain (and not purchase or sell) securities.
Case Updates
Outcome
March 21, 2006
The Supreme Court found that federal law takes supremacy over state law in cases involving allegations of securities fraud.
U.S. Chamber files amicus brief
November 14, 2005
Describing the background to the enactment of the Securities Litigation Uniform Standards Act (SLUSA), NCLC urged the Supreme Court to overrule the Second Circuit’s determination that SLUSA does not preempt state law claims brought by plaintiffs who merely held their securities during the applicable time period rather than purchasing or selling them. In this case, stockbroker Shadi Dabit filed suit on behalf of himself and other investors claiming they were fraudulently induced to hold underperforming stocks, and that SLUSA only pertained to investors induced to buy or sell stock. NCLC pointed out in its amicus brief that so-called “holder” class action lawsuits are often used to extract large settlements by alleging speculative injuries, which are typically proven through unsupported oral testimony. Congress could not have intended to allow national class actions asserting such claims to survive SLUSA.