You might've thought that, after the dot com bubble popped in 2000 and Enron melted down a year and a half later, Congress might've rued the free passes it gave to Bad Acters under the Private Securities Litigation Reform Act of 1995.
But that August Body, a decade beyond the PSLRA, handed out more of the sweet sweet candy. Witness the Class Action Fairness Act of 2005. CAFA swept lots of state court class actions into federal court, where pro-CAFAites hoped they would die. Many did.
And let's not forget the Securities Litigation Uniform Standards Act of 1998. SLUSA bars just about any class action that asserts a state law claim having the merest whiff of securities fraud about it.
A black hole sucks all things close by – including light! — into itself. A black hole converts stuff into non-stuff. Nothing escapes a black hole.
A black hole, if it had sentience, might envy SLUSA.
For SLUSA reaches far beyond the usual range of federal courts. It ties a tether to, and puts the stink of death on, all class state law claims so long as the complaint or (in Texas and elsewhere) the petition "covers the prohibited theories, no matter what words are used (or disclaimed) in explaining them." Segal v. Fifth Third Bank, N.A., No. 08-3576, slip op. at 6 (6th Cir. Sept. 17, 2009) (emphasis supplied).
Allege negligence, SLUSA gets you. Try breach of fiduciary duty, as Daniel Segal did, and SLUSA attacks. Go with tortious interference, defamation, trespass to chattels, trespass quare clausum fregit, battery, deceptive trade practices, theft of trade secrets, conversion, breach of contract, breach of warranty, monopolization, civil conspiracy, price fixing, allocation of customers, even nuisance — and yet SLUSA awaits.
The claims in Segal bought the farm because they alleged that Fifth Third Bank betrayed trust account customers by using its control over funds in their accounts to buy products that enriched the bank but cost the customers. The fact that the bank (allegedly) used deception to help its scheme proved fatal.
Nor did the court weep for the demise of class action treatment:
Segal claims that this approach allows SLUSA to "eliminate any remedy against an unfaithful fiduciary" short of removing the trustee. Appellant's Letter Br. at 8. "Congress," Segal adds, "could not have intended to prevent trust beneficiaries from pursuing damage claims for mismanagement against trust fiduciaries." Id. Yet Congress has done nothing of the sort. "The Act 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." [Merrill Lynch, Pierce, Fenner & Smith, Inc. v. ]Dabit , 547 U.S. [71,] 87 [(2006)]. SLUSA leaves open many avenues for claimants like Segal to vindicate their rights.
Segal, slip op. at 8.
Their Honors don't say what "avenues" the Segals of the world might now tread in their hopeful journey toward an award. Nor do they concern themselves with the fact that SLUSA makes uneconomic — on purpose — the pursuit of state law claims by any but large individual claimants. Or the fact that federal courts may kill even that way to go by consolidating 49 individuals' case with another one involving similar claims.