Consumer Protection from Deceptive Acts and
Practices Act, N.Y. Gen. Bus. Law § 349 (McKinney 1988).
On October 5, 2001, the defendant removed the case to this Court
pursuant to SLUSA and 28 U.S.C. § 1331 and 1441(b). The defendant now
moves to dismiss the complaint under the provisions of SLUSA. The
plaintiff cross-moves to file an amended complaint and to remand this
action to state court for lack of subject matter jurisdiction.
A. The Standard of Review
Rule 12(b)(1) of the Federal Rules of Civil Procedure provides the
applicable standard of review for the motions to dismiss and remand
because each concerns the subject matter jurisdiction of the Court. With
regard to a motion under Rule 12(b)(1), the Court may consider affidavits
and other material beyond the pleadings to resolve the jurisdictional
question. Robinson v. Gov't of Malaysia, 269 F.3d 133, 141 n. 6 (2d Cir.
2001); Antares Aircraft, L.P. v. Fed. Republic of Nigeria, 948 F.2d 90,
96 (2d Cir. 1991), vacated on other grounds, 505 U.S. 1215 (1992); Exch.
Nat'l Bank of Chicago v. Touche Ross & Co., 544 F.2d 1126, 1130 (2d Cir.
1976). Further, under Rule 12(b)(1), the Court must accept as true all
material factual allegations in the complaint, but will not draw
inferences favorable to the party asserting jurisdiction. Shipping Fin.
Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir. 1998); Atl. Mut. Ins.
Co. v. Balfour Maclaine Int'l Ltd., 968 F.2d 196, 198 (2d Cir. 1992).
Hearsay statements contained in affidavits may not be considered. Kamen
v. Am. Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986). Each party
may submit affidavits and other material in support of their respective
positions. The Court will consider such material to the extent they are
relevant to the issue of jurisdiction.
B. The Securities Litigation Uniform Standards Act of 1998
In 1998, Congress passed SLUSA to close a loophole in the Private
Securities Litigation Reform Act of 1995 ("PSLRA"). Landers v. Hartford
Life & Annuity Ins. Co., 251 F.3d 101, 107-08 (2d Cir. 2001). PSLRA
imposed, among other things, heightened pleading standards and a
mandatory stay of discovery for class actions alleging fraud in the sale
of securities. Id. at 107. The purpose of PSLRA was to prevent meritless
class actions alleging securities fraud by creating uniform standards for
such actions. Id.
According to House and Senate findings, Congress determined that class
action plaintiffs were avoiding PSLRA's heightened requirements by filing
class actions in state court under more lenient state statutory or common
law theories. Id. at 107-08. To close this alternative, SLUSA mandates
that federal courts be "the exclusive venue for class actions alleging
fraud in the sale of certain covered securities . . . [and that] such
class actions be governed exclusively by federal law." Id. at 108.
SLUSA directs the removal and dismissal of class actions brought under
state law alleging misrepresentation in connection with the purchase or
sale of a covered security. In particular, SLUSA provides:
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
15 U.S.C. § 77p(b). SLUSA also directs the removal of such actions
from state court to federal court. 15 U.S.C. § 77p(c).