Robert E. Riley and Sheila Cantrell are the trustees of the Performance Toyota, Inc. Profit Sharing Plan (“Performance Plan”), and Gregory Dingle is the trustee of the Master Packaging, Inc. 401(K) plan (“Master Packaging”). Both plaintiffs initially filed a class action 1 in federal district court against Merrill Lynch 2 alleging a violation of two Florida statutes: the Florida Securities and Investor Protection Act (Fla. Stat. Ann. § 517.011 et seq.) and the Florida Deceptive and Unfair Trade Practices Act (Fla. Stat. Ann. § 501.201 et seq.) 3 The complaint alleged that Merrill Lynch made “material Misrepresentations and Omissions [that] induced the Plaintiffs and other Class members to purchase and retain shares of the Growth Fund....” 4 Merrill Lynch moved to dismiss, arguing (a) that the Securities Litigation Uniform Standards Act of 1998, 15 U.S.C. § 78bb (“SLUSA”) specifically barred the plaintiffs’ class action and (b) there was no diversity jurisdiction because one of the Merrill Lynch defendants, the Growth Fund, was required to be treated as a Florida citizen for diversity purposes because it had shareholders who, like the plaintiffs, were Florida citizens. While Merrill Lynch’s motion to dismiss was pending, the district court sua sponte issued an order to show cause why the complaint should not be dismissed for lack of jurisdiction. Performance Plan responded by filing a Notice of Voluntary Dismissal Without Prejudice and then refiling its action in state court. 5
Pursuant to the removal provision of SLUSA, Merrill Lynch immediately removed the Performance Plan action “back” to federal court, where it was “re-consolidated” with the Master Packaging action. Performance Plan moved to remand the action to state court, but the district court denied the motion. Shortly thereafter, the Court issued an order dismissing the complaints of both Performance Plan and Master Packaging under SLUSA and for lack of diversity jurisdiction over the underlying state law claims.
We review the district court’s grant of a motion to dismiss
de novo. Lowell v. Am. Cyanamid Co.,
DISCUSSION
As always, jurisdiction is a threshold inquiry that we are required to consider before addressing the merits of any claim. But the jurisdictional analysis here is complicated by the unique procedural posture of this case. Master Packaging filed suit
*1337
in diversity directly in federal court, and never left. Thus, the district court was, and this court now is, required to assess whether Master Packaging was diverse from each and every defendant before addressing the merits of its Florida statutory claims and before determining whether SLUSA barred those claims.
See University of S. Ala. v. American Tobacco Co.,
Performance Plan, in contrast, voluntarily left federal court in response to the district court’s jurisdictional inquiry, and re-filed its suit in Florida state court. The only reason Performance Plan found its way back to federal court was that Merrill Lynch removed its state lawsuit pursuant to SLUSA. Because SLUSA was the only basis for removal, the trial court was first required to assess, with respect to Performance Plan, whether SLUSA permitted removal from state to federal court. Because the sequence of analysis differs with respect to each plaintiff, we consider each separately.
I. The Master Packaging Action and Growth Fund’s Citizenship
There are two issues raised with respect to Master Packaging’s appeal. The threshold issue is whether there is diversity jurisdiction. If we conclude that there is jurisdiction, we must turn to the question whether SLUSA bars Master Packaging’s lawsuit. For the reasons set forth below, we conclude that the requisite diversity is lacking. Therefore we do not reach the question of whether SLUSA bars Master Packaging’s lawsuit. 6
Master Packaging sued the Merrill Lynch defendants solely under Florida statutory law and the basis for federal jurisdiction was diversity of citizenship. In order for federal diversity jurisdiction to exist, each defendant must be diverse from each plaintiff.
See Univ. of S. Ala.,
In
Carden
the Supreme Court held that, for diversity purposes, an Arizona limited partnership was a citizen of each state in which at least one of its general or limited partners was a citizen.
7
See id.
at 195,
In its extended discussion of
Navarro Sav. Ass’n. v. Lee,
Arkoma claims to have found another exception to our Chapman tradition 9 in Navarro Savings Assn. v. Lee,446 U.S. 458 ,100 S.Ct. 1779 ,64 L.Ed.2d 425 (1980). That case, however, did not involve the question whether a party that is an artificial entity other than a corporation can be considered a “citizen” of a State, but the quite separate question whether parties that were undoubted “citizens” (viz., natural persons) were the real parties to the controversy. The plaintiffs in Navarro were eight individual trustees of a Massachusetts business trust, suing in their own names. The defendant, Navarro Savings Association, disputed the existence of complete diversity, claiming that the trust beneficiaries rather than the trustees were the real parties to the controversy, and that the citizenship of the former and not the latter should therefore control. In the course of rejecting this claim, we did indeed discuss the characteristics of a Massachusetts business trust — not at all, however, for the purpose of determining whether the trust had attributes making it a “citizen,” but only for the purpose of establishing that the respondents were “active trustees whose control over the assets held in their names
*1339 is real and substantial,” thereby bringing them under the rule, “more than 150 years” old, which permits such trustees “to sue in their own right, without regard to the citizenship of the trust beneficiaries.” Id., at 465-466,100 S.Ct., at 1784 . Navarro, in short, has nothing to do with the Chapman question, except that it makes available to respondent the argument by analogy that, just as business reality is taken into account for purposes of determining whether a trustee is the real party to the controversy, so also it should be taken into account for purposes of determining whether an artificial entity is a citizen. That argument is, to put it mildly, less than compelling.
Carden,
Significantly, prior to
Carden
(but based on its underlying precedents) this Court has applied the incorporated/unincorporated distinction in determining the citizenship of trusts on the basis of the citizenship of their shareholders.
See Laborers Local 938 Joint Health & Welfare Trust Fund v. B.R. Starnes Co. of Fla.,
Master Packaging argues that the capacity rule of Fed.R.Civ.P. 17(b), in combination with Mass. Gen. Laws ch. 182 § 6, compels us to conclude that Growth Fund is a Massachusetts Citizen for diversity purposes. We disagree. Fed.R.Civ.P. 17(b) provides that the “capacity of a corporation to sue or be sued shall be determined by the law under which it is organized.” (emphasis added). Mass. Gen. Laws ch. 182 § 6, under which the Growth Fund was organized, in turn states that “[a]n association or trust may be sued in an action at law for debts and other obligations or liabilities ... and its property shall be subject to attachment and execution in like manner as if it were a corporation....”
As an initial matter, R. 17(b) says nothing whatever about the status of a business trust, dealing, by its express terms, only with the right of a corporation to sue or be sued. It tells us nothing about the similar (or dissimilar) rights of a business trust. If anything, the mention solely of corporations without any reference to other types of business associations reaffirms the doctrinal distinction of Carden, distinguishing corporations from other types of business entities.
Mass. Gen. Laws ch. 182 § 6 also tells us nothing about the diversity question at issue here. To begin with, Massachusetts state law cannot prescribe rules to govern federal diversity jurisdiction, and the Supreme Court has clearly stated in Carden that unincorporated entities are not to be treated as corporations for diversity purposes. In any event, ch. 182 § 6 says nothing about how business trusts should be treated for purposes of citizenship, stating only that for purposes of property attachment and execution, they are to be treated in the manner of a corporation.
Thus, the district court correctly determined that complete diversity was lacking between Master Packaging and the Merrill Lynch defendants, requiring the dismissal *1340 of the Master Packaging class action for lack of jurisdiction. As noted, this determination eliminates the need to reach the SLUSA question with respect to Master packaging. However, in order to review the district court’s denial of Performance Plan’s motion to remand its action to state court (as well as its subsequent dismissal of that action), we must determine SLU-SA’s applicability to the Performance Plan action. 10
II. Does SLUSA Apply to Performance Plan’s Claims
SLUSA is the most recent in a line of federal securities statutes originating with Congress’ passage of the Securities Act of 1933 (“1933 Act”), 48 Stat. 74 (1933) (codified as amended at 15 U.S.C. § 77a et seq.), and the Securities Exchange Act of 1934 (“1934 Act”), 48 Stat. 881 (1934)(codi-fied as amended at 15 U.S.C. § 78a et seq.), and continuing through Congress’ 1995 passage of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Pub.L. 104-67, 109 Stat. 737 (1995) (codified in part at 15 U.S.C. §§ llzr-1, 78u). In construing the meaning of SLUSA’s key terms, we must view SLUSA in this larger statutory context.
The 1933 Act deals with the contents of stock registration statements and prospectuses, giving purchasers a private right of action against stock issuers who fail to comply with the statute’s requirements. In relevant part, the 1934 Act, Section 10, makes it “unlawful for any person ... [t]o use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities Exchange Commission (‘SEC’)] may prescribe_” 15 U.S.C. § 78j(2)(b) (emphasis supplied). The SEC accordingly promulgated Rule 10b-5, 17 CFR § 240.10b-5, the basis for a vast amount of modern securities litigation, which provides as follows:
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.
17 CFR § 240.10b-5 (emphasis added).
In 1995, after determining that the federal securities laws, and especially § lob-5, were being abused through the bringing of “strike suits,”
11
Congress passed the PSLRA. The PSLRA set heightened pleading requirements for class actions alleging fraud in the sale of national securities,
see
15 U.S.C. § 78u-4, and also pro
*1341
vided for a mandatory stay of discovery to allow district courts, prior to discovery, to determine the legal sufficiency of claims brought in securities class actions,
see
15 U.S.C. § 77z-l(b). These reforms were designed to enable securities defendants to obtain early dismissal of frivolous class actions, and thereby avoid the high expense of discovery.
See, e.g., Lander v. Hartford Life and Annuity Ins. Co.,
By 1998, however, Congress realized that many of the goals of PSLRA were being frustrated because plaintiffs were simply shifting their securities class actions from federal to state court, where the PSLRA did not restrict their claims. See Pub.L. No. 105-353 § 2(2). 12 By suing in state court under state statutory or common law (rather than under the federal securities laws), litigants were able to circumvent the restrictions placed upon securities claims in federal court. See id. To close this loophole in the PSLRA, Congress passed SLUSA, making federal court the exclusive venue for class actions alleging fraud in the sale of “covered securities.” Congress accomplished this by providing for removal of state actions to federal court, and requiring the immediate dismissal of “covered lawsuits.” To this end, SLUSA provides, in relevant part:
(1) Class action limitations
No covered class action 13 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—
(A) a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security 14 ; or
(B) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security-
(2) Removal of covered class actions
*1342 Any covered class action brought in any State court involving a covered security, as set forth in paragraph (1), shall be removable to the Federal district court for the district in which the action is pending, and shall be subject to paragraph (1).
15 U.S.C. § 78bb(f) (emphasis added).
Thus, in order to remove an action to federal court under SLUSA, the removing party must show that (1) the suit is a “covered class action,” (2) the plaintiffs’ claims are based on state law, (3) one or more “covered securities” has been purchased or sold, and (4) the defendant misrepresented or omitted a material fact
“in connection with the purchase or sale of such security.” See Spielman v. Merrill, Lynch, Pierce, Fenner & Smith, Inc.,
No. 01 Civ. 3013(DLC),
SLUSA does not define the term “in connection with the purchase or sale of a covered security.” Nor has the Supreme Court yet had occasion to address this phrase in the context of SLUSA, although it has construed and applied the identical phrase as it appears in § 10b-5.
See Blue Chip Stamps v. Manor Drug Stores,
Analogizing to § 10b-5 is particularly appropriate because SLUSA was specifically enacted as an amendment to the 1933 and 1934 Acts (and their successor statutes). In enacting SLUSA, therefore, Congress was not writing on a blank slate; instead, it was legislating in an area that had engendered tremendous amounts of litigation and received substantial judicial attention. In using the phrase “in connection with the purchase or sale of a covered security,” Congress was not creating language from a vacuum; instead, it was using language that, at the time of SLUSA’s enactment, had acquired settled, and wide *1343 ly-aeknowledged, meaning in the field of securities law, through years of judicial construction in the context of § 10b-5 lawsuits. Under these circumstances, we must presume that Congress intended the phrase “in connection with the purchase or sale of a covered security” to have the same meaning in SLUSA that it has in § 10b-5.
Because, in this case, the parties stipulate that the securities involved are “covered securities,” that Performance Plan actually purchased shares of Growth Fund, and that Performance Plan’s claims are based on state law, the only remaining question is whether the statements allegedly made by Merrill Lynch were made “in connection with the purchase or sale of covered securities,” and therefore whether Performance Plan’s action was properly removed to federal court, and subsequently dismissed, under SLUSA.
Performance Plan argues that its action was properly brought in state court, under state law because Merrill Lynch’s alleged misrepresentations caused it to
hold
shares of Growth Fund rather than to “purchase or sell” them. Therefore, Pern formance Plan argues, its complaint falls outside the scope of SLUSA, which covers only claims involving misrepresentations made “in connection with
purchase or sale.”
Performance Plan asserts that Supreme Court precedent interpreting the phrase “in connection with the purchase or sale of a covered security,” in the context of § 10b-5, compels this conclusion.
See Blue Chip Stamps v. Manor Drug Stores,
In
Blue Chip,
the Supreme Court expressly held that there is no right of action under § 10b-5 unless a challenged misrepresentation or omission caused the plaintiff
actually
to buy or sell a particular stock.
Blue Chip,
Based substantially on the rule of
Blue Chip,
the Eighth Circuit held, in
Green,
*1344
that SLUSA did not bar a state law claim for breach of contract where the plaintiffs failed to allege that the defendants made misrepresentations that caused them to buy or sell a covered security. Green sued Ameritrade for breach of contract in state court alleging that he had contracted with Ameritrade to receive “real time” stock quotes on Ameritrade’s web site, but the quotes provided were not “real time.” Ameritrade removed under SLUSA, claiming that the suit was really one for misrepresentations made “in connection with the purchase or sale of a covered security.” The trial court held that Green’s claim was not a securities fraud claim within the purview of SLUSA, but simply a claim for breach of contract, and the Eighth Circuit affirmed.
See Green,
[T]he critical question is whether Green’s amended complaint can reasonably be read as alleging a sale or purchase of a covered security made in reliance on the allegedly faulty information provided to himself and to putative class members by Ameritrade ... Green’s amended complaint completely omits any mention of such reliance. He alleges no sale or purchase of a covered security, only that he did not receive the type of information from Ameritrade for which he believed he had contracted and paid twenty dollars monthly. We are satisfied that nothing in Green’s amended complaint suggests that his cause of action arises from a sale or purchase of a security in reliance .on information gained from Ameritrade’s real-time quote service. The amended complaint simply is not susceptible to being read as alleging anything of the sort. It therefore does not satisfy the criteria for SLUSA preemption.
Id.
Also relying on Blue Chip, the federal district in Gutierrez held that SLUSA does not apply to claims of misrepresentations that caused plaintiffs to retain securities, rather than actually to buy or sell them. In Gutierrez, the plaintiffs brought a class action alleging that the defendant’s acts of “accounting misfeasance” caused them to hold securities that they otherwise would have sold. Specifically, the complaint identified a subclass of
[a]ll persons or entities that held any “covered security” as that term is defined in the Private Securities Litigation Reform Act of 1995 at all relevant times through 1993 through present and did not sell or otherwise dispose of said products prior to June 1999....
Gutierrez,
In arguing that SLUSA did not bar their claim, but that they were entitled to bring their retention claim in state court, under state law, the Gutierrez plaintiffs argued (in the court’s words), that:
category (iii) is explicitly limited to damages caused by the holding of covered securities and the loss of value which resulted from such holding. [It does not seek] purchaser or seller damages arising out of any alleged misrepresentation which may or may not have occurred when the[ plaintiffs] purchased the covered stock. Rather, plaintiffs seek damages for being fraudulently induced to continue to hold stock after they and the category (iii) putative class members had purchased the securities. Plaintiffs maintain they are not asserting a claim “in connection with the sale or purchase” of a covered security and thus their claims are not subject to mandatory removal under the SLUSA.
Id.
Based on Blue Chip, the court held that retention claims were not claims of misrep *1345 resentations “in connection with the purchase or sale of a covered security,” and that the plaintiffs, therefore, were entitled to bring those claims in state court. The court emphasized that “plaintiffs have ‘gone to great lengths’ to stress that their first amended petition alleges misrepresentations only in the holding of covered securities.” Id. at 593 (emphasis added). The Court further stated:
Although the stocks purchased by subclass category (iii) claimants are covered securities for purposes of the Act, the first amended petition alleges misrepresentations only in the holding of these covered securities and nowhere do plaintiffs allege subclass category (iii) includes purchasers. Rather, as plaintiffs argue, they have “expressly carved out and excluded [purchasers] when they elected to allege only claims for holding covered securities, not the purchase or sale of covered securities.”
Id. (emphases in original).
We agree with the Gutierrez court, that under Blue Chip, SLUSA does not apply to claims dealing solely with the retention of securities, rather than with purchase or sale. We also agree with the Gutierrez Court’s implication, however, that when a claim that sweeps within its ambit actual purchases or sales of stock is covered by SLUSA, a plaintiff may not avoid SLUSA’s restrictions simply by alleging that a given misrepresentation caused him both to purchase and hold a particular security.
For this reason, we agree with the district court that Performance Plan’s suit is covered by SLUSA, and was not properly brought in state court, under state law. The simple fact is, unlike the carefully-crafted allegations in Gutierrez, Performance Plan’s allegations in this case are not limited solely to the retention of covered securities. Paragraph 37, which Performance Plan submits as the principal source of its retention claim, states that Merrill Lynch made “material Misrepresentations and Omissions [that] induced the Plaintiffs and other Class members to purchase and retain shares of the Growth Fund during the Class Period.” (emphasis added). This language clearly alleges that Merrill Lynch’s conduct caused Performance Plan to purchase covered securities and as retain them. The fact that class members purchased and then retained their Growth Fund shares does not necessarily add anything to the basic claim of purchasing, because all investors, by definition, hold their shares for at least some time after purchase. Thus, while in principle we agree with Performance Plan’s argument that SLUSA does not apply to “holding” claims, and that such claims accordingly may be brought in state court, under state law, we do not find that the rule applies in this case.
Alternatively, Performance Plan argues that SLUSA does not apply to state law claims that lack the scienter requirement of the federal securities laws. Performance Plan’s syllogistic argument appears to be as follows: Congress did not intend to bar claims pursuant to state laws that are
stricter
than federal securities laws; Performance Plan’s state claims do not require scienter and are thus stricter than federal securities laws; therefore Performance Plan’s lawsuit is not preempted by SLUSA.
16
In support of this argument,
*1346
Performance Plan relies on the district court opinion in
Green, supra,
(reported at
Initially, we find Performance Plan’s re-banee misplaced. Neither of the cases cited can support this proposition.
Bums
was a class action brought in state court by clients of Prudential Securities who alleged that over the course of a two-day period, one of Prudential’s brokers liquidated their accounts without permission. The plaintiffs brought state law claims for conversion, breach of contract, breach of fiduciary duties, and negligent supervision. Prudential removed to federal court under SLUSA and the plaintiffs moved to remand. The district court granted the motion to remand, holding that SLUSA did not apply because the plaintiffs’ claims, while related to securities, were
not
claims for securities
fraud
at ab. No misrepresentation was alleged in that case.
See Burns,
More fundamentally, the premise of Performance Plan’s argument is incorrect. SLUSA amends both the 1933 Act (15 U.S.C. § 77p) and the 1934 Act (15 U.S.C. § 78bb), preempting claims brought under both of those statutes. The sections of SLUSA that amend the 1933 Act track the language of §§ 11 and 12(a)(2), and claims under §§ 11 and 12(a)(2) of the 1933 Act do not require a showing of scienter. Thus, SLUSA preempts some claims-namely, those brought under § 11 or 12(a)(2) of the 1933 Act-that lack a scien-ter requirement. Accordingly, we cannot accept Performance Plan’s contention that scienter is the dispositive factor in determining whether a given lawsuit falls within the scope of SLUSA.
In sum, we find no merit to Performance Plan’s argument that the district court erred in declining to remand its lawsuit to state court, and in subsequently dismissing the action.
III. SLUSA is Constitutional
Finally, the plaintiffs argue that SLUSA is unconstitutional because it exceeds Congress’ power under the Commerce Clause. 17 We readily disagree.
The Supreme Court has identified three categories of conduct that Congress may regulate under the Commerce Clause: (1) the use of the channels of interstate commerce; (2) the instrumentalities of interstate commerce, or persons or things in interstate commerce; and (3) activities that substantially affect interstate commerce.
United States v. Lopez,
*1347
SLUSA regulates only national securities markets and expressly deals with claims pertaining to nationally-traded securities. As the district court recognized, “both the securities in question and the defendant in this action are entrenched in interstate commerce.” SLUSA defines a “covered security” as “a security issued by an investment company that is registered, or that has filed a registration statement, under the Investment Company Act of 1940.” The Growth Fund shares in this case are federally-registered securities and Merrill Lynch’s trading operations for Growth Fund shares extend throughout the country. SLUSA thus is constitutional because it regulates both “channels” of interstate commerce (ie., national securities markets) and “things” in interstate commerce (ie., nationally-traded securities themselves). Indeed, though it has addressed the 1933 and 1934 securities Acts on countless occasions, the Supreme Court has never invalidated any part of either statute (which SLUSA amended) — or for that matter, any federal statute regulating the national securities markets — on Commerce Clause grounds.
See e.g., North Am. Co. v. SEC,
CONCLUSION
Because there is no diversity jurisdiction in this ease, the district court properly dismissed Master Packaging’s action. We also find that SLUSA is clearly constitutional and applies to Performance Plan’s state court lawsuit. Therefore, the district court correctly denied its motion for remand and correctly dismissed that suit. The orders of the district court, therefore, are
AFFIRMED.
Notes
. The putative class consisted of "all persons and entities who purchased or sold shares of the [Growth] Fund in Florida through Defendant Merrill Lynch Pierce Fenner & Smith, Inc. or any related entity between November 1, 1997 and April 30, 1999." Plaintiffs estimate that both the Master Packaging and Performance Plan classes include thousands of putative class members.
. Specifically, the four defendants were Merrill, Lynch, Pierce, Fenner & Smith, Inc., the Merrill Lynch Growth Fund ("Growth Fund”), the individual trustees of the Growth Fund and Merrill Lynch Asset Management. For convenience, we refer collectively to the four defendants as "Merrill Lynch.”
. The Plaintiffs did not bring any claims directly under federal law.
. The purported basis for jurisdiction was diversity. As noted, all claims were brought under Florida state law.
. Thus, parallel actions were proceeding in state and federal court, with the Performance Plan plaintiffs in state court and the Master Packaging plaintiffs remaining in federal court.
. As detailed below, we do consider SLUSA's applicability with respect to Performance Plan's lawsuit. We recognize that our application of SLUSA to Performance Plan will, in the abstract, also be applicable to Master Packaging. But because there is no diversity jurisdiction, which is the threshold inquiry in the Master Packaging action, we do not address SLUSA in the context of its appeal.
. The district court and the Fifth Circuit had previously ruled that the partnership's citizenship would be based on the citizenship of the general partners alone.
. The Puerto Rican sociedad en comandita is the only artificial entity that the Court has treated as a traditional corporation for diversity purposes.
.
Chapman v. Barney,
. Because we determine that Growth Fund must be treated as a citizen of Florida (among other states) for purposes of diversity jurisdiction, there is no need for us to address Merrill Lynch’s argument that neither Master Packaging nor Performance Plan meets the amount in controversy requirement for diversity jurisdiction under 28 U.S.C. § 1332.
. By "strike suits,” Congress referred to securities class actions that had no merit, but that were improperly brought for the purpose of forcing securities defendants into large settlements in order to avoid costly discovery. See H.R. Conf. Rep! No. 105-803 (1998).
. According to a joint House-Senate Committee Report, the decline in federal securities class action suits that occurred after the passage of PSLRA was accompanied by a nearly identical increase in state court filings. See H.R. Conf. Rep. No. 105-803 (1998).
. SLUSA defines "covered class action” as:
(i) any single lawsuit in which—
(I) damages are sought on behalf of more than 50 persons or prospective class members, and questions of law or fact common to those persons or members of the prospective class, without reference to issues of individualized reliance on an alleged misstatement or omission, predominate over any questions affecting only individual persons or members; or
(II) one or more named parties seek to recover damages on a representative basis on behalf of themselves and other unnamed parties similarly situated, and questions of law or fact common to those persons or members of the prospective class predominate over any questions affecting only individual persons or members; or
(ii) any group of lawsuits filed in or pending in the same court and involving common questions of law or fact, in which—
(I) damages are sought on behalf of more than 50 persons; and
(II) the lawsuits are joined, consolidated, or otherwise proceed as a single action for any purpose.
15 U.S.C. § 78bb(f)(5)(B).
."Covered security,” in turn, is defined as
a security that satisfies the standards for a covered security specified in paragraph (1) or (2) of section 77r(b) of this title, at the time during which it is alleged that the misrepresentation, omission, or manipulative or deceptive conduct occurred....
15 U.S.C. § 77p(f)(3). Section 77r(b)(2) states that:
[a] security is a covered security if such security is a security issued by an investment company that is registered, or that has filed a registration statement, under the Investment Company Act of 1940.
15 U.S.C. § 77r(b)(2).
. Relying on 10b-5 case law, federal district courts have held, for example, that SLUSA does not apply to state law claims for breach of fiduciary duty that occurred
after
the sale of the securities in question,
see Hines v. ESC Strategic Funds, Inc.,
No. 3:99-0530,
.
See
H.R. Conf. Rep. No. 105-803, at *2;
Compare Ernst & Ernst v. Hochfelder,
. The plaintiffs also argue that SLUSA violates the Equal Protection clause. This argument lacks merit.