Document: 547 U.S. 71 (2006) MERRILL LYNCH, PIERCE, FENNER & SMITH INC. v. DABIT No. 04-1371. Supreme Court of United States. Argued January 18, 2006. Decided March 21, *73 Jay B. Kasner argued the cause for petitioner. With him on briefs were Preeta D. Bansal, Edward J. Yodowitz, Scott Musoff, and Joanne Gaboriault. Deputy Solicitor General Hungar States as amicus curiae urging reversal. brief Clement, Daryl Joseffer, Giovanni P. Prezioso, Jacob H. Stillman, Eric Summergrad, Susan S. McDonald, Jeffrey T. Tao. David C. Frederick respondent. Priya R. Aiyar, William Federman, Stuart W. Emmons, Clell I. Cunningham III.[*] *74 JUSTICE STEVENS delivered opinion Court. Title I Securities Litigation Uniform Standards Act 1998 (SLUSA) provides that "[n]o covered class action" based state law alleging "a misrepresentation or omission a material fact in connection with purchase sale security" "may be maintained any State Federal court by private party." § 101(b), 112 Stat. 3230 (codified at 15 78bb(f)(1)(A)). In this case Second Circuit held SLUSA only pre-empts state-law class-action claims brought plaintiffs who have remedy under federal law. 395 F.3d 25 (2005). A few months later, Seventh ruled to contrary, holding statute also which no remedy. Kircher Putnam Funds Trust, 403 478 The background, text, purpose SLUSA's preemption provision all support broader interpretation adopted Circuit. Petitioner Merrill Lynch, Pierce, Fenner Smith Inc. (Merrill Lynch) is an investment banking firm offers research brokerage services investors. Suspicious firm's loyalties its clients had produced biased advice, New York attorney general 2002 instituted formal investigation into *75 Lynch's practices. sparked number securities fraud actions, one among them.[1] Respondent, Shadi Dabit, former Lynch broker. He filed action District Western Oklahoma behalf himself other current brokers who, while employed purchased (for themselves their clients) certain stocks between December 1, 1999, 31, 2000. See App. 27a-46a. Rather than rely laws, Dabit invoked Court's diversity jurisdiction advanced his gist Dabit's complaint was breached fiduciary duty covenant good faith fair dealing it owed disseminating misleading thereby manipulating stock prices.[2] theory used misinformed enhance prices clients' stocks: analysts, management's direction, allegedly issued overly optimistic appraisals stocks' value; relied analysts' reports advising investor deciding whether not sell own holdings; both continued hold long beyond point when, truth been known, they would sold. further alleged when actually revealed (around time investigation), plummeted. *76 asserted actions damaged members two ways: misrepresentations manipulative tactics caused them onto overvalued securities, lost commission fees clients, now aware made poor investments, took business elsewhere. July 2002, moved dismiss complaint. It argued, first, pre-empted and, second, cognizable indicated "not impressed by" argument, but agreed least some claims. Id., 49a-50a. noted "claims damages wrongfully-induced purchases" holding." Ibid. While "holding" claims, suggested, might pre-empted, "purchasing" certainly were. dismissed leave amend give opportunity untangle "hopeless mélange purchase-related holding-related assertions." (punctuation added). promptly amended omitted direct references purchases. What began "purchased" subject during period became "owned own" those securities. id., 52a. Meanwhile, dozens suits, allegations similar Dabit's, against around country federal- theories liability. Judicial Panel Multidistrict transferred cases, along one, Southern consolidated pretrial proceedings. then second motion Senior Judge Milton Pollack granted ground fell "squarely within ambit." *77 re Co., Inc., 2003 WL 1872820, *1 (Apr. 10, 2003). Appeals Circuit, however, vacated judgment remanded F.3d, 51. concluded holders did allege "in sale" SLUSA. Although phrase, has defined broadly Court, Congress nonetheless intended narrower meaning hereone incorporates "standing" limitation Blue Chip Stamps Manor Drug Stores, 421 723 (1975). Under Circuit's analysis, SLUSA, if purchaser seller Thus, extent fraudulently induced, purchase, retain delay selling outside pre-emptive scope.[3] After determining necessarily exclude purchasers, panel instructions pleading without prejudice. court's order permit file another defines "claimants therefore could meet standing requirement" action, include "who came [a Lynch] Stock before relevant misrepresentation." 45-46. so limited *78 sustained For reasons follow, we disagree. II magnitude interest protecting integrity efficient operation market nationally traded cannot overstated. response sudden disastrous collapse listed 1929, Great Depression followed, enacted 1933 (1933 Act), 48 74, Exchange 1934 (1934 881. Since enactment, these statutes anchored regulation vital elements our economy. Commission (SEC) Rule 10b-5, 17 CFR 240.10b-5 (2005), promulgated 1942 pursuant 10(b) Act, 78j(b), important part regulatory scheme. Rule, like itself,[4] prohibits deception, misrepresentation, security."[5] *79 SEC express statutory authority enforce Rule. 78u (2000 ed. Supp. III). such expressly individuals injured fraud, 1946 Kirkpatrick Eastern Pennsylvania, relying "the purpose" recognized implied right thereunder. Kardon National Gypsum 69 F. 512, 514. His "overwhelming consensus Courts Appeals," Stamps, U. S., 730, endorsed Superintendent Ins. N. Y. Bankers Life Casualty 404 6 (1971). years after decided, reach 10b-5. Birnbaum Newport Steel Corp., 193 F.2d 461 (1952), composed Chief Swan Judges Augustus Learned Hand upheld dismissal suit corporation stockholders with" director's controlling block third parties violated associated her protect neither nor sold question instead corporate insiders' sales parties. 464. plaintiffs' later cases treated requirement. Eason Motors Acceptance 490 654, 657 (CA7 1973). *80 By first confronted question, literally hundreds lower decisions accepted "Birnbaum's conclusion plaintiff purposes 10b-5 damage purchasers sellers." 731-732. Co. interpreted coverage more prohibit, example, "deceptive practices touching victim's] investor." U.S., 12-13 (emphasis added); see Eason, 2d, (collecting cases). "judicial oak ha[d] grown from little legislative acorn," then-Justice Rehnquist described rules governing 737, thus developed differently defining what constituted substantive violation Ultimately, decide sue harm, limit sellers. Relying principally "policy considerations" viewed appropriate explicating judicially crafted remedy, ibid., following judicial precedent rather many commentators" criticized rule "an arbitrary restriction unreasonably prevents deserving recovering damages," 738, chose main policy consideration tipping scales favor widespread recognition "litigation presents danger vexatiousness different degree kind accompanies litigation general." 739. Even weak may substantial settlement value, explained, because "[t]he very pendency lawsuit frustrate normal activity." 740. Cabining means purchaser-seller *81 would, view, minimize ill effects. course application Government enforcement 751, n. 14. III Policy considerations supported decision prompted Congress, 1995, adopt legislation targeted perceived abuses vehicle involving acknowledging indispensable tool defrauded investors can recover losses," House Conference Report accompanying Private Reform 1995 (Reform 109 737 §§ 77z-1 78u-4), identified ways device being injure entire economy." Conf. Rep. 104-369, p. 31 (1995). According Report, nuisance filings, targeting deep-pocket defendants, vexatious discovery requests, "manipulation lawyers whom purportedly represent" become rampant recent years. Proponents resulted extortionate settlements, chilled discussion issuers' future prospects, deterred qualified serving boards directors. 31-32. captioned "Reduction Abusive Litigation," represents Congress' effort curb abuses. Its provisions recoverable attorney's fees, provide "safe harbor" forward-looking statements, impose new restrictions selection (and compensation awarded to) lead plaintiffs, mandate imposition sanctions frivolous litigation, authorize stay pending resolution dismiss. 78u-4. imposes heightened requirements 10b-5; "insists complaints *82 `specify' each statement; set forth facts `on [a] belief' statement `formed'; `state particularity giving rise strong inference defendant acted required mind.'" Dura Pharmaceuticals, Broudo, 544 336, 345 (2005) (quoting 78u-4(b)(1), (2)). deter quickly dispose suits whose value outweighs merits placed special burdens seeking bring actions. But unintended consequence: bar avoid forum altogether. face obstacles path representatives bringing law, often court. evidence presented 1997 hearing evaluate effects suggested phenomenon novel one; state-court previously rare. 105-640, 10 (1998); 105-182, pp. 3-4 (1998). To stem "shif[t] courts" "prevent lawsuits objectives of" 2(2), (5), 3227, IV core reads follows:[6] "CLASS ACTION LIMITATIONS.  No upon common subdivision thereof party alleging *83 "(A) security; "(B) deceptive contrivance security." 78bb(f)(1)).[7] "covered are sought 50 people.[8] regulated national exchange.[9] Respondent does dispute *84 issue "covered" statute, alleges omissions facts. disputed wrongdoing urges operative language must read narrowly encompass pre-empt) requirement met. Such, too, view. insofar argument assumes stems text 10b-5specifically, language, rejected. Unlike court, 10b-5's crafting limitation, chiefly, candidly, adopting limitation. 737. purported define scope 10b-5not words sale." 749 ("No either [§ 10b-5] speaks contours violation"). Any ambiguity score resolved O'Hagan, 521 642, 656, 664 (1997); Holmes Investor Protection Corporation, 503 258, 285 (1992) (O'Connor, J., concurring judgment); 289-290 (SCALIA, Naftalin, 441 768, 774, (1979); 39 (acknowledging unquestionably distinct concept prohibition securities"). *85 Moreover, phrase context espoused broad interpretation. narrow construction not, matter impression, unreasonable; purchasing particular all, case. F.2d, early (1971), most recently Zandford, 535 813, 820, 822 (2002), rejected precedents, enough "coincide" transactionwhether someone else. 651. requisite showing, words, "deception `in security,' deception identifiable seller." 658. Notably, comports longstanding views SEC. 819-820.[10] hardly unaware imported key phrase"in sale"into provision. And interpretations settled existing provision, repetition same indicates, matter, intent incorporate . well." Bragdon *86 Abbott, 524 624, 645 Cannon University Chicago, 677, 696-699 (1979). Application presumption particularly apt here; use appears 10(b). Generally, "identical parts presumed meaning." IBP, Alvarez, 546 34 envisioned follows ordinary principles concerns culminated enactment. reading undercut effectiveness run contrary stated purpose, viz., "to prevent objectives" Act. 2(5), 3227. As observed, pose risk litigation. odd, say least, exempted troublesome subset sweep. Kircher, 3d, 484. Respondent's preferred wasteful, duplicative Facts supporting (which proceed all) typically well, recognize holder prospect raised, then, parallel proceeding standards identical That prospect, exists case,[11] squarely conflicts *87 congressional preference "national securities." 3227.[12] concluding complaint, do lose sight "presum[ption] cavalierly pre-empt causes action." Medtronic, Lohr, 518 470, 485 (1996). carries less force here contexts action. simply denies vindicate deny individual plaintiff, indeed group fewer exist. tailored exceptions command demonstrate act "cavalierly" here. carefully exempts issuer security incorporated, agency pension plan, contracts issuers indenture trustees, derivative shareholders corporation. 78bb(f)(3)(A)(C), (f)(5)(C). preserves over 78bb(f)(4). existence carve-outs evinces sensitivity prerogatives field *88 makes inappropriate courts create additional, exceptions. Finally, principal asserting See, e. g., 105-803, 14 (1998) ("Prior passage there essentially significant court").[13] More importantly, theoretically available actual assertion way virtually unheard enacted; respondent amici pre-SLUSA claims.[14] This situation, eliminated historically entrenched Cf. Bates Dow Agrosciences LLC, 431, 449 (observing "long history" tort "add[ed] force" pre-emption). V tried plead, envisioned, distinguishable *89 typical respect: pre-emption, distinction irrelevant; identity determine misconduct complains herefraudulent manipulation pricesunquestionably qualifies 822, vacated, proceedings consistent opinion. ordered. ALITO NOTES [*] Briefs reversal Chamber Commerce America Charles A. Rothfeld, Andrew Pincus, Stephen M. Shapiro, Timothy Bishop, Robin Conrad, Amar Sarwal; Investment Company Institute Theodore Olson Mark Perry; Lord, Abbett et al. Lee Eisen, Maletta, Nicholas G. Terris; Industry Association Carter Phillips Richard Bernstein; Washington Legal Foundation Donald Verrilli, Jr., Ronald L. Marmer, John Koch, Daniel Popeo, Price. affirmance Eliot Spitzer, Attorney York, Caitlin Halligan, General, Mariya Treisman, Assistant Attorneys respective follows: Bill Lockyer California, Blumenthal Connecticut, Bennett Hawaii, Lisa Madigan Illinois, Thomas Miller Iowa, Michael Cox Michigan, Mike Hatch Minnesota, Jim Hood Mississippi, McGrath Montana, Peter Harvey Jersey, Patricia Madrid Mexico, Petro Ohio, Drew Edmondson Oklahoma, Hardy Myers Oregon, Henry McMaster South Carolina, Sorrell Vermont, Rob McKenna Washington, Peggy Lautenschlager Wisconsin; IJG Investments Ira Neil Richards; Shareholder Consumer Stewart Weltman, Kevin Roddy, Deborah Zuckerman; Phillip Goldstein Robert King. Steven Feirson Nory Pacific Insurance curiae. [1] eventually general. [2] alleged, "artificially inflated result efforts" "acting central nerve center various ., perpetrated through variety devices, artifices, hallmarks manipulation." 28a-29a. [3] escaped pre-emption "allege `coincide[s]' 47 825 (2002)). determination review. [4] Section "It shall unlawful person, directly indirectly, instrumentality interstate commerce mails, facility exchange "(b) employ, registered exchange contravention regulations [SEC] prescribe necessary public protection investors." 78j(b). [5] commerce, mails exchange, "(a) employ device, scheme, artifice defraud, make untrue omit statements made, light circumstances misleading, "(c) engage act, practice, operates operate deceit [6] amends substantially ways. convenience pertinent here, quote amendments [7] Another actions" removable 78bb(f)(2)). [8] "The term `covered action' means "(i) single which "(I) persons prospective members, questions class, reference issues individualized reliance misstatement omission, predominate affecting members; "(II) named seek representative basis unnamed similarly situated, "(ii) fact, persons; joined, consolidated, otherwise purpose." 3232 78bb(f)(5)(B)). [9] security' satisfies specified paragraph (1) (2) section 18(b) 1933, conduct occurred ." 78bb(f)(5)(E)). turn exchange. 77r(b). [10] observed consistently "maintained broker accepts payment he never intends deliver, sells customer misappropriate proceeds, violates 10b-5." 819. Here, supports language. [11] (SDNY, Apr. 2003) rested "on series transactions occurrences Lynch). [12] (the "solution" circumvention "is exclusive venue litigation"); 3 (identifying maintaining differing liability nationally-traded [13] points out (1975), factor mitigating unfairness adoption "remedies nonpurchasers nonsellers law." 9. argues revisit understanding equities involved limiting availability remedies law; concerned evident [14] Brief 5 (citing Weinberger Kendrick, 698 61, 78 (CA2 1982) (approving included law)); Tr. Oral Arg. 34-35.

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