Court Opinion

ID: 3044767
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:14:37.004542+00
Date Added: 2024-06-11T12:43:53.457825
License: Public Domain

United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                    ___________

                                    No. 07-3565
                                    ___________

Ellen Jane Kutten, individually          *
and on behalf of her daughters,          *
                                         *
             Plaintiff,                  *
                                         *
Mary Ann Arnold; Elise Mahler            *
Scharff, on behalf of themselves         *
and all others similarly situated,       * Appeal from the United States
                                         * District Court for the
             Plaintiffs-Appellants,      * Eastern District of Missouri.
                                         *
       v.                                *
                                         *
Bank of America, N.A.; Bank of           *
America Corporation,                     *
                                         *
             Defendants-Appellees.       *
                                    ___________

                              Submitted: June 11, 2008
                                 Filed: June 16, 2008
                                  ___________

Before MURPHY, BYE, and SHEPHERD, Circuit Judges.
                           ___________

SHEPHERD, Circuit Judge.

      This case is one of the “at least five class actions in various jurisdictions
seeking redress for the same alleged injuries” as claimed by the plaintiffs in Siepel v.
Bank of America, N.A., Nos. 07-1899/07-1906, 2008 U.S. App. LEXIS 10667, at *6
(8th Cir. May 19, 2008). Finding the case “nearly identical” to Siepel, which it had
earlier dismissed, the district court1 dismissed all of the Appellants’ class action
claims as preempted by the Securities Litigation Uniform Standards Act of 1998
(SLUSA), 15 U.S.C. §§ 77p(b), 78bb(f)(1). We affirmed the district court in Siepel,
and do so again in this case.

       Just as in Siepel, the Appellants’ class action claims center on Bank of
America’s alleged plan to funnel trust assets into a mutual fund substantially owned
by the Bank. See id. at *4-*5. In their Amended Complaint, the Appellants asserted
twelve class action claims, including breach of fiduciary duty, aiding and abetting a
breach of fiduciary duty, unjust enrichment, breach of contract, violation of the
California Probate Code, violation of the California Business and Professions Code,
and violation of the California and Missouri Prudent Investor Acts. Each of the
substantive claims “repeat[ed] and reallege[d]” the allegations made in the previous
pages of the complaint.

       The Siepel plaintiffs conceded that their complaint contained allegations that
the Bank misrepresented and omitted material facts. Id. at *11. Although their
complaint also rests on the same alleged plan by the Bank, the Appellants attempt to
distinguish their complaint from the one in Siepel. In filings with this court, they
assert that their complaint “does not contain any allegations that facts were concealed.
Nor does the Complaint in this action allege there were any omissions of facts or
misrepresentations made to Plaintiffs.” “[D]ifferent results can be reached based upon
changes in the language used in the complaint,” they urge.

       We review a district court’s dismissal based on SLUSA preemption de novo,
as a dismissal for failure to state a claim. Siepel, 2008 U.S. App. LEXIS 10667 at *4.

      1
       The Honorable Paul A. Magnuson, United States District Judge for the District
of Minnesota, sitting by designation in the Eastern District of Missouri.

                                          -2-
SLUSA preempts state-law class actions that allege an untrue statement or omission
of a material fact, or the use of a manipulative or deceptive device or contrivance “in
connection with the purchase or sale of a covered security.” 15 U.S.C. §§ 77p(b),
78bb(f)(1); Siepel, 2008 U.S. App. LEXIS 10667, at *10. In determining whether
SLUSA applies, we do not rely on the names of the causes of action that the plaintiff
alleges. Instead we look at the substance of the allegations, based on a fair reading.
See Sofonia v. Principal Life Ins. Co., 465 F.3d 873, 879-80 (8th Cir. 2006); Dudek
v. Prudential Sec., Inc., 295 F.3d 875, 879-80 (8th Cir. 2002). SLUSA preemption is
based on the conduct alleged, not the words used to describe the conduct.

       In the hearing on the Bank’s motion to dismiss, Judge Magnuson attempted to
purge the allegations of fraudulent conduct from the Appellants’ Amended Complaint,
and decide whether their complaint was different from that in Siepel. The Appellants’
counsel explained:

      [The Bank’s transfers of fiduciary account assets to Nations Funds] in
      fact were a cloak for self-dealing and engaging in conflict of interest
      transactions . . . . It’s a breach of fiduciary duty case, and that duty
      includes disclosing to beneficiaries certain information.

After further argument, Judge Magnuson asked if the complaint was “no more than
a regurgitation of the words of the misrepresentation.” Counsel replied:

      [C]ertainly one of the components [of a fiduciary duty] is . . . a duty to
      disclose, a duty to be candid, a duty to be honest with your beneficiaries,
      to let your beneficiaries have the straight scoop with respect to the
      handling of their assets. . . . That is not the same thing as saying we were
      misrepresented to and this is what you lied about. . . . That’s the failing
      to disclose. That’s the failing to be candid. That’s the failing to be
      honest. That’s what we allege the bank failed to do repeatedly in the
      context of its wholesale conversion of common trust funds into their own
      mutual funds . . . .

                                          -3-
       We agree with the district court that the Appellants failed to distinguish their
case from Siepel. Whatever the distinction between “deceiving” and “failing to be
honest,” or between “omitting a material fact” and “failing to disclose,” it does not
bear on whether SLUSA preempts the claim containing those allegations. In this case,
the district court correctly found that without allegations of deceptive and misleading
conduct, the Appellants’ complaint was empty of any non-preempted class action
claims.

       In all other respects, the Appellants’ argument is the same as was asserted by
the plaintiffs in Siepel. We therefore reach the same result, and affirm the judgment
of the district court.
                         ______________________________

                                          -4-