Opinion ID: 63560
Heading Depth: 2
Heading Rank: 4

Heading: SLUSA Dismissal

Text: The Financial Institutions present an alternative argument, suggesting that this court should affirm the district court in its entirety because the Securities Litigation Uniform Standards Act (SLUSA) would preempt all of the proposed state law claims. SLUSA provides, 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 securities claim. 15 U.S.C. § 77p(b). The Act defines a covered class action as, inter alia, any group of lawsuits filed in or pending in the same court and involving common questions of law or fact, in which (I) damages are sought on behalf of more than 50 persons; and (II) the lawsuits are joined, consolidated, or otherwise proceed as a single action for any purpose. Id. § 77p(f)(2)(A)(ii). If a state law case is a covered class action under SLUSA, it is subject to removal and subsequent dismissal as preempted. Id. § 77p(c). The Financial Institutions argue that the thirty-four proposed lawsuits constitute a covered class action because, in the aggregate, they assert claims on behalf of more than fifty persons, and the lawsuits would proceed as a single action in the state court. The Financial Institutions note that the thirty-four proposed petitions are identical except for the plaintiffs' names, and the proposed suits each include fewer than fifty plaintiffs solely to defeat preemption under SLUSA. The Financial Institutions speculate that if the Fleming Firm were to file the thirty-four petitions in state court, the Texas courts would consolidate them under Texas Rule of Civil Procedure 174, which would then allow the Financial Institutions to remove the cases pursuant to SLUSA. The Financial Institutions also assert that the cases still would otherwise proceed as a single action for purposes of discovery even if the Texas courts do not consolidate the cases. However, the Financial Institutions' argument falls apart when recognizing that a party is allowed to tailor a suit to avoid federal jurisdiction. See Newby I, 302 F.3d at 303. As we stated when affirming the district court's February 15, 2002 injunction, the district court cannot predicate future denials of leave solely upon [the] Fleming[ ] [Firm's] desire to avoid the reach of [SLUSA]. Id.; see also S.REP. NO. 105-182 (1998), 1998 WL 226714, at -8 (noting that Congress did not intend SLUSA preemption to prevent plaintiffs from bringing bona fide individual actions simply because more than fifty persons commence the actions in the same state court against a single defendant). Additionally, the Financial Institutions' premise rests on an assumption that the Texas courts will consolidate the cases, but there is no evidence that the Texas courts will order consolidation. Predicting that the Texas courts necessarily will consolidate would infringe upon notions of federalism. See, e.g., Newby I, 302 F.3d at 303 (The parallel exercise of state and federal judicial power is inherent in our government of dual sovereignty.). The Texas courts should be allowed to decide in the first instance how to manage their dockets with regard to the Fleming Firm's claims that are not time-barred. [4] Therefore, we reject the Financial Institutions' alternative argument for affirming.