314 F. Supp. 3d 589
D.N.J.2018Background
- Sixteen institutional investors opted out of two consolidated Vytorin class actions (filed 2008) after class certification and settlement; they then filed four nearly identical individual actions (2013–2014) asserting federal securities claims and a state common-law fraud claim.
- Plaintiffs’ federal Exchange Act claims were dismissed as time-barred after the Supreme Court held that American Pipe tolling does not apply to the statutes of repose (ANZ Securities); the state common-law fraud claim remained.
- Defendants moved to dismiss the state common-law fraud claim under SLUSA, which bars “covered class actions” based on state law fraud in connection with the purchase or sale of covered securities.
- SLUSA defines a “covered class action” to include any group of lawsuits filed in or pending in the same court that involve common questions and (i) seek damages on behalf of more than 50 persons and (ii) are joined, consolidated, or otherwise proceed as a single action for any purpose.
- The Individual Actions involve 16 plaintiffs, but defendants argued they should be aggregated with the earlier Vytorin Class Actions (which collectively exceed 50 persons) because of extensive overlap in pleadings, designation as related cases, and plaintiffs’ stated intent to rely on class-case discovery.
- The District Court found that (a) the Individual Actions and the Vytorin Class Actions were "filed in" the same court and involved common questions, (b) the actions functionally proceeded as a single action for purposes of SLUSA despite the class actions’ prior dismissal, and (c) SLUSA therefore bars the state-law fraud claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SLUSA bars Plaintiffs’ state common-law fraud claim by treating the Individual Actions as part of a "covered class action" | The Individual Actions are bona fide individual opt-out suits; they are not part of a covered class action because the class actions were dismissed before the individuals filed, and there was no real-time consolidation or joinder. | The Individual Actions should be aggregated with the earlier Vytorin Class Actions under SLUSA’s grouping provision due to identical complaints, related-case filings, plaintiffs’ reliance on class discovery, and other indicia of coordination. | Held for Defendants: the actions together form a "covered class action" and SLUSA bars the state-law claim. |
| Whether SLUSA’s catchall phrase "otherwise proceed as a single action for any purpose" requires simultaneous pendency (real-time coordination) | "Proceed" is present tense; thus SLUSA should only reach cases actually proceeding together when a SLUSA motion is filed; dismissed class actions cannot be aggregated. | The statutory text, structure, legislative history, and purpose support a broad reading; "filed in" and "for any purpose" allow aggregation even if the class was dismissed before individual suits were filed. | Held for Defendants: no real-time simultaneity requirement; past filing and functional coordination suffice. |
| What degree of coordination is required to show cases "proceed as a single action for any purpose" under SLUSA | Coordination must be significant; ordinary overlap from opt-out suits is insufficient to trigger SLUSA. | SLUSA’s broad language and purpose permit aggregation where indicia of coordination exist (near-identical complaints, related-case designations, reliance on class discovery, stipulations, stays, coordinated briefing). | Held for Defendants: substantial indicia here (virtually identical pleadings, related-case filings, plaintiffs’ representations about using class discovery) show the cases proceeded as a single action. |
| Whether judicial estoppel prevents Defendants from asserting SLUSA preclusion after earlier litigation positions | Plaintiffs argue Defendants earlier characterized the Individual Actions as "new civil actions" and cannot now claim aggregation; estoppel should bar reversal. | Defendants’ prior positions were not irreconcilably inconsistent; moreover, jurisdictional facts are not subject to judicial estoppel to foreclose inquiry. | Held for Defendants: judicial estoppel not warranted; positions not irreconcilably inconsistent and SLUSA preclusion is a jurisdictional inquiry. |
Key Cases Cited
- American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974) (class-action tolling principle)
- California Pub. Employees’ Ret. Sys. v. ANZ Securities, Inc., 137 S. Ct. 2042 (2017) (American Pipe tolling is equitable and inapplicable to Exchange Act statutes of repose)
- Dabit v. Merrill Lynch, Pierce, Fenner & Smith Inc., 547 U.S. 71 (2006) (SLUSA and PSLRA context; broad reading to prevent evasion)
- Cyan, Inc. v. Beaver County Employees Retirement Fund, 138 S. Ct. 1061 (2018) (discussion of SLUSA’s broad scope and relationship to federal securities laws)
- LaSala v. Bordier & Cie, 519 F.3d 121 (3d Cir. 2008) (SLUSA preemption is jurisdictional)
- In re Enron Corp. Securities, 535 F.3d 325 (5th Cir. 2008) (functionally consolidated/ coordinated actions can trigger SLUSA)