II

105TH CONGRESS

1ST SESSION S. 1260

To amend the Securities Act of 1933 and the Securities Exchange Act

of 1934 to limit the conduct of securities class actions under State

law, and for other purposes.

IN THE SENATE OF THE UNITED STATES

OCTOBER 7, 1997

Mr. GRAMM (for himself, Mr. DODD, Mr. DOMENICI, Mrs. BOXER, Mr.

FAIRCLOTH, Mrs. FEINSTEIN, Mr. HAGEL, Mr. REID, Mr. WYDEN, Mr.

ALLARD, Ms. MOSELEY-BRAUN, Mrs. MURRAY, and Mr. LIEBERMAN) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

A BILL

To amend the Securities Act of 1933 and the Securities

Exchange Act of 1934 to limit the conduct of securities

class actions under State law, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Securities Litigation

5 Uniform Standards Act of 1997’’.

6 SEC. 2. LIMITATION ON REMEDIES.

7 (a) AMENDMENTS TO THE SECURITIES ACT OF

8 1933.—
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1 (1) AMENDMENT.—Section 16 of the Securities

2 Act of 1933 (15 U.S.C. 77p) is amended to read as

3 follows:

4 ‘‘SEC. 16. ADDITIONAL REMEDIES; LIMITATION ON REM5 EDIES.

6 ‘‘(a) REMEDIES ADDITIONAL.—Except as provided in

7 subsection (b), the rights and remedies provided by this

8 title shall be in addition to any and all other rights and

9 remedies that may exist at law or in equity.

10 ‘‘(b) CLASS ACTION LIMITATIONS.—No class action

11 based upon the statutory or common law of any State or

12 subdivision thereof may be maintained in any State or

13 Federal court by any private party alleging—

14 ‘‘(1) an untrue statement or omission of a ma15 terial fact in connection with the purchase or sale of

16 a covered security; or

17 ‘‘(2) that the defendant used or employed any

18 manipulative or deceptive device or contrivance in

19 connection with the purchase or sale of a covered se20 curity.

21 ‘‘(c) REMOVAL OF CLASS ACTIONS.—Any class action

22 brought in any State court involving a covered security,

23 as set forth in subsection (b), shall be removable to the

24 Federal district court for the district in which the action

25 is pending, and shall be subject to subsection (b).
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1 ‘‘(d) DEFINITIONS.—For purposes of this section the

2 following definitions shall apply:

3 ‘‘(1) CLASS ACTION.—The term ‘class action’

4 means any single lawsuit, or any group of lawsuits

5 filed in or pending in the same court involving com6 mon questions of law or fact, in which—

7 ‘‘(A) damages are sought on behalf of

8 more than 25 persons;

9 ‘‘(B) one or more named parties seek to

10 recover damages on a representative basis on

11 behalf of themselves and other unnamed parties

12 similarly situated; or

13 ‘‘(C) one or more of the parties seeking to

14 recover damages did not personally authorize

15 the filing of the lawsuit.

16 ‘‘(2) COVERED SECURITY.—A security is a ‘cov17 ered security’ if it satisfies the standard for a cov18 ered security specified in paragraph (1) or (2) of

19 section 18(b) at the time during which it is alleged

20 that the misrepresentation, omission, or manipula21 tive or deceptive conduct occurred.’’.

22 (2) CONFORMING AMENDMENTS.—Section

23 22(a) of the Securities Act of 1933 (15 U.S.C.

24 77v(a)) is amended—
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1 (A) by striking ‘‘and, concurrent with

2 State and Territorial courts,’’ and inserting

3 ‘‘and, concurrent with State and Territorial

4 courts, except as provided in section 16 with re5 spect to class actions,’’; and

6 (B) by striking ‘‘No case arising under this

7 title and brought in any State court of com8 petent jurisdiction shall be removed’’ and in9 serting ‘‘Except as provided in section 16(c), no

10 case arising under this title and brought in any

11 State court of competent jurisdiction shall be

12 removed’’.

13 (b) AMENDMENTS TO THE SECURITIES EXCHANGE

14 ACT OF 1934.—Section 28 of the Securities Exchange Act

15 of 1934 (15 U.S.C. 78bb) is amended—

16 (1) in subsection (a), by striking ‘‘The rights

17 and remedies’’ and inserting ‘‘Except as provided in

18 subsection (f), the rights and remedies’’; and

19 (2) by adding at the end the following new sub20 section:

21 ‘‘(f) LIMITATIONS ON REMEDIES.—

22 ‘‘(1) CLASS ACTION LIMITATIONS.—No class ac23 tion based upon the statutory or common law of any

24 State or subdivision thereof may be maintained in
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1 any State or Federal court by any private party

2 alleging—

3 ‘‘(A) a misrepresentation or omission of a

4 material fact in connection with the purchase or

5 sale of a covered security; or

6 ‘‘(B) that the defendant used or employed

7 any manipulative or deceptive device or contriv8 ance in connection with the purchase or sale of

9 a covered security.

10 ‘‘(2) REMOVAL OF CLASS ACTIONS.—Any class

11 action brought in any State court involving a cov12 ered security, as set forth in paragraph (1), shall be

13 removable to the Federal district court for the dis14 trict in which the action is pending, and shall be

15 subject to paragraph (1).

16 ‘‘(3) DEFINITIONS.—For purposes of this sub17 section the following definitions shall apply:

18 ‘‘(A) CLASS ACTION.—The term ‘class ac19 tion’ means any single lawsuit, or any group of

20 lawsuits filed in or pending in the same court

21 involving common questions of law or fact, in

22 which—

23 ‘‘(i) damages are sought on behalf of

24 more than 25 persons;
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1 ‘‘(ii) one or more named parties seek

2 to recover damages on a representative

3 basis on behalf of themselves and other

4 unnamed parties similarly situated; or

5 ‘‘(iii) one or more of the parties seek6 ing to recover damages did not personally

7 authorize the filing of the lawsuit.

8 ‘‘(B) COVERED SECURITY.—A security is a

9 ‘covered security’ if it satisfies the standard for

10 a covered security specified in paragraph (1) or

11 (2) of section 18(b) of the Securities Act of

12 1933, at the time during which it is alleged

13 that the misrepresentation, omission, or ma14 nipulative or deceptive conduct occurred.’’.

15 (c) APPLICABILITY.—The amendments made by this

16 section shall not affect or apply to any action commenced

17 before and pending on the date of enactment of this Act.

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