Supreme Court Rules State-law Securities "Holder" Class Actions Are Pre-empted

On March 21, 2006, the United States Supreme Court unanimously ruled in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit that the Securities Litigation Uniform Standards Act of 1998 ("SLUSA") pre-empts certain state-law securities claims from being brought as class actions in state court, even though federal law provides no private remedy. Dabit closes a perceived loophole that had allowed certain securities class actions to be brought in state court, thereby avoiding certain restrictions on securities litigation that Congress had enacted during the past decade. However, even after Dabit, various ways remain for institutional investors and other plaintiffs to bring securities suits under state law.

To read Friedman Kaplan's memorandum on the Dabit decision, click here.