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February 20, 2004.

IN RE WORLDCOM, INC. SECURITIES LITIGATION, This Document Relates to: JACKIE S. BELL, et al., Plaintiffs, -v- BERNARD J. EBBERS, et al. Defendants

The opinion of the court was delivered by: DENISE COTE, District Judge Page 2


The defendants' motion to dismiss — made in the context of the securities litigation that has accompanied the collapse of WorldCom, Inc. ("WorldCom") — addresses whether ten lawsuits, filed in nine separate Mississippi counties and bringing identical securities fraud and negligence claims under state law against defendants associated with WorldCom, are preempted by the Securities Litigation Uniform Standards Act, Pub.L. No. 105-353, 112 Stat. 3227 (1998) ("SLUSA") (codified in scattered sections Page 3 of Title 15 of the United States Code). For the reasons set forth below, the defendants' motion is granted.


  On June 25, 2002, WorldCom declared that it would undertake a massive restatement of its financial statements. Shortly thereafter, it filed the largest bankruptcy in United States history.

  Even before WorldCom's June 25 announcement, the first class action alleging WorldCom claims was filed in the Southern District of New York on April 30, 2002 and assigned to this Court. Subsequent actions, alleging either class or individual claims ("Individual Actions"), were filed in this district or transferred to this Court by the Judicial Panel on Multi-District Litigation ("MDL Panel"). The class actions were consolidated for pre-trial purposes by Order dated August 15, 2002.

  The Individual Actions which had been filed in state court had been removed to federal court as "related to" the WorldCom bankruptcy, and in some instances, on other grounds as well. By Order dated December 23, 2003 ("December 23 Order"), the Court found that the Individual Actions and the securities class actions involved common questions of law and fact, and that consolidation of these actions for pretrial proceedings was necessary. See In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2002 WL 31867720, at *1 (S.D.N.Y. Dec. 23, 2002). The Individual Actions were consolidated with the WorldCom class Page 4 action for pre-trial purposes by Opinion and Order dated May 28, 2003 ("May 28 Order"). See In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 21242882 (S.D.N.Y. May 28, 2003).*fn1 Pursuant to the May 28 Order, actions transferred to this Court are automatically consolidated with In re WorldCom, Inc. Securities Litigation unless plaintiffs objected to consolidation within ten days after service on their counsel of the Consolidation Order.

  An Opinion of March 3, 2003, resolved the first motion to remand brought before this Court on behalf of an Individual Action. See In re WorldCom, Inc. Sec. Litig., 293 B.R. 308, 323-324 (S.D.N.Y. 2003)("March 3 Opinion"). In denying the motion to remand, the March 3 Opinion found that the Individual Actions considered in that Opinion were sufficiently "related to" the WorldCom bankruptcy to support federal jurisdiction over them and their removal to federal court. An Order of June 11 required plaintiffs in any other Individual Action whose action was transferred and assigned to this Court on or after June 11, 2003, and who had made a timely motion to remand, to show cause within three weeks of the action's arrival on this Court's docket why Page 5 the analysis in the March 3 Opinion did not require the denial of their remand motion. Failure to so renew the motion meant that the remand motion was deemed withdrawn.

  At a conference on September 12, defense counsel gave notice of their intent to bring two separate sets of motions to dismiss claims that are common to many Individual Actions.*fn2 The second tranche of such motions included the instant motion, which addresses preemption issues under SLUSA.*fn3 As instructed by a September 22 Scheduling Order, defendants have moved to dismiss one of the Individual Actions implicated by this motion and the plaintiffs in the similarly situated Individual Actions were given an opportunity to submit an amicus brief and will also have an opportunity to show cause why the Opinion issued today does not control any motion to dismiss their actions.*fn4 Page 6

  The complaint that is the subject of this motion to dismiss is one of ten identical complaints ("Ten Actions" and "Ten Complaints") filed in late 2002 and January 2003 by the same attorneys in the Circuit Court in nine different northern Mississippi counties. The Ten Actions are brought on behalf of between five to forty-eight plaintiffs, for a total of 293 plaintiffs, and assert exclusively state securities fraud and negligence claims against certain former and current WorldCom officers and directors, and Salomon Smith Barney and its former employee Jack Grubman as an investment analyst who issued research reports relating to WorldCom (the "SSB Defendants").*fn5 The action that is the subject of this motion, Bell, et al. v. Ebbers, et al., 03 Civ. 4490 ("Bell Action" and "Bell Complaint") was filed in the Circuit Court of Itawamba County, Mississippi by Page 7 27 current and former shareholders of WorldCom. Each of the Ten Complaints explicitly renounces federal causes of action. For example, the Bell Complaint states "[p]laintiffs assert no federal claim in these proceedings and withdraw any federal claims asserted unintentionally."

  With the exception of the names of the plaintiffs and the name of the counties in which they were filed, all Ten Complaints are verbatim copies of each other right down to the typographical errors. Indeed, nine of the ten complaints, including the Bell Complaint, assert that "[v]enue is proper since a number of Plaintiffs are residents of Lee County, Mississippi." (emphasis supplied). Only two of these complaints were actually filed, however, in Lee County. As noted, the same attorneys are listed on each complaint. The Ten Actions have continued to act in unison following their filing.*fn6

  The defendants timely removed the Ten Actions to the United States District Court for the Northern District of Mississippi, claiming that they are a "covered class action" within the meaning of SLUSA, thereby permitting removal under 15 U.S.C. § 77p Page 8 (c) & 78bb(f)(2).*fn7 Defendants further claimed that the actions are "related to" the WorldCom bankruptcy case, providing federal jurisdiction under 28 U.S.C. § 1334 and removal authority under 28 U.S.C. § 1452, 1441. On July 7, 2003, the MDL Panel transferred the Ten Actions to this Court for pre-trial proceedings pursuant to 28 U.S.C. § 1407.

  Following their arrival on this Court's docket, the plaintiffs in the Ten Actions made no objection to the consolidation of their actions with each other and with In re WorldCom, Inc. Securities Litigation for pretrial purposes, and thus, have consented to such consolidation. In addition, they did not renew their motions for remand and under the terms of the May 28 Order, plaintiffs have forfeited their right to remand.*fn8

  Defendants have moved to dismiss the Bell Action on the ground that it is a "covered class action" and therefore federally preempted. As the parties acknowledge, this motion Page 9 requires consideration of the Ten Actions taken together as well as the Bell Action.


  It is undisputed that the attorneys representing the Bell plaintiffs drafted the complaint, and coordinated the filing of the other Nine Actions, with the intention of evading SLUSA's preemption provisions. The question presented through the defendants' motion is whether their efforts to evade SLUSA have been successful. To answer this question, this Opinion describes the background to the passage of SLUSA, the requirements of SLUSA implicated by this motion, and whether the Bell Complaint, when considered with the other Nine Actions, constitutes a "covered class action," as that term is defined by SLUSA. This latter issue requires consideration principally of whether the Ten Actions are a "single lawsuit" or whether the Ten Actions are a "group of lawsuits" pending in the same court and "proceed[ing] as a single action for any purpose." Lastly, the plaintiffs' judicial estoppel argument is addressed.

 1. Background of SLUSA

  SLUSA, enacted in 1998, was passed "in response to a demonstrably unavailing attempt by Congress, through the Private Securities Litigation Reform Act of 1995 ("PLSRA"), Pub.L. 104-67, 109 Stat. 737 (1995) (codified in part at 15 U.S.C. § 77z-1, 78u), to prevent strike suits, described as meritless class Page 10 actions that allege fraud in the sale of securities." Spielman v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 332 F.3d 116, 122 (2d Cir. 2003) (citation omitted). The PLSRA had imposed stringent pleading requirements and mandatory discovery stays for securities fraud actions filed in federal court. Id.; see H.R. Conf. Rep. No. 104-369, available in 1995 WL 709276 (1995). The PLSRA, however, "proved ineffective in actual practice to prevent litigation of meritless suits." Speilman, 322 F.3d at 123.

  Faced with the hurdles presented by the PLSRA, claimants simply abandoned federal court and filed suit in state court, alleging state securities law claims. See Lander v. Hartford Life & Annuity Ins. Co., 251 F.3d 101, 107-08 and n.4 (2d Cir. 2001) (citing Pub. L. No. 105-353 § 2(2)).*fn9 "SLUSA was enacted to Page 11 close the loophole by mandating federal courts as the exclusive venue for class actions alleging fraud in the sale of certain covered securities and by mandating that such class actions be governed exclusively by federal law." Spielman, 332 F.3d at 123 (citation omitted); see 15 U.S.C. § 77p(b)-(c); 15 U.S.C. § 78bb(f)(1)(A) and (f)(2).*fn10

  The statute's findings and legislative history reflect Congress' clear purpose to provide for exclusive federal jurisdiction over a broad range of securities class actions. See H.R. Conf. Rep. 105-83, available in 1998 WL 703964, at *13 (1998). Congress specifically directed the courts to interpret SLUSA in an expansive fashion. The Senate Banking Committee Report on SLUSA states:
[W]hile the committee believes that it has effectively reached those actions that could be used to circumvent the reforms enacted by Congress in 1995 as part of the Private Securities Litigation Reform Act, it remains the Committee's intent that the bill be interpreted broadly to reach mass actions and all other procedural devices that might be used to circumvent the class action definition.
S. Rep. No. 105-182, at 8 (1998) (emphasis supplied). The plain language of SLUSA, its legislative history, ...

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