The Securities Litigation Uniform Standards Act of 1998 pre-empts state law class and mass actions that allege fraud in connection with the purchase or sale of a "covered security". SLUSA thus tries to stop collective lawsuits that seek to avoid the limitations of the Private Securities Litigation Reform Act of 1995 by asserting only state law claims.
The Ninth Circuit today applied SLUSA pre-emption to a class action whose claims merely "coincided" with allegations of securities fraud. The case involved people who made real estate loans through a public company, U.S. Mortgage, Inc., and lost money because, they alleged, of a scheme to defraud buyers of U.S. Mortgage stock. The plaintiffs didn’t themselves acquire or part with the stock, but the court held that that didn’t matter under SLUSA. Applying the Supreme Court’s "expansive view of SLUSA’s preemptive scope" in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 126 S. Ct. 1503 (2006), the court affirmed dismissal on the ground that the complaint alleged fraud that "concided" with the purchase or sale of securities. U.S. Mortgage, Inc. v. Saxton, No. 04-17494 (9th Cir. July 13, 2007).
Blawgletter notes that Saxton and Dabit don’t apply in several situations, including where the fraud didn’t relate to buying and selling securities that trade on a stock exchange or don’t require federal registration. So plaintiffs have that going for them.