Opinion ID: 76037
Heading Depth: 3
Heading Rank: 1

Heading: Covered Class Action

Text: 19 Behlen argues that his case was not removable, because it was not a covered class action. Behlen points to the statutory language of the SLUSA, which 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. 15 U.S.C. §§ 77p(b), 78bb(f)(1) (emphasis added). Behlen contends that at the time of removal the case was not maintained as a class action, because the state court had not determined whether the case should proceed in a class-wide fashion. 20 We find no merit in Behlen's argument and believe that it is based upon a misreading of the statute. The SLUSA does not require that an action be maintained as a class action before it can be removed; rather, it merely provides that no class action falling within the scope of its coverage can be maintained in a state or federal court, which means that dismissal of a covered class action is required. Prager v. Knight/Trimark Group, Inc., 124 F.Supp.2d 229, 231 (D.N.J.2000). 21 The SLUSA defines a covered class action as 22 any single lawsuit in which ... damages are sought on behalf of more than 50 persons or prospective class members, and questions of law or fact common to those persons or members of the prospective class, without reference to issues of individualized reliance on an alleged misstatement or omission, predominate over any questions affecting only individual persons or members. 23 15 U.S.C. §§ 77p(f)(2)(A)(i)(I), 78bb(f)(5)(B)(i)(I) (emphasis added). We thus believe that it is clear from the statutory language that prospective class actions are removable to federal court even if the state court has not determined whether the action should go forward as a class action. Were we to find that a class action must be maintained as such before it is subject to removal under the SLUSA, we essentially would require that the action be certified in state court before it could be removed to federal court. Nothing in the statutory language of the SLUSA, however, suggests that certification prior to removal is required. Indeed, requiring certification prior to removal would frustrate the objectives of the SLUSA rather than further them. The SLUSA's provisions were designed to enable securities defendants to obtain early dismissal of frivolous class actions, and thereby avoid the high expense of discovery. Riley, 292 F.3d at 1341. Requiring certification prior to removal would entail potentially lengthy and expensive pretrial practice and discovery in state court, regardless of the merits of the action. We believe that such a prospect is contrary to the stated objectives of the SLUSA. 24