MEMORANDUM AND ORDER
This is a class action alleging New York State claims for violation of breach of fiduciary duties. The action was commenced in the Supreme Court of the State of New York, County of Nassau, and was thereafter removed to this court. The removal petition alleges that while Plaintiffs cast their claims in terms of state law, the complaint actually sets forth causes of action sounding in federal securities law violations.
Presently before the court is Plaintiffs’ motion to remand the matter to State Court. Defendants, arguing the existence of federal jurisdiction based upon their characterization of the complaint as raising federal claims, oppose remand. Further, once jurisdiction is retained, Defendants move for judgment dismissing the complaint. The dismissal motion is based upon the argument that the state law claims set forth in the complaint (which are the only claims therein) are subject to dismissal pursuant to the Securities Litigation Uniform Standards Act, 15 U.S.C. § 77 (“SLUSA”). SLUSA expressly prohibits the pursuit of class action state law claims that are more properly characterized as raising claims of securities fraud. For the reasons that follow, the motion to remand is denied, and the motion to dismiss the complaint is granted.
BACKGROUND
I. The Parties
Plaintiff Betsabe Montoya (“Montoya”) is a teacher, and Plaintiff Blanche Pesce (“Pesce”) is a retired teacher. Both Betsabe and Montoya (collectively “Plaintiffs”) invested in tax deferred annuity programs offered by AETNA Life Insurance and Annuity Company (“AETNA”), the predecessor in interest to Defendant ING Life *469 Insurance and Annuity Company (“ILI-AC”), (collectively referred to herein as “ING”). The programs in which Plaintiffs participated are known as the “Opportunity Plus” and “Opportunity Independence” programs (the “Programs”). The Programs offer participants a variety of retirement investment options and exist pursuant to Section 403(b) of the Internal Revenue Code. They were created by Defendant New York State United Teachers Member Benefits Trust (“United Teachers Trust”), an arm of Defendant New York State United Teachers (“United Teachers”), in conjunction with ING. Also named as Defendants herein are the individual trustees of Teachers Trust. The court refers herein to United Teachers Trust, its individual trustees, and Teachers Trust collectively as the “NYSUT” Defendants.
II. The Allegations of the Complaint
The Programs are characterized by Plaintiffs as “extremely high cost investments that carry greater risk than comparable lower cost investments.” The factual crux of Plaintiffs’ complaint is based upon an exclusive endorsement relationship that existed over several years between the NYSUT Defendants and ING. Specifically, Plaintiffs’ allege that Teachers Trust agreed to exclusively endorse the Programs to its members in exchange for millions of dollars paid to Teachers Trust. It is those payments, and not the fulfillment of the obligation to offer the most prudent investment to its participants, that are alleged to have been the force that drove the NYSUT endorsement. The endorsement is thus argued to have been an act that violated the NYSUT Defendants’ fiduciary obligations to the Plaintiffs and the class. ING is alleged to have aided and abetted the NYSUT Defendants’ breach of fiduciary duty.
III. Prior ERISA Action
Prior to the commencement of this action, Plaintiffs commenced a lawsuit against the same Defendants named herein in the Southern District of New York. That lawsuit, based upon the same factual allegations raised here, sought to impose liability pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1132(a)(2) and (a)(3) (“ERISA”) (the “ERISA Action”). Essentially, the ERISA action alleged that the endorsement arrangement described above, pursuant to which the NYSUT Defendants exclusively endorsed the Programs to its members in exchange for the payment of millions of dollars, violated Defendants’ fiduciary obligations under ERISA.
Similar to the factual allegations set forth here, the ERISA Action alleged that Defendants breached their ERISA fiduciary obligations by:
• failing to conduct an adequate investigation of the merits of the [Programs];
• exclusively endorsing the [Programs] in exchange for the payment of millions of dollars by ING notwithstanding the fact that the [Programs were] substantially more expensive than comparable programs that were readily available in the marketplace, and
• by failing to provide complete and accurate information to participants regarding the [Programs], the reasons for its endorsement, and the fact that [they] were not in the best interests of NYSUT members.” 1
In August of 2009, the District Court for the Southern District of New York dismissed the ERISA Action. That dismissal was based upon the legal conclusion that the court lacked subject matter jurisdiction over Plaintiffs’ claims because the Programs are governments plans that are statutorily exempt from ERISA.
See
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Montoya v. ING Life Insurance and Annuity Company,
IV. The Motions
As noted, Plaintiffs seek to have this matter remanded to State Court. The remand motion is based upon the procedural argument that Defendants did not timely remove, and, in the event that removal is deemed timely, on the merits. Defendants oppose remand and, as described above, seek dismissal. After discussing relevant legal standards, the court will turn to the merits of the motions.
DISCUSSION
1. Timeliness of Removal
Initially, the court addresses, and rejects, the argument that removal was not timely. 28 U.S.C. § 1446(b) requires that a notice of removal be “filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.” 28 U.S.C. § 1446(b). The running of the thirty day removal period is triggered by “simultaneous service of the summons and complaint, or receipt of the complaint, ‘through service or otherwise,’ after and apart from service of the summons,
but not by mere receipt of the complaint unattended by any formal service.” Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc.,
II. Remand: Propriety of Removal Under SLUSA
SLUSA’s 1998 enactment was an effort by Congress to prevent class action securities law plaintiffs from circumventing the heightened pleading requirements enacted under the Private Securities Litigation Reform Act (“PSLRA”). To that end, SLUSA prohibits plaintiffs from pursuing securities law violations as state law class actions in state courts. SLUSA provides that such state law class actions, referred to as “covered” actions, may be removed to federal court, where they are to be dismissed. See 15 U.S.C. § 77p. Specifically, SLUSA provides that:
no covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging—
(1) an untrue statement or omission of a material fact in connection with the purchase or sale of a covered security; or
(2) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.
15 U.S.C. § 77p(b); 15 U.S.C. § 78bb(f).
2
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SLUSA further provides that any such action is removable, and is deemed prohibited pursuant to subsection (b) of the statute. 15 U.S.C. § 77p(c).
See generally Romano v. Kazacos,
If an action is covered by SLUSA, it may proceed in neither federal nor state court, and must be dismissed.
See Kircher v. Putnam Funds Trust,
To remove a state court action under SLUSA, and thereafter compel dismissal, Defendants must show that the action: (1) is a “covered” class action; (2) that is based on state statutory or common law; (3) alleging that defendants made a “misrepresentation or omission of a material fact” or “used or employed any manipulative device or contrivance” “in connection with the purchase or sale,” (4) of a “covered security.”
Romano,
Before turning to the merits of those elements about which the parties disagree, the court notes that the mere refusal of Plaintiffs to refer to their claims as securities violations is not dispositive of the matters before the court. Where, as here, removal is alleged pursuant to SLU-SA, the artful pleading doctrine applies, and the court looks beyond the face of the complaint to determine whether the complaint actually alleges securities fraud. Thus, Plaintiffs are not the masters of their complaint and therefore “free to avoid federal jurisdiction by ‘pleading only state claims even where a federal claim is also available.’ ”
Romano,
A. Covered Security
Plaintiffs do not dispute that the variable annuities offered as investment options in the Programs are covered securities within the meaning of SLUSA. Their argument against holding that Plaintiffs invested in “covered securities,” focuses on a single investment option within the Programs—a fixed annuity option.
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First, Plaintiffs argue that it is premature to determine whether the Programs constitute covered securities within the meaning of SLUSA. While that argument might have merit if the court were limited to considering only the four corners of the complaint, it has no merit where, as here, it is appropriate to look outside of the pleadings to determine whether SLUSA jurisdiction exists.
Romano,
When considering the Programs, it is clear that to the court that they are covered securities. First, the parties do not dispute that variable annuities, such as those available for investment under the Programs, are registered securities under the Investment Company Act of 1940, and are therefore covered securities within the meaning of SLUSA.
See Lander v. Hartford Life & Annuity Ins. Co.,
B. Use of a “Manipulative or Deceptive Device” and/or Misrepresentations or Omissions of Material Fact
As described above, and recited at length in Plaintiffs’ complaint, the factual basis of Plaintiffs’ complaint is the exclusive endorsement arrangement between the NYSUT Defendants and ING. As stated repeatedly by Plaintiffs, that endorsement was provided in exchange for payments made by ING, and did not represent a recommendation based upon the best interests of the Plaintiffs and others making pension investment decisions. Plaintiffs go to great lengths to characterize their claim as a breach of fiduciary duty, and not as a “manipulative device” or the “failure to disclose material information.” Defendants, on the other hand, argue that the facts supporting Plaintiffs’ claims present a classic case of a scheme *473 prohibited under the securities laws, as well as non-disclosure of material information that would have been important to know when making an investment decision. The court agrees with Defendants.
Despite the fact that Plaintiffs assiduously avoid words and phrases using the terms “manipulative or deceptive device,” “disclose,” “disclosure” “duty to disclose,” or “omission,” it is clear that Plaintiffs’ claim of breach of fiduciary duty is based upon the alleged existence of a fraudulent scheme, as well as the failure to disclose a relationship violating Plaintiffs’ trust in Defendants. Had Defendants based their endorsement of the Programs on Plaintiffs’ best financial interests and/or disclosed the relationship that is alleged to have driven the exclusive endorsement, there would be no breach of the fiduciary duty alleged. Engaging in the exclusive endorsement in return for payment, and the failure to make proper disclosure are necessarily the same conduct supporting the alleged breaches of fiduciary duty. There is no question but that Plaintiffs’ claim turns upon whether or not it was appropriate to receive payments in exchange for allegedly objective investment advice, and whether there was a duty to disclose the alleged conflict of interest underlying the exclusive endorsement arrangement. Either way, the factual allegations underlying conduct covered by SLUSA are one and the same as those alleged in support of the fiduciary breach alleged.
Similar facts were presented in
Felton v. Morgan Stanley Dean Witter & Co.,
Plaintiffs’ complaint is also easily characterized as alleging “an untrue statement or omission of a material fact” sufficient to bring the complaint within those covered by SLUSA. Plaintiffs’ breach of fiduciary duty claim hinges not only on the existence of an improper agreement but also on the failure to disclose that arrangement. Certainly, the failure to disclose the financial relationship between NYSUT and ING constitutes, according to Plaintiffs, an alleged breach of fiduciary duty owed by NYSUT to its members. Disclosure of that relationship would likely satisfy the fiduciary duty alleged to have been breached by non-disclosure.
For the foregoing reasons, the court holds that Plaintiffs’ complaint alleges, *474 within the meaning of SLUSA, both “an untrue statement or omission of a material fact,” and the use or employment of a “manipulative or deceptive device or contrivance.” 15 U.S.C. § 77p(b); 15 U.S.C. § 78bb(f).
C. “In Connection With” Requirement
The court turns next to consider the final SLUSA element at issue,
ie.,
whether the alleged scheme and/or omissions were made “in connection with” a covered security, and concludes easily that they were. When considering this element of SLUSA, courts are guided by interpretations of the “in connection with” phrase in securities fraud actions brought pursuant to Section 10 and Rule 10b-5 of the Securities Act of 1934.
Romano,
III. Disposition of the Motions
The court concludes, based upon the holdings above, that Plaintiffs’ class action is covered by SLUSA, and therefore may not be pursued. Accordingly, the motion to remand must be denied and the motion to dismiss must be granted. The court expresses no opinion, as none is necessary, as to the actual propriety of the conduct of any Defendant herein. The court holds only that Plaintiffs’ state law class action may not be maintained, and is hereby dismissed.
CONCLUSION
For the foregoing reasons, the motion to remand this matter to the State Court is denied and the motion to dismiss is granted. The Clerk of the Court is directed to close the file in this case.
SO ORDERED.