Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-13-07041/USCOURTS-caDC-13-07041-0/pdf.json

Nature of Suit Code: 160
Nature of Suit: Stockholder's Suits
Cause of Action: 

---

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Decided August 1, 2014

No. 13-7041

KATHRYN LYNN CAMPBELL, ON BEHALF OF HERSELF AND

SIMILARLY SITUATED EQUITY UNITS HOLDERS OF AMERICAN

INTERNATIONAL GROUP, INC.,

APPELLANT

v.

AMERICAN INTERNATIONAL GROUP, INC., ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:12-cv-00115)

Wendu Mekbib was on the briefs for appellant. 

Robert F. Carangelo, Peter C. Thomas, and Paul C. Curnin

were on the brief for appellees.

Before: GARLAND, Chief Judge, and SRINIVASAN and

PILLARD, Circuit Judges.

Opinion for the Court filed PER CURIAM.

USCA Case #13-7041 Document #1505523 Filed: 08/01/2014 Page 1 of 9
2

PER CURIAM: Kathryn Lynn Campbell contends that the

American International Group, Inc. (AIG) and its board of

directors wrongfully reduced the value of certain securities

issued by AIG. The district court dismissed Campbell’s

securities class action for lack of subject matter jurisdiction,

holding that the Securities Litigation Uniform Standards Act of

1998 (SLUSA) does not confer federal jurisdiction over

Campbell’s state-law claims. We agree. 

*

I. 

In 2008, AIG issued 78.4 million “Equity Units,” a type of

security that included a stock purchase contract obligating

holders to purchase AIG common stock. AIG, Annual Report

(Form 10-K) (Fiscal Year 2008). According to Campbell, an

Equity Unit holder, AIG and its directors depleted the

investment value of the Equity Units by improperly reducing the

number of common shares each Equity Unit holder was entitled

to receive. Campbell filed a securities class action in federal

district court on behalf of herself and similarly situated

investors. Her complaint stated claims for unjust enrichment

and breaches of the covenant of good faith and fair dealing

under both Delaware and New York law. Although she alleged

violations of state law, Campbell did not invoke the district

court’s diversity jurisdiction. Instead, she asserted subject

matter jurisdiction principally under SLUSA, codified in

relevant part at 15 U.S.C. §§ 77p(d) and 78bb(f)(3). See

SLUSA, Pub. L. No. 105-353, 112 Stat. 3227 (1998) (codified

as amended at scattered sections of 15 U.S.C.).

This case was considered upon the record from the United States

*

District Court for the District of Columbia and upon the briefs

submitted by the parties. See Fed. R. App. P. 34(a)(2); D.C. Cir. R.

34(j).

USCA Case #13-7041 Document #1505523 Filed: 08/01/2014 Page 2 of 9
3

AIG moved to dismiss for lack of federal jurisdiction over

Campbell’s state law claims. The district court granted the

motion. Campbell v. AIG, 926 F. Supp. 2d 178 (D.D.C. 2013).

We review the dismissal for lack of subject matter jurisdiction

de novo, Nat’l Air Traffic Controllers Ass’n v. Fed. Serv.

Impasses Panel, 606 F.3d 780, 786 (D.C. Cir. 2010), and we

now affirm.

II. 

Campbell’s principal contention, below and on appeal, is

that SLUSA confers federal jurisdiction over her class action. 

Congress enacted SLUSA in 1998, closely on the heels of the

Private Securities Litigation Reform Act of 1995 (the Reform

Act), Pub. L. No. 104-67, 109 Stat. 737 (codified as amended at

scattered sections of 15 U.S.C.). See Merrill Lynch, Pierce,

Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 82 (2006). The

Reform Act aimed to curb “perceived abuses of the class-action

vehicle in litigation involving nationally traded securities” by

imposing a number of limitations on federal securities class

actions. Id. at 81. To avoid the “special burdens” associated

with federal securities fraud class actions established by the

Reform Act, plaintiffs “began bringing class actions under state

law, often in state court.” Id. at 82 (emphasis added). Congress

then enacted SLUSA to stem the migration from federal to state

court and “to prevent certain State private securities class action

lawsuits alleging fraud from being used to frustrate the

objectives” of the Reform Act. 112 Stat. at 3227. 

SLUSA amends the Securities Act of 1933 and the

Securities Exchange Act of 1934 “in substantially identical

ways.” Dabit, 547 U.S. at 82 n.6; compare 15 U.S.C. § 77p

(codifying amendments to the 1933 Act), with 15 U.S.C. §

78bb(a)(2), (f) (codifying amendments to the 1934 Act). To

simplify the analysis, we, like the district court, focus our

discussion on the amendments to the Securities Act of 1933. 

USCA Case #13-7041 Document #1505523 Filed: 08/01/2014 Page 3 of 9
4

See Kircher v. Putnam Funds Trust, 547 U.S. 633, 637 n.3

(2006); Dabit, 547 U.S. at 82 n.6. Those amendments begin by

clarifying that, “[e]xcept as provided in subsection (b), the rights

and remedies provided by this title shall be in addition to any

and all other rights and remedies that may exist at law or in

equity.” 112 Stat. at 3227-28 (codified at 15 U.S.C. § 77p(a)). 

As a general matter, then, SLUSA leaves state-law claims in

place except as set forth in subsection (b). 

Subsection (b) is SLUSA’s “core provision.” Dabit, 547

U.S. at 82. Referred to as the “preclusion provision,” Kircher,

547 U.S. at 636, subsection (b) bars the bringing of certain statelaw securities fraud claims as class actions, in either state or

federal court. It provides:

No 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—

(1) an untrue statement or omission of a material fact

in connection with the purchase or sale of a covered

security; or

(2) that the defendant used or employed any

manipulative or deceptive device or contrivance in

connection with the purchase or sale of a covered

security.

112 Stat. at 3228 (codified at 15 U.S.C. § 77p(b)). A “covered

class action” refers to a lawsuit seeking damages on behalf of

more than fifty persons. See 15 U.S.C. § 77p(f)(2). A “covered

security” refers to a nationally traded security listed on a

national exchange. See 15 U.S.C. §§ 77p(f)(3), 77r(b). 

USCA Case #13-7041 Document #1505523 Filed: 08/01/2014 Page 4 of 9
5

The next provision, subsection (c), “ensur[es] that federal

courts will have the opportunity to determine whether a state

action is precluded.” Madden v. Cowen & Co., 576 F.3d 957,

965 (9th Cir. 2009). It authorizes defendants to remove to

federal district court “[a]ny covered class action brought in any

State court involving a covered security, as set forth in

subsection (b).” 112 Stat. at 3228 (codified at 15 U.S.C. §

77p(c)). Subsection (c) provides for removal if the suit falls

within the scope of subsection (b), i.e., if it alleges “claims of

untruth, manipulation, and so on.” Kircher, 547 U.S. at 642. 

Removal under subsection (c) is for a specific purpose: when a

case is removed to federal district court under that provision, the

court’s jurisdiction is confined to examining whether the action

in fact falls within subsection (b)’s scope of preclusion. If so,

“neither the district court nor the state court may entertain it, and

the proper course is to dismiss.” Id. at 644. If not, “the federal

court likewise has no jurisdiction to touch the case on the merits,

and the proper course is to remand to the state court that can

deal with it.” Id.; see also 15 U.S.C. § 77p(d)(4) (“Remand of

removed actions”).

That brings us to subsection (d), the provision on which

Campbell rests her assertion of jurisdiction. Entitled

“[p]reservation of certain actions,” subsection (d) states, in

relevant part:

(1) Actions under State law of State of incorporation

(A) Actions preserved

Notwithstanding subsection (b) or (c), a covered class

action described in subparagraph (B) of this paragraph

that is based upon the statutory or common law of the

State in which the issuer is incorporated (in the case of

a corporation) or organized (in the case of any other

USCA Case #13-7041 Document #1505523 Filed: 08/01/2014 Page 5 of 9
6

entity) may be maintained in a State or Federal court

by a private party.

15 U.S.C. § 77p(d)(1)(A) (emphasis added); see also id. §

77p(d)(1)(B) (imposing additional restrictions on the “covered

class action[s]” preserved by subparagraph (A)). That provision

limits the preclusive reach of subsection (b) by “preserv[ing]”

certain class actions asserting claims under the law of the state

in which the defendant is incorporated. See Dabit, 547 U.S. at

87. In light of the large number of corporations incorporated

under the laws of Delaware, subsection (d)(1)(A) is often

referred to as the “Delaware carve-out.” See Madden, 576 F.3d

at 964. 

Focusing on the phrase, “may be maintained in a . . .

Federal court,” Campbell contends that subsection (d)(1)(A)

functions as an independent grant of federal subject matter

jurisdiction over the set of covered class actions falling within

the Delaware carve-out. In other words, Campbell reads

SLUSA to open the federal courthouse door to certain securities

class actions based only on state law, even if no diversity of

citizenship exists. Campbell’s reading of the statute is

untenable. 

Campbell does not dispute that subsections (a), (b), and (c)

address preclusion—that is, whether certain state-law class

actions that might otherwise be justiciable are nonetheless

“nonactionable” in either state or federal court. Kircher, 547

U.S. at 636 n.1. As the district court explained, “[s]ubsection (a)

states the general rule”: the federal remedies provided by the

Securities Act do not preclude any other remedies that may

exist. Campbell, 926 F. Supp. 2d at 181. Subsection (b)

establishes an exception to that rule, precluding certain state-law

securities fraud class actions. Dabit, 547 U.S. at 82-83. 

Subsection (c) “provides a limited grant of jurisdiction to render

USCA Case #13-7041 Document #1505523 Filed: 08/01/2014 Page 6 of 9
7

subsection (b) effective”: it authorizes removal of state-court

class actions falling within the ambit of subsection (b). 

Campbell, 926 F. Supp. 2d at 181. But the federal court’s

“adjudicatory power” under subsection (c) extends only to

determining whether the action is in fact precluded, in which

event the federal court must dismissit. Kircher, 547 U.S. at 644

& n.12. 

Understood against that backdrop, subsection (d)

“carefully” carves out exceptions to the preclusive reach of

subsection (b). Dabit, 547 U.S. at 87; see id. (subsection (d)

“exempts from [SLUSA’s] operation certain class actions based

on the law of the State in which the issuer of the covered

security is incorporated”). There is no indication, however, that

Congress intended subsection (d)(1)(A) to go substantially

further, so as to create federal jurisdiction over a category of

state-law securities class actions. To the contrary, the

introductory clause of subsection (d)(1)(A)—“Notwithstanding

subsection (b) or (c)”—confirms that the provision responds to

subsections (b) and (c). It does not embark on a wholly

independent mission to conferfederal-court jurisdiction on statelaw actions. Indeed, the operative language of subsection

(d)(1)(A), which permits certain class actions to “be maintained

in a State or Federal court,” directly parallels the language of

subsection (b). See 15 U.S.C. § 77p(b) (when conditions for

preclusion are met, no such action “may be maintained in any

State or Federal court”). That symmetry indicates that

subsection (d)(1)(A)’s use of the phrase, “may be maintained,”

serves only to negate the preclusive effect of subsection (b) with

regard to a certain category of class actions, nothing more. And

subsection (d)(1)(A)’s use of the term “preserve[],” meaning “to

keep (something) in its original state,” Merriam-Webster’s

Collegiate Dictionary (online ed. 2014), manifests Congress’s

intent to retain the state-law claims falling within the Delaware

USCA Case #13-7041 Document #1505523 Filed: 08/01/2014 Page 7 of 9
8

carve-out in their pre-SLUSA state—not to inject those claims

into federal court for the first time.

The Supreme Court’s decision in Kircher confirms our

reading of the statute. Kircher involved state-court actions

removed to federal district court pursuant to subsection (c) of

SLUSA. The Supreme Court considered whether the district

court’s orders remanding the cases to state court were

appealable. 547 U.S. at 636. The Court held that 28 U.S.C.

§ 1447(d)—which provides that an “order remanding a case to

the State court from which it was removed is not reviewable on

appeal or otherwise”—barred appeal of the remand orders. Id.

at 648. Noting that § 1447(d) applies to remands based on

defects in removal procedure or lack of subject matter

jurisdiction, see Thermtron Prods., Inc. v. Hermansdorfer, 423

U.S. 336, 346-48 (1976), the Court determined that the district

court’s orders fell in the latter category. 547 U.S. at 643-44. In

reaching that conclusion, the Court rejected the defendants’

contention that subsection (c) of SLUSA creates “jurisdiction

greater than that necessary to render the preclusion decision.” 

Id. at 644 n.12. The defendants argued that “[i]f there is any

colorable claim that an action is precluded . . . the district court

can keep the case for adjudication, even after concluding on the

merits that the state-law claims are not precluded”; and because

the court “has discretion to keep the case or remand to state

court, a remand is not jurisdictional and hence is reviewable.”

Id. In response, the Supreme Court explained that “there is no

indication whatsoever in [SLUSA] that, apart from its purpose

to preclude certain vexing state-law class actions, Congress

intended to add other state-law cases to the federal dockets.” Id.

That understanding fully applies to subsection (d), reinforcing

our conclusion that subsection (d) does not independently create

federal jurisdiction over any state-law class actions.

USCA Case #13-7041 Document #1505523 Filed: 08/01/2014 Page 8 of 9
9

* * * * *

For the foregoing reasons, we agree with the district court

that SLUSA does not confer federal subject matter jurisdiction

in this case. We have also considered Campbell’s remaining

arguments in favor of federal jurisdiction and find them to be

without merit for the reasons explained by the district court. We

therefore affirm the district court’s dismissal of the complaint

for lack of subject matter jurisdiction.

 So ordered.

USCA Case #13-7041 Document #1505523 Filed: 08/01/2014 Page 9 of 9