A unanimous U.S. Supreme Court last week slammed the door shut on state class action suits by shareholders who claim that they held on to a security—but didn’t purchase or sell it—as a result of a fraudulent statement.
Plaintiffs’ lawyers had argued that the Securities Litigation Uniform Standards Act of 1998, which bars state class actions “in connection with the purchase or sale” of securities, contained a loophole for holders of stock. Lower courts had been split on the question, with the New York-based 2nd Circuit Court of Appeals saying that SLUSA doesn’t include shareholders who merely hold on to securities, and the 7th Circuit in Chicago saying the opposite.
