In Alkow v. TXU Corp., 2003 WL 21056750 (N.D. Tex. May 8, 2003), the court addressed a conflict in the provisions of the '33 Act. Stay with me, because this gets a little tricky. Private actions under the '33 Act may be brought in federal or state court. The Securities Litigation Uniform Standards Act of 1998 ("SLUSA"), however, was designed to prohibit the bringing of securities class actions in state court and provides for their removal to federal court. In doing so, however, SLUSA specifically limits itself to class actions "based upon the statutory or common law of any State." The drafters were focused on plaintiffs who wanted to avoid the heightened pleading standards of the PSLRA by bringing the equivalent of Rule 10b-5 claims (for which federal courts have exclusive jurisdiction) in state court under state law. All of which leaves the question addressed in Alkow: can plaintiffs bring a class action pursuant to the '33 Act in state court?
The N.D. of Texas doesn't think so. The court noted that the jurisdiction section of the '33 Act "prohibits removal of cases 'arising under' the 1933 Act, '[e]xcept as provided in section 77p(c).'" Section 77p is the SLUSA section. As a result, the court held, it is clear that Congress intended to prevent the filing of class actions pursuant to the '33 Act in state court, despite the specific reference to state law in SLUSA. Moreover, any other result would create a loophole in SLUSA. Still there? Hello?
Holding: Motions to remand denied.
Quote of note: "In short, Congress intended SLUSA to prevent the exact maneuver used by the Alkows here. If sec. 77p(c) does not permit removal of claims arising under the 1933 Act, then SLUSA did not counteract the shift in cases to state courts that Congress determined had frustrated the intent of PSLRA."Posted by Lyle Roberts at May 20, 2003 1:05 PM | TrackBack