Devoted to Corporate Attorneys, Corporate Lawyers, and Corporate Counsel

In Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, the Supreme Court resolved a conflict among the circuit courts regarding the Securities Litigation Uniform Standards Act of 1998 (SLUSA). This statute provides that “[n]o covered class action” based on state law and alleging “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security” “may be maintained in any State or Federal court by any private party.”

In this case the Second Circuit held that SLUSA only pre-empts state-law class-action claims brought by plaintiffs who have a private remedy under federal law. Faced with a similar case, the Seventh Circuit held that the statute also pre-empts state-law class-action claims for which federal law provides no private remedy. The Supreme Court agreed with the Seventh Circuit, holding that the background, text, and purpose of SLUSA’s pre-emption provision all support the broader interpretation adopted by that court.