SLUSA Pre-Emption Clause Not Delimited By Blue Chip Stamps
The Supreme Court reversed a Second Circuit decision which held that the pre-emption provision of the Securities Litigation Uniform Standards Act of 1998 only encompassed those actions in which the purchaser-seller requirement of Blue Chip Stamps is met. The court noted that the Blue Chip Stamps purchaser-seller requirement was not based on the statutory language of Section 10(b) and Rule 10b-5 but rather on policy considerations. Accordingly, the case does not represent a construction of the “in connection with” language of the Section and Rule. That statutory language, consistent with Superintendent of Ins. of N.Y v. Bankers Life & Casualty, 404 U.S. 6 (1971) and SEC v. Zandford, 535 U.S. 813 (2002), makes it clear that the Section and rule prohibit any fraud alleged to “coincide” with a securities transaction whether by the plaintiff or by someone else. The plaintiff’s state law securities class action was pre-empted by the SLUSA. Merrill Lynch, Pierce, Fenner & Smith, Inc., v. Dabit, No. 04-1371 (March 21, 2006).