Media for Merrill Lynch, Pierce, Fenner & Smith, Inc. v. DabitAudio Transcription for Opinion Announcement - March 21, 2006 in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit
Audio Transcription for Oral Argument - January 18, 2006 in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit
John G. Roberts, Jr.:
We'll hear argument next in number 04-1371, Merrill Lynch, Pierce, Fenner & Smith versus Dabit.
Jay B. Kasner:
Mr. Chief Justice, and may it please the Court--
In an effort to limit State law securities class actions which undermine the market for nationally traded securities, Congress enacted SLUSA, a statute of broad preemption.
SLUSA, which is reprinted at page 8(a) of Petitioner's blue brief, preempts, subject to three specific statutory extensions, all State law covered class actions, quote,
"by any private party who alleges misrepresentations, omissions, or fraudulent behavior in connection with the purchase or sale of a covered security. "
The Second Circuit erred in implying an exception, that nowhere appears in the statutory language, and is wholly at odds with the purpose in the enactment of the statute for holders claims, a type of claim in which a plaintiff alleges, "I did not purchase" or
"I did not sell, but would have, had I known the allegedly false information. "
a type of claim which this Court, in Blue Chip Stamps, over 30 years ago, recognized as the most vexatious and abusive type of securities class action claims.
The court below erred, for a number of different reasons.
First and foremost, it completely violated the natural meaning of the statute.
As I have mentioned, an examination of SLUSA, beginning at page 8(a), reflects that no covered class action may be maintained, quote, "by any private party", a clause that this Court, time and again, has interpreted as perhaps the broadest way of phrasing "any and all private parties" making certain types of allegations.
Those allegations appear in (a) or (b), focusing on the conduct of the defendant in connection with the purchase or sale of a covered security.
Now, Congress could have... had it intended to inject a purchase/seller limitation, consistent with what the court below concluded, Congress could have phrased that language differently.
As the Court is aware, in the both the 1933 and 1934 acts, Congress has made express causes of action, subject to an explicit purchase or seller requirement.
For example, section 11 of the '33 act affords a private right of action to purchasers of securities in registered offerings.
Section 12 affords a private right of action to persons from whom an offer or sale of securities.
Section 9(e) of the '34 act, similarly, affords a purchase or seller requirement.
Significantly, SLUSA nowhere speaks in terms of a purchase or sale.
And it could have.
For example, Congress could have provided that no covered class action by any private party alleging "his or her sale" of a covered security is preempted.
It could have said,
"Any private party alleging a misrepresentation or omission of a material fact in connection with the plaintiff or that party's purchase or sale. "
It did not.
The decision of the court below is also at odds with this Court's teaching in United States versus O'Hagan, which was decided 1 year before SLUSA was enacted by Congress.
In United States versus O'Hagan, this Court concluded that the so called "misappropriation theory" stated a viable claim in a criminal case brought by the United States Government.
In responding to an argument by the defendant that no one involved that had been defrauded purchased or--
John Paul Stevens:
May I just ask you this question about the plain language?
If the word in 1(f)(1)(A) had not been
"in connection with the purchase of sale... sale of security. "