Court Opinion

ID: 4665657
Source: CourtListenerOpinion
Date Created: 2021-03-08 18:00:48.105+00
Date Added: 2024-06-11T08:02:44.583592
License: Public Domain

FOR PUBLICATION

    UNITED STATES COURT OF APPEALS
         FOR THE NINTH CIRCUIT

 EDWARD ANDERSON; COLEEN                            No. 19-17520
 WORTHINGTON; JANET GORAL,
             Plaintiffs-Appellants,                   D.C. No.
                                                   2:18-cv-00714-
                      v.                              JAM-AC

 EDWARD D. JONES & CO., L.P.; THE
 JONES FINANCIAL COMPANIES,                           OPINION
 LLLP; EDJ HOLDING COMPANY,
 INC.; JAMES D. WEDDLE; VINCENT J.
 FERRARI,
               Defendants-Appellees.

         Appeal from the United States District Court
             for the Eastern District of California
          John A. Mendez, District Judge, Presiding

          Argued and Submitted December 9, 2020
                 San Francisco, California

                       Filed March 4, 2021

  Before: DANNY J. BOGGS, * MILAN D. SMITH, JR.,
        and MARK J. BENNETT, Circuit Judges.

             Opinion by Judge Milan D. Smith, Jr.

    *
      The Honorable Danny J. Boggs, United States Circuit Judge for
the U.S. Court of Appeals for the Sixth Circuit, sitting by designation.
2           ANDERSON V. EDWARD D. JONES & CO.

                          SUMMARY **

                          Securities Law

    The panel reversed the district court’s dismissal of a
class action brought by investors with a financial services
firm, alleging breach of fiduciary duties under Missouri and
California law when the investors moved their assets from
commission-based to fee-based accounts.

    The district court concluded that it lacked subject matter
jurisdiction over the state law claims because the Securities
Litigation Uniform Standards Act (SLUSA) prevented
plaintiffs from bringing their claims as a class action
consisting of fifty or more persons. The district court also
dismissed plaintiffs’ securities fraud claim under § 10(b) of
the Securities Exchange Act of 1934. Plaintiffs appealed
dismissal of their state law claims only.

    Reversing, the panel held that SLUSA did not bar
plaintiffs’ state law fiduciary duty claims because the alleged
misrepresentation or omission that formed the basis for the
claims was not “in connection with the purchase or sale of a
covered security.” Following Chadbourne & Parks LLP v.
Troice, 571 U.S. 377 (2014), the panel held that the phrase
“in connection with” requires a showing that the
misrepresentation or omission was material to a decision to
buy or sell a security. The panel concluded that defendants’
alleged failure to conduct a suitability analysis before
inviting plaintiffs to switch to fee-based accounts was not

    **
       This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
          ANDERSON V. EDWARD D. JONES & CO.                3

material because plaintiffs did not allege that they would
have purchased or sold different covered securities had
defendants conducted such an analysis.

                        COUNSEL

Michael Anthony Brown (argued), Spertus Landes &
Umhofer LLP, Los Angeles, California; John R. Garner,
Garner & Associates, Willows, California; Michael D.
Murphy, Franklin D. Azar & Associates P.C., Aurora,
Colorado; for Plaintiffs-Appellants.

Mark A. Perry (argued), Gibson Dunn & Crutcher LLP,
Washington, D.C.; Alexander K. Mircheff and Meryl L.
Young, Gibson Dunn & Crutcher LLP, Los Angeles,
California; Samuel A. Keesal Jr., Keesal Young & Logan,
Long Beach, California; Julie L. Taylor, Keesal Young &
Logan, San Francisco, California; for Defendants-
Appellees.

                        OPINION

M. SMITH, Circuit Judge:

    Plaintiff-Appellant Edward Anderson and others
(collectively, Plaintiffs) are the Lead Plaintiffs in a class
action brought against Defendant-Appellee Edward D. Jones
& Co., L.P., and other associated entities and individuals
(collectively, Edward Jones). Plaintiffs alleged that Edward
Jones breached its fiduciary duties owed to Plaintiffs under
Missouri and California law. The district court concluded
that it did not have subject matter jurisdiction because the
Securities Litigation Uniform Standards Act (SLUSA)
4           ANDERSON V. EDWARD D. JONES & CO.

prevents Plaintiffs from bringing their claims as a class
action consisting of fifty or more persons. See 15 U.S.C.
§ 78bb(f)(1), (f)(5)(B).

    Because Edward Jones’s alleged misrepresentation or
omission that forms the basis for Plaintiffs’ fiduciary duty
claims is not “in connection with the purchase or sale of a
covered security,” id. § 78bb(f)(1)(A), we reverse the
decision of the district court and remand for further
proceedings consistent with this opinion.

 I. FACTUAL AND PROCEDURAL BACKGROUND

A. Plaintiffs’ Investment Relationship with Edward
   Jones

    Plaintiffs were investors with Edward Jones, a financial
services firm headquartered in St. Louis, Missouri. 1
According to Plaintiffs, they are “buy-and-hold clients,”
which means that they “conduct[] little to no trading each
year.” Plaintiffs previously invested with Edward Jones
through commission-based accounts. Under this investment
model, “Edward Jones provided its clients free financial
advice, only charging them on a per trade basis.” Plaintiffs
assert that this “model particularly benefitted middle-income
investors in small communities who engaged in little to no
trading,” like themselves.

   In 2008, Edward Jones introduced a fee-based model of
investing. In a fee-based account, Edward Jones “charged a

    1
      The background that we lay out in this opinion is largely drawn
from Plaintiffs’ Second Amended Complaint. Because the district court
disposed of this case at the motion to dismiss stage of the litigation, we
must accept Plaintiffs’ well-pleaded allegations as true. Northstar Fin.
Advisors, Inc. v. Schwab Invs., 904 F.3d 821, 828 (9th Cir. 2018).
          ANDERSON V. EDWARD D. JONES & CO.                  5

flat annual asset management fee.” “The standard fee was
1.35% to 1.50% of a client’s assets under management,”
though it could be as high as 2%, in addition to
administrative fees. Clients investing in a fee-based account
would pay an annual fee “regardless of the transactions” that
Edward Jones conducted on behalf of those clients.

    Plaintiffs moved their assets from commission-based to
fee-based accounts. During the transition, Edward Jones
purportedly gave written disclosures to Plaintiffs, including
a brochure entitled “Making Good Choices.” Clients also
signed a form in which they “acknowledge[d] that [the
client] has received and read the Brochure, which describes
the [fee-based program] in greater detail.” Clients also
acknowledged that they “made [their] own decision[s] to
invest in the” fee-based account. Additionally, clients filled
out a form with their investment objectives.

B. Plaintiffs’ Suit Against Edward Jones

    Plaintiffs filed their Second Amended Complaint on July
29, 2019, which forms the basis for this appeal. Plaintiffs
brought a number of counts against Edward Jones, including
allegations that Edward Jones violated its state law fiduciary
duties and federal securities law.

     Most important to Plaintiffs’ fiduciary duty allegations
is that Edward Jones allegedly failed to conduct a “suitability
analysis” before inviting Plaintiffs to switch to fee-based
accounts. Plaintiffs argue that under Financial Industry
Regulatory Authority (FINRA) Rule 2111, “broker-dealers
must ensure that fee-based accounts are only recommended
to those clients for whom they are suitable; as such accounts
tend to be more expensive for clients who engage in little to
no trading activity.” Plaintiffs concede that FINRA Rule
2111 “may not [create] a private right of action,” but argue
6          ANDERSON V. EDWARD D. JONES & CO.

that a FINRA rule “may be used as evidence of industry
standards and practices” when pursuing a breach of fiduciary
duty claim.

    Additionally, Plaintiffs contend that Edward Jones
“improperly incentivize[d] its [financial advisors] to violate
their fiduciary duties and rack up asset-based fee revenue
for” Edward Jones and “terminated, gave smaller raises and
bonuses to, and/or failed to promote [financial advisors] who
disagreed with [Edward Jones’s] strategy.” Plaintiffs allege
that Edward Jones pressured financial advisors to switch
clients to fee-based accounts through regional meetings,
training sessions, and field office visits.

    Plaintiffs claim that this lack of a suitability analysis and
the corresponding push to move clients to fee-based
accounts is a breach of Edward Jones’s fiduciary duties
under Missouri and California law. According to Plaintiffs,
they “should not have been transferred from commission-
based accounts into fee-based accounts and, thus, should not
have been charged annual asset-based fees at all, only
commissions.” They seek damages

        in the amount of the fees they paid Edward
        Jones after having their assets improperly
        transferred from commission-based accounts
        into unsuitable fee-based accounts, less the
        commissions they would have paid if the
        assets ha[d] properly remained in the
        commission-based accounts, plus the
        increase in value the assets would have
        achieved over time had Edward Jones not
        improperly deducted the substantial fees
        from the accounts.
           ANDERSON V. EDWARD D. JONES & CO.                   7

Plaintiffs do not allege that they would have made or not
made any particular trades had Edward Jones conducted a
suitability analysis.

    Plaintiffs also alleged that Edward Jones violated § 10(b)
of the Securities Exchange Act of 1934, 15 U.S.C. § 78j, and
the corresponding Securities and Exchange Commission
Rule 10b-5, 17 C.F.R. § 240.10b-5. In this section of the
complaint, Plaintiffs argued that Edward Jones “failed to
disclose” the fact that financial advisors “did not conduct a
suitability analysis to assess whether a fee-based account
was suitable or otherwise in the best interests of clients, prior
to transferring the clients from commission-based accounts
to fee-based accounts.” Plaintiffs claimed that “[t]he
commission-based/fee-based dichotomy is critical and
material to any investment decision, including Lead
Plaintiffs’ and the Class members’ investment decisions to
transfer them from commission-based accounts into fee-
based accounts.” Plaintiffs did not devote a section of the
Rule 10b-5 cause of action to showing that there was “a
connection between [Edward Jones’s] misrepresentation or
omission and the purchase or sale of a security.” Halliburton
Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 267 (2014).

     Referring to the choice of investment advisor, rather
than the choice to purchase or sell a security, Plaintiffs
alleged:

        [I]f [Edward Jones] disclosed to Lead
        Plaintiffs that Edward Jones was not
        fulfilling even its most basic responsibilities
        as     an    investment     advisor—namely,
        conducting a suitability analysis—Lead
        Plaintiffs’ trust in the relationship would
        have faltered and a reasonable investor would
        have looked elsewhere for investment
8            ANDERSON V. EDWARD D. JONES & CO.

         advisory services or chosen not to heed their
         [financial advisor’s] advice.

    The district court dismissed the complaint with
prejudice. In re Edward D. Jones & Co., L.P. Sec. Litig.,
No. 2:18-CV-00714-JAM-AC, 2019 WL 5887209, at *8
(E.D. Cal. Nov. 12, 2019). The district court characterized
Plaintiffs’ fiduciary duty causes of action as alleging a
misrepresentation or omission based on Edward Jones not
conducting a suitability analysis. Id. at *2. The district court
reasoned that Plaintiffs could not plead a state law fiduciary
duty claim and a federal securities claim based on the same
conduct when Plaintiffs characterized the lack of a suitability
analysis as an omission for the federal law claim, but not an
omission for the state law claim. Id. Thus, in accordance
with the previous dismissal, 2 the district court held, pursuant
to SLUSA, that it had no jurisdiction over the class action
state law claim. See id. The court did not address whether
the lack of a suitability analysis was “in connection with the
purchase or sale of a covered security” for the fiduciary duty
claims. 3 15 U.S.C. § 78bb(f)(1)(A).

    2
      The district court previously dismissed Plaintiffs’ First Amended
Complaint for largely the same reasons, but without prejudice. In re
Edward D. Jones & Co., L.P. Sec. Litig., No. 2:18-CV-00714-JAM-AC,
2019 WL 2994486, at *9 (E.D. Cal. July 9, 2019).
    3
      The district court did hold that Plaintiffs’ breach of contract claims
involved alleged promises that were “in connection with” the purchase
or sale of covered securities. See In re Edward D. Jones, 2019 WL
5887209, at *2–3. Plaintiffs’ contract claims, which they do not appeal,
were not based on a lack of suitability analysis, but instead on “the
allegation Edward Jones never intended to provide and did not provide
the additional services purportedly warranting the fees imposed in” the
fee-based accounts. Id. at *2. The district court did “not agree that the
            ANDERSON V. EDWARD D. JONES & CO.                       9

    The district court also held that the Rule 10b-5 claim
failed for a number of reasons. Relevant here, the district
court decided that the alleged lack of suitability analysis was
not an actionable omission because Edward Jones provided
Plaintiffs with various documents relating to the nature of
the fee-based accounts. See In re Edward D. Jones, 2019
WL 5887209, at *4–5. The district court also stated that
these various documents “were part of the suitability
analysis [Edward Jones] conducted, further undermining
Plaintiffs’ allegations that [Edward Jones] did not conduct a
suitability analysis.” Id. at *5 (internal quotation marks and
citation omitted). The district court additionally addressed
scienter, reliance, and loss causation. See id. at *5–7.
However, the district court did not decide whether Plaintiffs’
Rule 10b-5 claim alleged “a connection between” the lack of
a suitability analysis “and the purchase or sale of a security.”
Halliburton, 573 U.S. at 267.

    Plaintiffs appealed only the district court’s dismissal of
the state fiduciary duty claims. Plaintiffs did not appeal the
dismissal of any other claims brought before the district
court.

               II. STANDARD OF REVIEW

    We have jurisdiction to entertain this appeal pursuant to
28 U.S.C. § 1291. Banks v. N. Tr. Corp., 929 F.3d 1046,
1049 (9th Cir. 2019). “[D]ismissals under SLUSA are
jurisdictional,” governed by Federal Rule of Civil Procedure
12(b)(1). Hampton v. Pac. Inv. Mgmt. Co. LLC, 869 F.3d
844, 847 (9th Cir. 2017). “We review de novo a district
court’s order granting a motion to dismiss.” Northstar Fin.

breach of contract claims repackage[d] Plaintiffs’ specific securities
claims.” Id.
10        ANDERSON V. EDWARD D. JONES & CO.

Advisors, Inc. v. Schwab Invs., 904 F.3d 821, 828 (9th Cir.
2018). “In evaluating [Plaintiffs’] claims, we accept factual
allegations in the complaint as true and construe the
pleadings in the light most favorable to the nonmoving
party.” Id. (citation and internal quotation marks omitted).

                      III. ANALYSIS

A. SLUSA

     “SLUSA bars a plaintiff class from bringing (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 purchase or sale of (5) a covered
security.”     Northstar, 904 F.3d at 828; 15 U.S.C.
§ 78bb(f)(1).

     SLUSA is to be given a broad interpretation. Merrill
Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71,
85 (2006). SLUSA “seeks to prevent state class actions
alleging fraud ‘from being used to frustrate the objectives’
of the” Private Securities Litigation Reform Act of 1995,
which created heightened pleading requirements for
securities class actions. Freeman Invs., L.P. v. Pac. Life Ins.
Co., 704 F.3d 1110, 1114 (9th Cir. 2013) (citation omitted).
The statute “is designed to prevent persons injured by
securities transactions from engaging in artful pleading or
forum shopping in order to evade limits on securities
litigation that are designed to block frivolous or abusive
suits.” Holtz v. JPMorgan Chase Bank, N.A., 846 F.3d 928,
930 (7th Cir. 2017). Accordingly, while we normally
construe federal statutes preempting state laws narrowly,
“this general principle carries far less force when construing
SLUSA,” because SLUSA does not preempt state law
claims; it only prohibits use of the class action device for
            ANDERSON V. EDWARD D. JONES & CO.                          11

certain claims by fifty or more persons. Northstar, 904 F.3d
at 829 (citing Dabit, 547 U.S. at 87). 4

    However, SLUSA “is not boundless. It ‘does not
transform every breach of fiduciary duty into a federal
securities violation.’” Rowinski v. Salomon Smith Barney
Inc., 398 F.3d 294, 301 (3d Cir. 2005) (quoting SEC v.
Zandford, 535 U.S. 813, 825 n.4 (2002)). To interpret
SLUSA too broadly “would interfere with state efforts to
provide remedies for victims of ordinary state-law frauds.”
Chadbourne & Parke LLP v. Troice, 571 U.S. 377, 391
(2014). “[A] claim is not automatically SLUSA-barred
merely because it involves securities.” Fleming v. Charles
Schwab Corp., 878 F.3d 1146, 1153 (9th Cir. 2017).

    Finally, because SLUSA includes many statutory terms
that Congress also used in § 10(b), courts look to § 10(b) and
cases interpreting that statute when deciding SLUSA cases.
See, e.g., Dabit, 547 U.S. at 86; Fleming, 878 F.3d at 1152–
53.

B. Overlapping Claims

    SLUSA’s restrictions on bringing a claim as a class
action “does not turn on the name or title given to a claim by
the plaintiff. It turns instead on the gravamen or essence of
     4
       SLUSA defines “covered class action” as “any single lawsuit in
which . . . damages are sought on behalf of more than 50 persons or
prospective class members.” 15 U.S.C. § 78bb(f)(5)(B)(i)(I). Thus,
“SLUSA does not actually pre-empt any state cause of action.” Dabit,
547 U.S. at 87. Instead, the statute “simply denies plaintiffs the right to
use the class-action device to vindicate certain claims. [SLUSA] does
not deny any individual plaintiff, or indeed any group of fewer than
50 plaintiffs, the right to enforce any state-law cause of action that may
exist.” Id. The district court technically erred in discussing “SLUSA
preemption.” See In re Edward D. Jones, 2019 WL 5887209, at *2.
12        ANDERSON V. EDWARD D. JONES & CO.

the claim.” Northstar, 904 F.3d at 829 (internal quotation
marks and citation omitted). We “must determine if the
Plaintiffs’ claims, stripped of formal legal characterization,
could have been pursued under § 10(b) and Rule 10b-5.”
Fleming, 878 F.3d at 1153; see also Goldberg v. Bank of
Am., N.A., 846 F.3d 913, 916 (7th Cir. 2017) (per curiam).
“[P]laintiffs cannot avoid” the SLUSA class action bar
“‘through artful pleading that removes the covered words . . .
but leaves in the covered concepts.’” Freeman, 704 F.3d
at 1115 (citation omitted). However, “[j]ust as plaintiffs
cannot avoid SLUSA through crafty pleading, defendants
may not recast [state law] claims as fraud claims by arguing
that they ‘really’ involve deception or misrepresentation.”
Id. at 1116.

    Edward Jones argues that Plaintiffs’ “position on appeal
cannot be reconciled with the operative complaint.”
Essentially, Edward Jones contends that Plaintiffs’ Second
Amended Complaint is internally inconsistent. In the Rule
10b-5 portion of the complaint, Plaintiffs alleged that “[t]he
commission-based/fee-based dichotomy is critical and
material to any investment decision.” Yet, as detailed below,
for Plaintiffs’ fiduciary duty claims to survive SLUSA, they
must show that the move from commission-based to fee-
based accounts was not material to the decision to purchase
or sell covered securities.

    Even if Plaintiffs’ complaint is internally inconsistent,
that does not mean that SLUSA automatically blocks them
from bringing their state law claims as a class action. The
question of whether a plaintiff could have pursued a claim
pursuant to Rule 10b-5 is distinct from the question of
whether a plaintiff did pursue that claim pursuant to Rule
10b-5. A plaintiff can plead both state law and federal
securities claims in the same complaint based on the same
          ANDERSON V. EDWARD D. JONES & CO.                  13

underlying conduct by the defendant. The presence of a
federal securities cause of action does not mechanically bar
the plaintiff from pursuing a state law class action in the
same complaint. See Fleming, 878 F.3d at 1153; Norman v.
Salomon Smith Barney Inc., 350 F. Supp. 2d 382, 387
(S.D.N.Y. 2004). To hold otherwise would prevent
plaintiffs from pursuing multiple theories of recovery.

    “In light of the liberal pleading policy embodied in
[Federal Rule of Civil Procedure 8(e)], . . . a pleading should
not be construed as an admission against another alternative
or inconsistent pleading in the same case,” at least at the
“initial pleading stage.” Molsbergen v. United States,
757 F.2d 1016, 1019 & n.4 (9th Cir. 1985). Furthermore,
forcing a plaintiff to bring different suits containing their
federal and state law claims would be inefficient for district
courts in these often-complex cases. The precept that a
plaintiff can pursue multiple, even if inconsistent, theories of
recovery in the same suit is especially true when the plaintiff
does not maintain that inconsistency on appeal. Here,
Plaintiffs have not appealed the dismissal of their Rule 10b-
5 claim.

   The district court implicitly recognized that Plaintiffs
pursued two inconsistent causes of action:

       Plaintiffs maintain [that the lack of suitability
       analysis], unlike the conduct underlying their
       federal securities claim, is “not based on
       misrepresentations or omissions.” And yet,
       when describing their federal securities claim
       pages before, Plaintiffs characterized
       [Edward Jones’s] failure to conduct a
       suitability analysis as a “misleading
       omission.” [Edward Jones’s] suitability
       analysis, or lack thereof was either an
14           ANDERSON V. EDWARD D. JONES & CO.

         omission or it wasn’t—Plaintiffs cannot have
         it both ways.

In re Edward D. Jones, 2019 WL 5887209, at *2 (citations
omitted). The district court was partially right. In light of
SLUSA, “Plaintiffs cannot have it both ways.” Id.
Plaintiffs’ fiduciary duty claims cannot proceed as a class
action if those claims give rise to a Rule 10b-5 claim. That
is the very purpose of SLUSA. However, that Plaintiffs
cannot have it both ways does not necessarily mean that they
cannot have it either way. 5

    This is not to say that every unsuccessful Rule 10b-5
claim bypasses SLUSA. The overlap between claims that

     5
        In Northstar, we cautioned that courts should not limit their
consideration “to a pleading’s satisfaction of the bare elements of the
state law claim” without also considering how the facts underlying those
claims could be pleaded as federal securities law violations. Northstar,
904 F.3d at 832. We did not state that the mere presence of a federal
securities law cause of action in the same complaint doomed any state
law claim as a class action under SLUSA. Additionally, in Northstar we
discussed only “whether the plaintiff class alleged that the defendants
made a misrepresentation or omission.” Id. at 828. As the district court
noted in this case, Plaintiffs might have alleged that the lack of suitability
analysis was both an omission for the purposes of Rule 10b-5 and not an
omission for the purposes of the state fiduciary duty claims. See In re
Edward D. Jones, 2019 WL 5887209, at *2. Here, we instead decide
whether any purported misrepresentation or omission was “in connection
with the purchase or sale of . . . a covered security.” Northstar, 904 F.3d
at 828. The district court did not address the “in connection with”
requirement for either the fiduciary duty or Rule 10b-5 claims. See id.;
Halliburton, 573 U.S. at 267. The district court only did so for Plaintiffs’
contract claims, which were based on different conduct. See supra n.3.
Thus, it is unclear if the district court would have held that Plaintiffs’
allegation of a lack of suitability analysis was “a connection between the
misrepresentation or omission and the purchase or sale of a security” for
the purposes of Rule 10b-5. Halliburton, 573 U.S. at 267.
            ANDERSON V. EDWARD D. JONES & CO.                        15

are both unsuccessful under federal securities laws and those
subject to SLUSA’s class action bar is not clear and may
require further elaboration by our court or the Supreme
Court. However, we need not draw the exact line in this
case. As we discuss below, Edward Jones’s alleged breach
of its fiduciary duties was clearly not “in connection with the
purchase or sale of a covered security.” 15 U.S.C.
§ 78bb(f)(1)(A). Thus, that Plaintiffs simply have pleaded a
Rule 10b-5 claim does not mean that SLUSA bars them from
bringing their state law fiduciary duty claims as a class
action.

    The parties further dispute whether a court should review
only the state law cause of action, or the entire complaint
(including any federal securities cause of action), when
determining whether SLUSA bars jurisdiction over the class
action. This disagreement misunderstands the SLUSA
analysis. SLUSA requires a court to “determine if the
Plaintiffs’ claims, stripped of formal legal characterization,
could have been pursued under § 10(b) and Rule 10b-5.”
Fleming, 878 F.3d at 1153. “Could have been pursued”
means that courts must analyze a plaintiff’s state law
allegations under federal securities law in every case,
regardless of whether the plaintiff has actually alleged a
federal securities law violation. Referencing a plaintiff’s
Rule 10b-5 claim from the same complaint might help a
court accomplish this task, but the court would need to
conduct such an analysis even in the absence of a pleaded
federal securities claim. 6

     6
       Because “dismissals pursuant to SLUSA’s class-action bar must
be for lack of subject-matter jurisdiction,” Hampton, 869 F.3d at 846, it
appears that a court must raise SLUSA in every class action involving a
claim that could implicate federal securities law, see Fed. R. Civ. P.
16          ANDERSON V. EDWARD D. JONES & CO.

C. “In Connection With” Requires Materiality

    For SLUSA’s class action bar to apply, the defendant’s
misrepresentation or omission must be “in connection with
the purchase or sale of . . . a covered security.” Northstar,
904 F.3d at 828. Plaintiffs argue that their fiduciary duty
claims “pertain to the terms of the relationship between
Edwards Jones and the Plaintiffs and the vehicle for
delivering the securities – neither of which are in connection
with the purchase or sale of the securities themselves.” The
district court did not address the “in connection with”
requirement for the SLUSA bar or the Rule 10b-5 claim. See
In re Edward D. Jones, 2019 WL 5887209, at *2, *6. We
now evaluate whether the alleged breach of Edward Jones’s
fiduciary duties—namely the purported lack of suitability
analysis—is in connection with the purchase or sale of a
covered security.

    The Supreme Court’s explanation of the phrase “in
connection with” has shifted in recent years. In Dabit, the
Court gave “in connection with” a relatively broad
interpretation. Drawing on § 10(b) precedent, the Court
stated that “it [wa]s enough that the fraud alleged
‘coincide[d]’ with a securities transaction—whether by the
plaintiff or by someone else.” Dabit, 547 U.S. at 85. We
then adopted this “coincide” standard. See, e.g., Freeman,
704 F.3d at 1116–17.

    Eight years after Dabit, the Court again confronted the
“in connection with” issue, this time in Troice. There, the
Court held that the phrase requires a showing of materiality:

12(h)(3) (“If the court determines at any time that it lacks subject-matter
jurisdiction, the court must dismiss the action.”). It is nonetheless more
efficient for a party to bring SLUSA to the court’s attention.
          ANDERSON V. EDWARD D. JONES & CO.                  17

“A fraudulent misrepresentation or omission is not made ‘in
connection with’ such a ‘purchase or sale of a covered
security’ unless it is material to a decision by one or more
individuals (other than the fraudster) to buy or sell a ‘covered
security.’” Troice, 571 U.S. at 387. The Court further
explained:

       The phrase “material fact in connection with
       the purchase or sale” suggests a connection
       that matters. And for present purposes, a
       connection        matters      where       the
       misrepresentation makes a significant
       difference to someone’s decision to purchase
       or to sell a covered security, not to purchase
       or to sell an uncovered security, something
       about which [SLUSA] expresses no concern.

Id. at 387–88. The Court explained that the materiality
principle “d[id] not . . . modify Dabit.” Id. at 387; but see
id. at 411 (Kennedy, J., dissenting) (“[T]he Court’s analysis
is inconsistent with the unanimous opinion in Dabit . . . .”).
The Court reasoned that every previous case involving the
in-connection-with language “concerned a false statement
(or the like) that was ‘material’ to another individual’s
decision to ‘purchase or s[ell]’” a covered security, allowing
the two decisions to be consistent. Id. at 393 (majority
opinion).

    Whether one views the difference between Dabit and
Troice as a change in interpretation or simply further
explanation of SLUSA, our sister circuits have taken this
shift seriously. The Sixth Circuit, pre-Troice, held that
SLUSA “does not ask whether the complaint makes
‘material’ or ‘dependent’ allegations of misrepresentation in
connection with buying or selling securities.” Segal v. Fifth
18        ANDERSON V. EDWARD D. JONES & CO.

Third Bank, N.A., 581 F.3d 305, 311 (6th Cir. 2009).
However, last year, the First Circuit noted that it had
“interpreted Troice to infuse the transactional nexus analysis
with a determinative inquiry into materiality.” United States
v. McLellan, 959 F.3d 442, 459 (1st Cir. 2020); see also
Taksir v. Vanguard Grp., 903 F.3d 95, 97 (3d Cir. 2018)
(“[T]he Supreme Court in Troice made clear that:
(1) materiality is relevant to the analysis of SLUSA’s
prohibitive scope; and (2) Troice clarifies—rather than
modifies—Dabit.”).

    We too have noted this shift. For example, in Banks, we
concluded that pre-Troice cases read “in connection with”
too broadly. See Banks, 929 F.3d at 1053–54. We explained
that the phrase still “must be read broadly, but not so broadly
that the connection between a defendant’s conduct and the
covered security becomes immaterial.” Id. at 1054.

    We have been less than precise as to Troice’s impact. In
Fleming, we reiterated Dabit’s “coincide” language and
implied that the materiality requirement accords with the
bare requirement that “[t]he misrepresentation need only
‘have more than some tangential relation to the securities
transaction.’” Fleming, 878 F.3d at 1155 (quoting Freeman,
704 F.3d at 1116); see also Banks, 929 F.3d at 1054 (quoting
the “tangential relation” language). In Fleming, we quoted
Troice’s materiality language in a parenthetical, see
Fleming, 878 F.3d at 1155. We later noted that “SLUSA
requires only that ‘the misrepresentation makes a significant
difference to someone’s decision to purchase or to sell a
covered security.’” Id. at 1156 (quoting Troice, 571 U.S. at
387).

    The five-part test for SLUSA we enunciated in Northstar
and other cases does not explicitly include the requirement
of “materiality.” See Northstar, 904 F.3d at 828. We take
           ANDERSON V. EDWARD D. JONES & CO.                  19

this opportunity to clarify that the fourth prong of that test—
“in connection with the purchase or sale,” id.—must include
an inquiry into the materiality of the alleged
misrepresentation or omission to the purchase or sale of a
covered security. See Banks, 929 F.3d at 1051. SLUSA
itself does not define “in connection with” or “materiality.”
See Troice, 571 U.S. at 398 (Thomas, J., concurring); see
also Grund v. Del. Charter Guarantee & Tr. Co., 788
F. Supp. 2d 226, 239 & n.3 (S.D.N.Y. 2011). We repeat the
Supreme Court’s admonition in Troice: “[A] connection
matters where the misrepresentation makes a significant
difference to someone’s decision to purchase or to sell a
covered security.” Troice, 571 U.S. at 387.

D. The Alleged Lack of Suitability Analysis Was Not
   Material

    With this materiality requirement in mind, we turn to
Plaintiffs’ claim that the lack of a suitability analysis did not
have a connection to the purchase or sale of a covered
security.

    i. Fees

    In a number of cases from outside this circuit, plaintiffs
have alleged that defendant brokerage firms violated state
law by charging customers transaction fees that exceeded the
actual cost to the firm when purchasing or selling a covered
security. See, e.g., Brink v. Raymond James & Assocs., Inc.,
892 F.3d 1142, 1144–45 (11th Cir. 2018). “[C]ustomers
chose to trade securities with full knowledge of the amount
of the Processing Fee for each trade and never paid more
than they agreed.” Id. at 1149. However, the plaintiffs
argued that inflating the fee beyond the actual cost of the
transaction constituted a breach of the firm’s state law “duty
of care owed to its customers, which [plaintiffs] alleged
20        ANDERSON V. EDWARD D. JONES & CO.

included a duty to charge customers a reasonable fee for [the
firm’s] services.” Id. at 1145.

    The Eleventh Circuit concluded that SLUSA did not
prohibit litigating this state law claim as a class action
because “a reasonable investor would [not] have made
different investment decisions had she known that some of
the Processing Fee . . . included profit for [the brokerage
firm] instead of merely covering the transaction execution
and clearing costs.” Id. at 1149. For support, the Eleventh
Circuit cited decisions from the Second and Seventh Circuits
that had reached similar conclusions concerning fees. See
Appert v. Morgan Stanley Dean Witter, Inc., 673 F.3d 609,
617 (7th Cir. 2012) (holding that SLUSA did not bar
bringing a breach of contract claim as a class action because
“whether Morgan Stanley improperly inflated the . . . fee to
include a profit is not objectively material to . . . any class
members’ investment decisions”); Feinman v. Dean Witter
Reynolds, Inc., 84 F.3d 539, 541 (2d Cir. 1996) (holding, in
the context of a § 10(b) claim, that “reasonable minds could
not find that an individual investing in the stock market
would be affected in a decision to purchase or sell a security
by knowledge that the broker was pocketing a dollar or two
of the fee charged for the transaction”). Thus, such fees were
not material to the decision to buy or sell securities for both
SLUSA and § 10(b).

    Plaintiffs’ allegations are based on fees charged by their
financial advisor, Edward Jones. Anderson alleges, for
example, that “during the history of his commission-based
account, [he] had paid minimal fees each year.” “After he
was moved into [a fee-based account], he paid over $6,000
in fees and would have seen his account balance materially
diminish each year for the life of the account had he not
closed it.”
           ANDERSON V. EDWARD D. JONES & CO.                  21

    It is difficult to compare Plaintiffs’ fees to those in Brink
and the other out-of-circuit fees cases. In Brink, the broker
charged “$30.00 to $50.00 per transaction, depending on the
type of security.” Brink, 892 F.3d at 1144. Thus, each and
every time that the broker purchased or sold a covered
security for a customer, the broker charged that customer a
fee. See also Taksir, 903 F.3d at 96 (noting that “Vanguard
charged the Taksirs a $7 commission for each of their
respective purchases” of Nokia Corporation stock). In this
case, Edward Jones took a percentage of each customer’s
total assets on a regular basis.

    For the Brink court, it was “the nature of the fees, not
their amount, that render[ed] the misrepresentation
immaterial as a matter of law.” Brink, 892 F.3d at 1149; but
see Taksir, 903 F.3d at 99 (“In contrast with such significant
investments, single-digit differences in trading commissions
are objectively immaterial.”). We agree that Brink’s
reasoning applies to this case. It is not the amount of fees
that Edward Jones charged Plaintiffs that renders those fees
immaterial. Instead, the fees are immaterial because the
Second Amended Complaint alleges that Plaintiffs did not
buy or sell any covered securities because Edward Jones
switched them to fee-based accounts. Nowhere do Plaintiffs
allege that they would have purchased or sold different
covered securities had Edward Jones conducted a suitability
analysis, which might have resulted in Plaintiffs remaining
in commission-based accounts. Edward Jones’s purported
lack of suitability analysis is less material to the trading of
covered securities than the brokers’ actions in Brink and the
other fees cases. The fees in Brink were paid each time the
broker bought or sold a security. Here, Plaintiffs paid a fee
“regardless of the transactions” Edward Jones took on their
behalf.
22        ANDERSON V. EDWARD D. JONES & CO.

    Even if we look to the Rule 10b-5 portion of the
complaint, Plaintiffs do not allege that their trading
strategies would have changed. Indeed they claim just the
opposite. Plaintiffs allege that, after transferring to fee-
based accounts, Plaintiffs’ “buy-and-hold philosophy
remained unchanged.” Plaintiffs do allege that “[t]he
commission-based/fee-based dichotomy is critical and
material to any investment decision,” but the only example
they give is their decision “to transfer . . . from commission-
based accounts into fee-based accounts.” Plaintiffs inform
us that they “do not allege in their fiduciary [duty] claims
that . . . Edward Jones’s conduct” caused them to change
their trading behavior. Again, Plaintiffs point to no instance
where they would have traded covered securities differently
had Edward Jones conducted a suitability analysis. The lack
of modification of Plaintiffs’ investment strategies suggests
that the lack of suitability analysis did not materially affect
the purchase or sale of any covered securities. Cf. Fleming,
878 F.3d at 1156 (holding that the claim met the “in
connection with” requirement when the plaintiffs’
“allegations make clear that if Schwab had not misled
Plaintiffs into believing that Schwab would obtain the best
prices for Plaintiffs’ trades, Plaintiffs would not have made
those trades”).

    In Freeman, we did connect the particular fees at issue
with the purchase or sale of covered securities. We held that
the “excessive cost of insurance charges” was “in connection
with” the purchase or sale of a security because “[e]ach
inflated charge . . . depletes the value of the investment.”
Freeman, 704 F.3d at 1114, 1117. We wrote that “[a] fund
subject to higher fees and charges will, over time, have a
lower value than a fund subject to more modest charges.” Id.
at 1117. However, we decided Freeman before the Supreme
Court handed down Troice, and nowhere did we cite a
            ANDERSON V. EDWARD D. JONES & CO.                        23

materiality requirement. We only required that there be
“more than some tangential relation to the securities
transaction.” Id. at 1116 (citation and internal quotation
marks omitted). 7

    Additionally, in Freeman, “[e]very time [the insurance
company] collected the allegedly inflated cost of insurance
charge, it sold securities to generate the funds.” Id. at 1118;
see also Behlen v. Merrill Lynch, 311 F.3d 1087, 1094 (11th
Cir. 2002) (deciding that fees “were an integral part of the
transactions” where “the very reason [plaintiffs] were sold
the Class B shares was because those shares were subject to
the excess fees and commissions”). That is not the situation
here. There is no allegation that Edward Jones bought or
sold securities to generate the fees that Plaintiffs owed after
switching to fee-based accounts.

    ii. Choice of Broker

    Plaintiffs allege that they changed their investment
behavior in one sense after switching to fee-based accounts:
they closed their accounts. In effect, they left Edward Jones
and found a new broker.

    Choosing a broker or specific type of account is
fundamentally different than choosing to buy or sell a
covered security. “[T]he choice of a type of investment
account, much like the choice of a broker-dealer, is not
intrinsic to the investment decision itself.” Brink, 892 F.3d

    7
       Further supporting the notion that Troice changed the landscape
for the fees cases are examples of other courts holding, pre-Troice, that
fees were “in connection with” the buying and selling of covered
securities. See, e.g., Rowinski, 398 F.3d at 303; Dommert v. Raymond
James Fin. Servs., Inc., No. CIV A. 1:06-CV-102, 2007 WL 1018234,
at *11 (E.D. Tex. Mar. 29, 2007).
24          ANDERSON V. EDWARD D. JONES & CO.

at 1148–49; see also SEC v. Goble, 682 F.3d 934, 943 (11th
Cir. 2012) (interpreting the materiality requirement under
§ 10(b) “to mean an investment decision—not an
individual’s choice of broker-dealers”); accord Abada v.
Charles Schwab & Co., Inc., 127 F. Supp. 2d 1101, 1103
(S.D. Cal. 2000) (holding that SLUSA’s “in connection
with” requirement was not met because the “defendant’s
conduct had nothing to do with the trading of any particular
security . . . but merely involved the relationship between
Schwab and its customers”). 8

    Edward Jones is correct that Plaintiffs argued to the
district court that they “would have looked elsewhere for
investment advisory services” had Edward Jones disclosed
that they failed to conduct a suitability analysis. Closing an
investment account is not equivalent to buying or selling a
covered security. SLUSA bars only class actions for claims
that are “in connection with” the latter.

     iii. Best Execution

   Edward Jones draws our attention to a series of cases
involving the duty of best execution. A violation of such a

     8
       As with fees, some pre-Troice cases held that a broker-investor
relationship satisfied the “in connection with” requirement. See, e.g.,
Rowinski, 398 F.3d at 303 (“[T]he action arises from the broker/investor
relationship, the ‘very purpose’ of which is ‘trading in securities.’”
(citation omitted)). Rowinski’s holding is in contrast to the post-Troice
cases, such as Brink.

     The First Circuit recently decided that the choice of an asset
transition manager was material, but that court specifically distinguished
brokers. See McLellan, 959 F.3d at 462. The asset transition manager’s
misrepresentations “concerned the costs of the trades themselves,” and
not “ancillary facts about [brokers’] businesses, such as the nature of a
processing fee and the financial state of the firm.” Id.
          ANDERSON V. EDWARD D. JONES & CO.                  25

duty occurs when a broker “directs large blocks of its clients’
trade orders to . . . pre-determined trading venues where [the
broker] will maximize kickback revenue.” Lewis v.
Scottrade, Inc., 879 F.3d 850, 854 (8th Cir. 2018) (internal
quotation marks and citation omitted). We decided that “[a]
broker’s fraudulent claim that it is able to provide best
execution can surely be material to the client’s decision to
trade.” Fleming, 878 F.3d at 1156; see also Lewis, 879 F.3d
at 853. Breaching the duty of best execution is “in
connection with” the purchase or sale of a covered security
because “if [the broker] had not misled Plaintiffs into
believing that [it] would obtain the best prices for Plaintiffs’
trades, Plaintiffs would not have made those trades.”
Fleming, 878 F.3d at 1156.

    Again, Plaintiffs’ allegations do not relate to the
purchase or sale of any particular security, or even any group
of securities. Cf. McLellan, 959 F.3d at 463 (“[T]here need
not ‘be a misrepresentation about the value of a particular
security in order to run afoul of [§ 10(b)].’” (quoting
Zandford, 535 U.S. at 820)). The fees affect the net value of
Plaintiffs’ assets stored in an Edward Jones account, but the
fees as alleged do not affect the net price of buying or selling
securities for that account. Because the purported lack of a
suitability analysis does not affect the price of any security
when it is bought or sold, Plaintiffs do not allege that they
“would not have made [certain] trades,” as in Fleming.
878 F.3d at 1156.

   iv. Edward Jones’s Other Arguments

    Edward Jones highlights two paragraphs of the fiduciary
duty claims in the Second Amended Complaint to try to
show that Plaintiffs are alleging that the purported lack of
suitability analysis relates to the buying or selling of
securities, not just the choice of account or brokerage firm.
26        ANDERSON V. EDWARD D. JONES & CO.

    First, Edward Jones calls attention to the following
allegation:

       Although Edward Jones may have exercised
       some trades in Lead Plaintiffs’ and Class
       members’ fee-based accounts, these
       additional trades (“Phantom Trades”) were
       not made with any real analysis, nor made to
       enhance the value of the fund’s assets, but to
       give the appearance that Edward Jones was
       managing the fee-based account in a
       deceptive effort to justify its fees it now
       “earned” as a percentage of the accounts’
       assets.

This specific allegation appears to be irrelevant to Plaintiffs’
fiduciary duty claims. We gather that Plaintiffs are
attempting to show how Edward Jones wanted to justify its
recommendation to switch to fee-based accounts after the
switch took place. Plaintiffs’ fiduciary duty claims are based
on the allegation that the switch itself was improper without
a suitability analysis. Once Edward Jones allegedly failed to
conduct a suitability analysis, and made a recommendation
without that analysis, causing Plaintiffs to switch accounts,
the breach of fiduciary duty would be complete. This
paragraph in Plaintiffs’ Second Amended Complaint
perhaps provides context to their claim, but “complaints are
often filled with more information than is necessary.”
LaSala v. Bordier et Cie, 519 F.3d 121, 141 (3d Cir. 2008).
“[T]he inclusion of such extraneous allegations does not
operate to require that the complaint must be dismissed
under SLUSA.” Id.; cf. In re Charles Schwab Corp. Secs.
Litig., 257 F.R.D. 534, 551 (N.D. Cal. 2009) (“True, those
            ANDERSON V. EDWARD D. JONES & CO.                         27

allegations are incorporated by reference into the state
claims but are really irrelevant thereto.”). 9

    Second, Edward Jones points to Plaintiffs’ allegation
that when they moved from commission-based to fee-based
accounts, it was done “through the sale of the[] assets” in
Plaintiffs’ accounts. Though Edward Jones did not highlight
this allegation in its brief, at oral argument, counsel for
Edward Jones contended that this allegation shows that
Plaintiffs’ allegations are “in connection with the purchase
or sale of . . . a covered security.” Northstar, 904 F.3d at
828.

    We note that this phrase appears a single time in the
complaint, in a parenthetical, and in a paragraph devoted to
alleging that Edward Jones did not conduct a suitability
analysis. It is not at all clear what this phrase means.
Anderson alleges that Edward Jones “moved his assets into”
a fee-based account. Other Plaintiffs allege the same.
Plaintiffs often refer to how Edward Jones “transferr[ed] . . .
clients’ assets from commission-based accounts to” fee-
based accounts, but Plaintiffs do not allege that they bought
or sold different assets in those fee-based accounts.
Additionally, Edward Jones does not point to any evidence
in the record to prove that it sold any covered securities on
Plaintiffs’ behalf after they transferred to fee-based
accounts. From the face of the complaint, and “constru[ing]
the pleadings in the light most favorable to” Plaintiffs, id.
(citation and internal quotation marks omitted), this single

    9
      Additionally, Plaintiffs make clear in the Rule 10b-5 portion of the
complaint that “to the extent Edward Jones ever performed a suitability
review of Lead Plaintiffs, it performed such review only in connection
with trades made after it had transferred Lead Plaintiffs’” assets to fee-
based accounts.
28           ANDERSON V. EDWARD D. JONES & CO.

phrase does not show that there was a material connection
between the alleged lack of suitability analysis and the
“purchase or sale of . . . a covered security,” id. 10

     10
         Additionally, although the Second Amended Complaint does not
show that the SLUSA class action bar applies because of this
parenthetical, our independent review of the record indicates that, at least
in theory, Edward Jones had the ability to purchase or sell securities on
Plaintiffs’ behalf after Plaintiffs transferred to fee-based accounts.
Edward Jones clients purportedly signed an agreement before
transferring to fee-based accounts that suggests that Edward Jones
distinguished between certain types of securities that could be held in
commission-based accounts and in fee-based accounts. The agreement
provides that “[i]f the Client transfers into the [fee-based] Account
marketable securities that are not” permitted in a fee-based account, then
that “Client . . . directs Edward Jones . . . to promptly sell those securities
. . . .” A client also “agree[d] that it has determined to participate in the
[fee-based account] and to direct the sales of those securities not
otherwise on the Program List,” i.e., the list of funds that Edward Jones
permitted a client to hold in a fee-based account. Even if Edward Jones
sold some of Plaintiffs’ securities after the transfer to the fee-based
accounts, Edward Jones has not shown that the alleged lack of suitability
analysis was “in connection with” the purchase or sale of the securities
for two reasons.

     First, similar to the “phantom trades” argument, Plaintiffs’ fiduciary
duty claim is based on the alleged lack of suitability analysis, not on post-
transfer sales of securities. Once Plaintiffs agreed to transfer to fee-
based accounts, allegedly because Edward Jones did not conduct a
suitability analysis, the purported breach of fiduciary duty is complete.
Actions Edward Jones took after the breach, such as selling securities as
part of the transfer of assets into the fee-based accounts, are extraneous
to the alleged state law violation.

    Second, as outlined above, Plaintiffs’ complaint is premised on their
“choice of a type of investment account,” which “is not intrinsic to the
investment decision itself.” Brink, 892 F.3d at 1148–49. The alleged
lack of suitability analysis might have caused Plaintiffs to choose fee-
based accounts, but, unlike in Fleming, Plaintiffs do not allege that they
            ANDERSON V. EDWARD D. JONES & CO.                          29

     Finally, Edward Jones contends that it “did, in fact,
perform a suitability analysis, as demonstrated by the
documents considered by the district court.” The district
court stated, only when discussing the Rule 10b-5 claim, that
the “questionnaires were part of the suitability analysis
[Edward Jones] conducted . . . further undermining
Plaintiffs’ allegations that [Edward Jones] did not conduct a
suitability analysis.” In re Edward D. Jones, 2019 WL
5887209, at *5 (citation and internal quotation marks
omitted). Whether Edward Jones did or did not conduct a
suitability analysis is a question pertaining to the substance
of the fiduciary duty claims. At this stage, we decide only
whether the district court had jurisdiction over those claims
pursuant to SLUSA. We must “accept factual allegations in
the complaint as true and construe the pleadings in the light
most favorable to the nonmoving party,” the Plaintiffs.
Northstar, 904 F.3d at 828 (citation and internal quotation
marks omitted). Plaintiffs’ Second Amended Complaint
alleges that Edward Jones failed to conduct a suitability
analysis. A defense that the questionnaires did amount to
such an analysis might succeed at a later stage of the
litigation, but not at this jurisdictional juncture.

“would not have made those trades” that occurred after the switch to the
fee-based accounts. Fleming, 878 F.3d at 1156. They tell us the
opposite. Plaintiffs do not allege that they changed their trading behavior
at all; they allege only that they would not have switched to fee-based
accounts. The alleged lack of suitability analysis must “make[] a
significant difference to [Plaintiffs’] decision to purchase or to sell a
covered security.” Troice, 571 U.S. at 387. The alleged lack of
suitability analysis might have made a significant difference to the
decision to move to fee-based accounts, but Plaintiffs have not alleged
that it made a significant difference in any decisions to purchase or sell
securities. Their “buy-and-hold philosophy remained unchanged.”
30          ANDERSON V. EDWARD D. JONES & CO.

                       IV. CONCLUSION

    We hold that SLUSA does not bar bringing the state law
fiduciary duty claims as a class action in Plaintiffs’ Second
Amended Complaint. Plaintiffs claim that Edward Jones
breached its fiduciary duties under Missouri and California
law by failing to conduct a suitability analysis. Plaintiffs
allege that this lack of suitability analysis caused them to
move their assets from commission-based accounts to fee-
based accounts, which was not in their best financial interest
as low-volume traders. Because the alleged failure to
conduct a suitability analysis was not material to the decision
to buy or sell any covered securities, Plaintiffs’ state law
claims are not based on alleged conduct that is “in
connection with” the purchase or sale of any covered
securities. SLUSA requires that all five elements outlined
by this court be met if a class action is to be barred. See
Northstar, 904 F.3d at 828. Because Plaintiffs’ state law
claims do not meet the fourth requirement, 11 we reverse the
decision of the district court and remand for further
proceedings consistent with this opinion.

     REVERSED AND REMANDED.

     11
       Because we decide that Plaintiffs’ claims are not “in connection
with the purchase or sale of a covered security,” 15 U.S.C.
§ 78bb(f)(1)(A), we need not analyze Plaintiffs’ other contention that the
lack of suitability analysis was not a misrepresentation or omission for
the purposes of SLUSA. See Banks, 929 F.3d at 1055.