Two recent Southern District rulings � one by Judge Charles Haight in Felton v. Morgan Stanley Dean Witter & Co. 1 and one by Judge John Sprizzo’s in Paru v. Mutual of America Life Ins. Co. 2 � while reaching opposite results, shed light on when the federal Securities Litigation Uniform Standards Act (SLUSA) does, and does not, pre-empt state class actions to remedy misconduct in the securities industry.
Class securities plaintiffs increasingly resorted to state courts after the Private Securities Litigation Reform Act of 1995 increased the substantive and procedural burdens in federal securities class actions. Congress enacted the Securities Litigation Uniform Standards Act three years later to stem this flight to state courts. The law was intended “to completely preempt certain types of securities class actions by essentially converting a state law claim into a federal claim and creating federal jurisdiction and venue for specified types of state securities fraud claims.” 3
