Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit (2005)
- Docket
- 04-1371
- Decided
- 2005-01-01
Summary
Question: Are class action securities fraud suits brought under state law pre-empted by the Securities Litigation Uniform Standards Act of 1998 if the suits allege that misleading statements or omissions induced brokers to hold, not sell or purchase, securities? Conclusion: Yes. In an 8-0 decision (Justice Alito not participating), the Court held that "holder" class actions such as Dabit's are "in connection with the purchase or sale" of a security and therefore are pre-empted by SLUSA. The opinion by Justice John Paul Stevens reasoned that Congress must have been aware of the broad interpretation the Court had given that phrase when it passed SLUSA, and that a broad interpretation of SLUSA is more consistent with the law's stated purpose. "For purposes of SLUSA pre-emption, that distinction [between sellers/purchasers and holders] is irrelevant," Justice Stevens wrote.