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Hampton v. Pacific Investment Management Company LLC

United States Court of Appeals, Ninth Circuit

August 24, 2017

William T. Hampton, individually and on behalf of all others similarly situated, Plaintiff-Appellant,
v.
Pacific Investment Management Company LLC; Pimco Funds; E. Philip Cannon; J. Michael Hagan; Brent R. Harris; Douglas M. Hodge; Ronald C. Parker; Vern O. Curtis; William J. Popejoy, Defendants-Appellees.

          Submitted June 7, 2017

         Appeal from the United States District Court for the Central District of California Cormac J. Carney, District Judge, Presiding D.C. No. 8:15-cv-00131-CJC-JCG

         COUNSEL

          Nicholas I. Porritt (argued) and Adam M. Apton, Levi & Korsinsky LLP, Washington, D.C.; Jeff S. Westerman, Westerman Law Corp., Los Angeles, California; for Plaintiff-Appellant.

          Matthew L. Larrabee (argued) and Joshua D.N. Hess, Dechert LLP, San Francisco, California; David A. Kotler, Dechert LLP, Princeton, New Jersey; Frank D. Rorie Jr., Law Office of Frank D. Rorie Jr., West Hollywood, California; John D. Donovan, Robert A. Skinner, and Amy D. Roy, Ropes & Gray LLP, Boston, Massachusetts; John C. Ertman, New York, New York; Ronald Rus and Randall A. Smith, Brown Rudnick LLP, Irvine, California; for Defendants-Appellees.

          Before: Sidney R. Thomas, Chief Judge, Stephen Reinhardt, Circuit Judge, and Edward R. Korman, [*] District Judge.

         SUMMARY [**]

         Securities

         The panel affirmed in part and vacated in part the district court's judgment dismissing state law claims as barred by the Securities Litigation Uniform Standards Act.

         SLUSA bars private class actions based on state law in cases where the plaintiff alleges a material falsehood or omission connected to the purchase or sale of federally-regulated securities. In a separately-filed memorandum disposition, the panel affirmed the district court's holding that the class-action claims in this case were barred by SLUSA. In its opinion, agreeing with the Third Circuit, the panel held that dismissals pursuant to SLUSA's class-action bar must be for lack of subject-matter jurisdiction, and therefore without prejudice, rather than on the merits.

         The panel affirmed the district court's judgment to the extent it concluded that the plaintiff's claims were barred, vacated the judgment to the extent it dismissed the claims with prejudice, and remanded for further proceedings.

          OPINION

          KORMAN, District Judge

         As a matter of substantive law, a private party injured in the securities trade can generally seek relief under whatever laws-federal or state-provide a cause of action. Congress, however, has significantly narrowed the availability of class relief based on state-law securities claims. The Securities Litigation Uniform Standards Act ("SLUSA"), 112 Stat. 3227 (1998) (codified in relevant part at 15 U.S.C. §§ 77p(b)-(f), 78bb(f)), bars private class actions based on state law in cases where the plaintiff "alleg[es]" a material falsehood or omission connected to the purchase or sale of most federally-regulated securities.

         A note on terminology: Claims subject to SLUSA are most frequently described as "precluded, " and sometimes as "preempted" by the statute. But as the Supreme Court has pointed out, "preemption" is a poor fit for a rule that "does not itself displace state law with federal law but makes some state-law claims nonactionable through the class-action device." Kircher v. Putnam Funds Trust, 547 U.S. 633, 636 n.1 (2006). By our lights, "preclusion" doesn't fare much better: In modern usage, preclusion-as in, issue or claim- describes something a judgment does. Whether SLUSA applies to a given claim, however, depends on the facts alleged in the complaint, not the existence or scope of a prior judgment. Moreover, this opinion also addresses questions related to claim preclusion, and we have a measure of "pity for the tired reader" who would have to ...


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