NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

WILLIAM T. HAMPTON, individually and

on behalf of all others similarly situated,

Plaintiff-Appellant, 

 v. 

PACIFIC INVESTMENT 

MANAGEMENT COMPANY LLC; et al., 

Defendants-Appellees. 

No. 15-56841

D.C. No. 

8:15-cv-00131-CJC-JCG

MEMORANDUM*

Appeal from the United States District Court

for the Central District of California

Cormac J. Carney, District Judge, Presiding

Argued and Submitted June 7, 2017

Pasadena, California

Before: THOMAS, Chief Judge, REINHARDT, Circuit Judge, and KORMAN,

**

District Judge.

Because we write only for the parties, we assume familiarity with the facts 

and prior proceedings in this case. The parties do not dispute that, under the 

Securities Litigation Uniform Standards Act (“SLUSA”), 112 Stat. 3227 (1998) 

 

* This disposition is not appropriate for publication and is not precedent 

except as provided by Ninth Circuit Rule 36-3.

** The Honorable Edward R. Korman, United States District Judge for the 

Eastern District of New York, sitting by designation.

FILED

AUG 24 2017

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
2

(codified in relevant part at 15 U.S.C. §§ 77p(b)–(f), 78bb(f)), Hampton’s suit raises 

state-law claims in a “covered class action,” see 15 U.S.C. § 77p(f)(2), or that all the 

relevant events took place “in connection with the purchase or sale of a covered 

security,” see id. § 77p(f)(3). Nor does Hampton appeal the district judge’s 

conclusion that his claims do not come within what is commonly referred to as the 

“Delaware carve-out.” See 15 U.S.C. § 77p(d)(1). Under that provision, covered 

class actions based on state law are exempt from SLUSA’s class-action bar, so long 

as 1) they are based on the law of the state in which the securities issuer is organized, 

id. § 77p(d)(1)(A), and 2) involve either transactions exclusively between the issuer 

and its existing stockholders, or a communication the issuer makes to its 

stockholders respecting the exercise of certain shareholder rights, id. § 77p(d)(1)(B). 

The district judge held that Hampton’s claims—which he asserts under 

Massachusetts law against a Massachusetts trust—satisfied the carve-out’s first 

prong but not the second. Hampton does not argue otherwise here.

In this memorandum disposition, we address only whether Hampton 

“alleg[es]” a material falsehood or omission. See 15 U.S.C. § 77p(b)(1). We address 

whether his claims should have been dismissed with or without prejudice in a 

simultaneously-filed opinion. SLUSA applies only to private plaintiffs “alleging” an 

untrue statement or omission of material fact. As Hampton points out, however, his 

complaint is carefully drafted to 1) avoid making any such allegations expressly, and 
3

2) plead contract and fiduciary duty claims that do not depend on any showing of 

false statements. Under well-established law, that is not enough to avoid SLUSA’s 

class-action bar.

Off the bat, the basic principles underlying SLUSA disfavor Hampton’s 

narrow, technical approach. Most fundamentally, as the Supreme Court counseled 

in Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 86 (2006), 

interpreting the statute starts with the “presumption that Congress envisioned a broad 

construction,” of SLUSA in order to effectuate its “stated purpose” of preventing 

state-law claims from making an end-run around the safeguards imposed by the 

Private Securities Litigation Reform Act.

For that reason, courts broadly recognize that SLUSA’s applicability does not 

depend on whether the plaintiff expressly makes the predicate allegations. We “look 

to the substance of the allegations,” rather than the presence or absence of “magic 

words,” precisely because doing otherwise would allow even minimally competent 

plaintiffs to circumvent Congress’s purpose “through artful pleading that removes 

the covered words but leaves in the covered concepts.” Freeman Invs., L.P. v. Pac.

Life Ins. Co., 704 F.3d 1110, 1115 (9th Cir. 2013) (quoting Segal v. Fifth Third Bank, 

N.A., 581 F.3d 305, 310–11 (6th Cir. 2009) (internal modifications omitted)).

SLUSA’s “alleging” standard is satisfied when “deceptive statements or 

conduct form the gravamen or essence of the claim.” Id. (emphasis added).
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Deception forms the essence of a claim when its core factual allegations, taken as 

true and viewed as a whole, show a likelihood that the defendant made a materially 

misleading statement. The question is not whether some reading of some facts in the 

complaint might support an inference of falsity, but whether the allegations 

underlying a given claim—the facts essential to its theory of the defendant’s 

liability—“make it likely” that the case will wind up centering on a materially 

misleading statement or omission. See Brown v. Calamos, 664 F.3d 123, 128–29

(7th Cir. 2011) (emphasis added).

Hampton’s claims are bottomed on the following facts: 1) The Total Return

Fund was an open-end fund engaged in a continuous offering of shares; 2) the Fund’s 

offering documents stated that it would follow the Emerging Markets Policy; 3) 

those documents were effective through the entire class period; and 4) during the 

same period, the Fund adopted an aggressive emerging markets strategy which

entailed accumulating a larger position in those assets than the Emerging Markets 

Policy would allow. Although Hampton styles these allegations in terms of 

contractual and fiduciary duties, the complaint unmistakably describes PIMCO 

Funds telling its investors it would do one thing—limit its exposure to certain risky 

assets—while it was in fact, at the same time, doing another—betting big on those 

same assets. The fact that PIMCO Funds promised to follow one course of action, at 

the same time as it did the exact opposite, raises the likelihood of falsity that SLUSA 
5

requires. 

Hampton contends that the prospectus’s statement committing the Fund to the 

Emerging Markets Policy could not, in fact, have been false at the time it was made. 

He points out that the Fund first announced the policy well before the class period

(April 1 through September 12, 2014), and adhered to it at least until April of 2014.

1

Therefore, Hampton argues, this is a straightforward case of a promise made once, 

kept for a while, and then broken later, without the implication of falsity that arises 

from simultaneously saying one thing and doing another. The problem with that 

argument, as the defendants point out, is that the statement was made more than 

once. As an open-end fund, the Total Return Fund was by definition engaged in a 

continuous offering of shares, effected through the dissemination of a prospectus, 

the statements in which were effectively “made” every day the prospectus was put 

forward to solicit new investors, including during the period where the Emerging 

Markets Policy had become a lie. The fact that the statement of policy was true at 

some prior point in time is irrelevant; the complaint unambiguously alleges facts 

demonstrating that it was also made while the Fund was over the 15% cap, which is 

 

1 The complaint does not allege a specific date on which the Fund exceeded its 15% 

cap on emerging markets investments. Rather, it points to the Fund’s quarterly 

reports to allege that at the close of the quarter ending March 31, 2014, the Fund was 

under the cap, and at the beginning of the quarter starting July 1, 2014, it had 

exceeded the cap. This explains why the class period begins on April 1, 2014—the 

first day of the fiscal quarter during which the cap was first breached. The exact date 

on which that breach first occurred, however, remains unknown.
6

enough to raise a likelihood that PIMCO Funds made an untrue statement of material 

fact relevant to the core of Hampton’s claim, and to bar Hampton’s suit under 

SLUSA.2

That strong implication of falsity distinguishes this case from Falkowski v. 

Imation Corp., 309 F.3d 1123 (9th Cir. 2002), and Freeman Investments, L.P. v. 

Pacific Life Insurance Co., 704 F.3d 1110 (9th Cir. 2013), in which we held that 

SLUSA did not bar claims for breach of contract. Hampton leans heavily on those

cases, arguing that he, too, pleads only “garden variety” claims for breach of contract 

and fiduciary duty. Freeman and Falkowski are inapposite, however, because neither 

of those cases involved any allegations—beyond the bare fact of a broken promise—

suggesting that the statements at issue were false when made. To be sure, given a 

broken promise, one can always infer the possibility that the promisor lied when they 

made it—but unlike in the cases upon which Hampton relies, the facts alleged here 

are enough to tip a possibility of falsity into a likelihood. Cf. Bell Atlantic Corp. v. 

Twombly, 550 U.S. 544, 570 (2007) (“[T]he plaintiffs . . . have not nudged their 

claims across the line from conceivable to plausible . . . .”).

Hampton’s remaining two arguments against SLUSA’s applicability similarly 

 

2 Hampton seeks to represent all persons who purchased or otherwise acquired Fund 

shares during the entire class period. He does not raise, and we do not address, the 

question of whether a class composed only of people who bought shares while the 

Emerging Markets Policy was still being followed would have their claims barred 

by SLUSA on account of the policy later becoming false.
7

fail. First, Hampton makes much of the fact that he does not allege the defendants 

“never intended” to follow the Emerging Markets Policy—that is to say, that he does 

not allege fraud. But SLUSA is not limited to barring claims based on facts that 

would amount to securities fraud. It encompasses claims involving simple false 

statements. See In re Kingate Mgmt. Ltd. Litig, 784 F.3d 128, 151 (2d Cir. 2015). 

Second, it does not matter that PIMCO Funds announced once during the relevant 

timeframe that its emerging markets position was worth about 21% of the Fund’s 

total value. That isolated snapshot of a disclosure, which was not made until three

months into the class period, does not negate the likelihood that the continuing 

description of the Emerging Markets Policy as one of the Total Return Fund’s 

“principal strategies” was false.

Finally, Hampton challenges the district judge’s decision to dismiss his claims 

with prejudice and without leave to replead. As we explain in a simultaneously-filed 

opinion, the dismissal should have been without prejudice because SLUSA enacts a 

jurisdictional bar rather than a defense on the merits. We do not, however, disturb 

the district judge’s decision that it would be futile for Hampton to replead state-law 

claims on a classwide basis. Because the representations in the Fund’s prospectus 

were made continuously throughout the class period, it would be impossible for 

Hampton to plead that PIMCO Funds’ investment practices diverged from its public 

statements without creating a likelihood that those statements were false at the time 
8

they were made.

CONCLUSION

For the reasons stated above and in our simultaneously-filed opinion, the 

judgment of the district court is AFFIRMED to the extent it concludes that 

Hampton’s claims are barred, and VACATED to the extent it dismissed 

Hampton’s claims with prejudice. The case is REMANDED for further 

proceedings consistent with this opinion.