Opinion ID: 3039127
Heading Depth: 3
Heading Rank: 4

Heading: Whether the Swiss-law claims are preempted

Text: because they incorporated the allegations of the state-law claims The District Court held, and the Banks argue, that because counts III and IV “reallege and incorporate by reference herein in their entirety the allegations” supporting the state-law claims, App. at 78, 80, and the state-law claims are, as the Banks contend, preempted, the Swiss-law claims must also be preempted. Aside from the fact that we are not persuaded that the state-law claims are preempted, the view advanced by the District Court and the Banks appears to stem from a misinterpretation of language in this court’s opinion in Rowinski, 398 F.3d at 305. In Rowinski, we held that a claim alleges “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), which subjects it to SLUSA preemption, when an allegation of a misrepresentation in connection with a securities trade is a “factual predicate” of the claim, even if misrepresentation is not a legal element of the claim. Rowinski, 398 F.3d at 300. Thus, when, as in Rowinski, a plaintiff alleges that a misrepresentation made in connection with a securities trade breaches a contract, the plaintiff cannot avoid SLUSA preemption by arguing that misrepresentation is not an element of a breach-of-contract action. In other words, when one of a plaintiff’s necessary facts is a misrepresentation, the plaintiff cannot avoid SLUSA by merely altering the legal theory that makes that misrepresentation actionable. It is important to recognize that Rowinski did not hold that any time a misrepresentation is alleged, the misrepresentation-inconnection-with-a-securities-trade ingredient is present. (Nor does it follow that failing to make such an allegation explicit necessarily avoids the ingredient). Rather, the point we made in Rowinski was that when an allegation of misrepresentation in 28 connection with a securities trade, implicit or explicit, operates as a factual predicate to a legal claim, that ingredient is met. To be a factual predicate, the fact of a misrepresentation must be one that gives rise to liability, not merely an extraneous detail. This distinction is important because complaints are often filled with more information than is necessary. While it may be unwise (and, in some cases, a violation of Rule 8) to set out extraneous allegations of misrepresentations in a complaint, the inclusion of such extraneous allegations does not operate to require that the complaint must be dismissed under SLUSA. Here, as to the Swiss-law claims, the allegations of misrepresentation appear to be extraneous. As explained in Part IV.B, supra, the Swiss-law counts allege that the Banks violated their Swiss-law duty properly to investigate and freeze the Directors’ various money-laundering transactions. The Directors’ prior alleged misrepresentations are not factual predicates to these claims because, according to the Trust’s characterization of the Swiss-law claims, they have no bearing on whether the Banks’ conduct is actionable; rather, they are merely background details that need not have been alleged, and need not be proved.25