On October 7, 2013, the Supreme Court began its 2013 term by hearing oral argument on three consolidated cases set to determine the scope of SLUSA’s preclusion provision.  Enacted in 1998 to curb plaintiffs’ efforts to avoid the Private Securities Litigation Reform Act by filing securities class actions in state court, SLUSA provides that: “[n]o covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security.”  15 U.S.C. §78bb(f)(1)(A).  The circuits are divided, however, over the proper standard for determining whether a misrepresentation meets the “in connection with” requirement.  In March 2012, the Fifth Circuit adopted the Ninth Circuit’s previously articulated standard and ruled in Roland v. Green that a misrepresentation or omission is in connection with a sale or purchase of a security “if there is a relationship in which the fraud and the stock sale coincide or are more than tangentially related.”  675 F.3d 503, 520 (5th Cir. 2012).  This standard is at odds with the standards the Second, Sixth, Seventh, Eight, and Eleventh Circuits have articulated.  Applying the tangentially related  standard, the Fifth Circuit held that SLUSA did not apply because the sale of certificates of deposit in question was only tangentially related to the alleged fraud and reversed the judgment of the district court.  The Supreme Court will also use the consolidated cases to determine if SLUSA precludes class actions alleging aiding and abetting claims when a non-party made the only alleged misrepresentations about the covered security.  The decision will certainly have a lasting impact on the future of securities class action lawsuits.  The three consolidated cases are Chadbourne & Parke LLP v. Troice (12-79), Willis of Colorado Inc. v. Troice (12-86), and Proskauer Rose LLP v. Troice (12-88).

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