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Joseph M. McLaughlin Joseph M. McLaughlin

The Securities Litigation Uniform Standards Act (SLUSA) precludes plaintiffs from bringing most state law class action claims in either state or federal court based on alleged misrepresentations or omissions made “in connection with” the purchase or sale of covered securities. SLUSA essentially precludes plaintiffs from attempting to impose state standards of liability for what is in substance a securities fraud claim involving nationally-traded securities. In Chadbourne v. Troice, 571 U.S. 377 (2014), the Supreme Court held that to bring a claim within SLUSA, the fraudulent misrepresentation or omission must be material to a decision by an investor to buy or sell a covered security.

Applying this principle to purported breach of fiduciary duty and breach of contract class action claims against securities brokers and financial advisors for improper fees has proved challenging. The U.S. Court of Appeals for the Ninth Circuit’s decision reversing a SLUSA dismissal of state law fiduciary claims last month in Anderson v. Edward D. Jones & Co., L.P., 990 F.3d 692 (9th Cir. 2021), illustrates that particularly in fee-related cases the line between federal securities law claims and state law claims remains inexact. Although prior Ninth Circuit case law characterized SLUSA’s “in connection with” requirement as a “slim hurdle,” Anderson emphasized that SLUSA preclusion is not boundless and “does not transform every breach of fiduciary duty into a federal securities violation.”

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