Opinion ID: 4414424
Heading Depth: 4
Heading Rank: 1

Heading: slusa

Text: In 1995, Congress passed the Private Securities Litigation Reform Act (“PSLRA”), which limited the filing of federal securities class actions in federal court. Pub. L. 6 BANKS V. NORTHERN TRUST No. 104-67, 109 Stat. 737. “[T]o avoid PSLRA’s heightened pleading requirements for class-action securities lawsuits, plaintiffs began asserting what were essentially federal securities law claims as state law causes of action in state courts. Congress sought to end this practice by enacting SLUSA.” Northstar Fin. Advisors, Inc. v. Schwab Invs., 904 F.3d 821, 828 (9th Cir. 2018) (citation omitted). SLUSA prohibits certain state-law class actions:
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— (A) a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security; or (B) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security. 15 U.S.C. § 78bb(f)(1). To simplify, SLUSA deprives a federal court of jurisdiction to hear “(1) a covered class action (2) based on state law claims (3) alleging that the defendants made a misrepresentation or omission or employed any manipulative or deceptive device (4) in connection with the BANKS V. NORTHERN TRUST 7 purchase or sale of (5) a covered security.” Northstar, 904 F.3d at 828. 1 When applying SLUSA to a complaint, courts must “look to the substance of the allegations” to ensure that “artful pleading” does not “remove[] the covered words . . . but leave[] in the covered concepts.” Freeman Invs., L.P. v. Pac. Life Ins. Co., 704 F.3d 1110, 1115 (9th Cir. 2013) (second alteration in original) (quoting Segal v. Fifth Third Bank N.A., 581 F.3d 305, 311 (6th Cir. 2009)). With that important principle in mind, we recognize that this case turns primarily on the “in connection with” requirement. 2 Even assuming Banks adequately alleged that Northern made a misrepresentation or omission or employed a manipulative device or contrivance, we must decide if Northern’s alleged activity was in connection with the purchase or sale of a covered security.