# Amicus Curiae Brief — Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0089%3A11 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 2006 - **Citation:** 547 U.S. 71 ## Text d upon the statutory or common law of any State or subdi- vision thereof may be maintained in any State or Fed- eral court by any private party alleging,” among other things, “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security.” SLUSA § 101(b), 112 Stat. 3230, 15 U.S.C. 7T8bb(f)(1)(A). 2. Respondent, a former broker of petitioner’s, filed suit in the United States District Court for the Western District of Oklahoma alleging state-law claims for breaches of fiduciary duty and the covenant of good faith and fair dealing. Pet. App. 4a-5a. Respondent alleged that petitioner “issued falsely favorable reports” about certain stocks “in an effort to encourage widespread purchasing of these stocks and to artificially support the stocks[’] prices.” J.A.3la. After the alleged manipula- tion ceased, the stock prices dropped, leaving those “who purchased these stocks at manipulation-inflated prices with substantial losses.” J.A. 29a. Respondent sought to represent a class of petitioner’s brokers who “ourchased” the relevant stocks and were damaged thereby. J.A. 4la. The district court dismissed the complaint as pre- empted by SLUSA because it alleged misrepresenta- tions in connection with the purchase of securities. J.A. 49a. The court granted leave to re-plead, however, be- cause it was “conceivable that claims based on wrongfully-induced holding could be pleaded.” J/bid. Respondent filed an amended complaint that gener- ally refrains from using the words “purchase” and “sale,” but alleges the same scheme to “manipulate the price of [certain] stocks, causing these stocks to trade at artificially inflated prices.” J.A. 53a. The class defini- 5 tion is limited to brokers who “held” the stocks and were damaged thereby. J.A. 64a. After the Judicial Panel for Multi-District Litigation transferred this case to the Southern District of New York, that court dismissed the amended complaint. Pet. App. 53a-55a. The court explained that respondent’s claims are “based on the very same series of transac- tions and occurrences asserted in the federal securities actions currently being coordinated before this Court” and “fall squarely within SLUSA’s ambit.” /d. at 55a. 3. The court of appeals vacated in part and re- manded. Pet. App. la-52a. Noting that SLUSA pre- empts claims based on misrepresentations “in connec- tion with the purchase or sale” of securities, the court began its analysis with the recognition that “the mean- ing of ‘in connection with’ under SLUSA is coterminous with the meaning of the nearly identical language of § 10(b) of the [1934 Act] and its corresponding Rule 10b- 5.” Pet. App. 3a. In construing the meaning of that phrase, however, the court relied on this Court’s holding in Blue Chip, supra, that persons who neither purchased nor sold securities lack standing to pursue a private right of action under Section 10(b) or Rule 10b-5. Pet. App. 27a-30a. The court recognized that “[(tJhe limita- tion on standing to bring private suit for damages” un- der Blue Chip “is unquestionably a distinct concept from the general statutory or regulatory prohibition on fraud in connection with the purchase or sale of securities.” Id. at 27a. Nonetheless, “{bJecause only purchasers and sellers have a federal private damages remedy,” the court concluded that “Congress meant to import the settled standing rule along with the ‘in connection with’ phrase as a substantive standard,” and thereby ex- 6 empted claims of non-purchasers and non-sellers from preemption. /d. at 28a. The court of appeals also relied on an “assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.” Pet. App. 30a- 31a (quoting City of Milwaukee v. Illinois, 451 U.S. 304, 316 (1981)). It determined that Congress had not mani- fested such a purpose because, although “[t]he legisla- tive history * * * generally indicates a broad preemp- tive intent,” it “contains no specific mention of holding claims or other non-purchaser/non-seller claims.” /d. at dla. Finally, the court of appeals held that respondent’s class action claims are preempted in part. “[C]laims of brokers who purchased the stock during the class period in reliance on the misrepresentations” were held to be preempted, while claims based on holding (but not pur- chasing or selling) stocks were held not to be pre- empted. Pet. App. 41a. Because the amended complaint does not distinguish between the two sets of claims, the court of appeals remanded with instructions to dismiss all such claims without prejudice to repleading the non- preempted claims. /d. at 42a-43a. SUMMARY OF ARGUMENT SLUSA preempts state-law class action claims alleg- ing “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered se- curity.” 15 U.S.C. 78bb(f)(1)(A). The court of appeals correctly held that “the meaning of ‘in connection with’ under SLUSA is coterminous with the meaning of the nearly identical language of § 10(b) of the [1934 Act] and its corresponding Rule 10b-5.” Pet. App. 3a. Because 7 respondent alleges that petitioner made misrepresenta- tions that inflated the prices at which securities were bought and sold, his claims fall well within the scope of Rule 10b-5 and are therefore preempted by SLUSA. The court of appeals nonetheless held that respon- dent could avoid preemption by “exclud[ing] from the class claimants who purchased in connection with the fraud.” Pet. App. 43a. That holding is incorrect because it conflates the question of standing to sue with the question of the conduct alleged. Preemption under SLUSA turns on whether the defendant allegedly com- mitted fraud in connection with the purchase or sale of securities, not whether the plaintiff or class members themselves purchased or sold securities. Under Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975), the latter inquiry determines whether a particular plain- tiff has standing to sue, but not whether the defendant committed fraud in connection with the purchase or sale of securities. The court of appeals further erred by relying on an “assumption” of non-preemption and a perceived ab- sence of relevant legislative history. Because securities markets and transactions have long been regulated by the federal government, no such “assumption” applies to SLUSA’s express preemption provision. In any event, SLUSA’s text overcomes any applicable assumption by clearly and manifestly tying its preemptive effect to the scope of Rule 10b-5’s substantive prohibition against securities fraud. The legislative history confirms that Congress intended to apply uniform federal standards to all securities fraud class actions except those it ex- pressly exempted. The uniformity that Congress in- tended to achieve would be illusory if the uniform fed- eral standards were not binding on plaintiffs who held, 8 rather than purchased or sold, an affected security dur- ing the period of alleged fraud. Under the court of ap- peals’ theory, state-law class actions could proceed in virtually every case of alleged fraud, because it is gener- ally possible in class actions to allege that the same fraudulent conduct injured purchasers and holders alike. Indeed, the decision below would have the perverse effect of reading a law designed to eliminate abusive and meritless lawsuits to preserve the suits most likely to be abusive and meritless. If any set of plaintiffs were to be exempted from preemption, it would not be those who neither purchased nor sold securities. Blwe Chip denies standing to such plaintiffs precisely because their suits present an especially high risk of abuse in light of the relative ease of alleging, and difficulty of disproving, that a plaintiff relied on public representations in not purchasing or selling a security. Construing Blwe Chip to immunize “holder” class actions from SLUSA pre- emption would contravene the intent of Congress and the policies recognized by this Court in Blue Chip by permitting a particularly abusive category of state-law class actions to escape SLUSA’s reach. ARGUMENT THERE IS NO PURCHASER/SELLER LIMITATION ON THE SCOPE OF SLUSA PREEMPTION In pertinent part, SLUSA provides that “({nJo cov- _ ered class action based upon the statutory or common law of any State or subdivision thereof may be main- tained in any State or Federal court by any private party alleging * * * a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security.” 15 U.S.C. 78bb(f)(1)(A). As the court of appeals recognized, there is no dispute that this 9 case is a “covered class action” (see 15 U.S.C. 78bb(f)(5)(B)(i)) based on state common law claims (for breach of fiduciary duty and the duty of good faith and fair dealing, see Pet. App. 6a), involving securities cov- ered by SLUSA (because they are traded on national exchanges, see 15 U.S.C. 78bb(f)(5)(E), 77r(b)(1)). See Pet. App. 16a-17a. Nor is there any dispute that the amended complaint alleges misrepresentations. See Pet. App. 17a. Instead, the question is “whether these purported misrepresen- tations were alleged to be ‘in connection with the pur- chase or sale’ of the covered securities.” /bid. Because the amended complaint alleges as a key premise of re- spondent’s claims that the misrepresentations caused stocks to trade at inflated prices, the misrepresentations were plainly made “in connection with the purchase or _ sale” of securities—regardless of whether this particular plaintiff class bought or sold securities in connection with the misrepresentations. A. The Key Statutory Phrase “In Connection With The Pur- chase Or Sale” Of A Security Has The Same Meaning In SLUSA That It Has In Section 10(b) And Rule 10b-5 As the court of appeals correctly concluded, “the meaning of ‘in connection with’ under SLUSA is coter- minous with the meaning of the nearly identical lan- guage in § 10(b) of the [1934 Act] and its corresponding Rule 10b-5.” Pet. App. 3a. “In using the phrase ‘in con- nection with the purchase or sale of a covered security,’ Congress * * * was using language that, at the time of SLUSA’s enactment, had acquired settled, and widely- acknowledged, meaning in the field of securities law, through years of judicial construction in the context of § 10b-5 lawsuits.” Riley v. Merrill Lynch, Pierce, 10 Fenner & Smith, Inc., 292 F.3d 1334, 1342-1343 (11th Cir.), cert. denied, 537 U.S. 950 (2002); accord Pet. App. 20a-21a; Disher v. Citigroup Global Mkts. Inc., 419 F.3d 649, 654 (7th Cir. 2005); Rowinski v. Salmon Smith Bar- ney Inc., 398 F.3d 294, 299 (8d Cir. 2005). When, as here, “administrative and judicial interpretations have settled the meaning of an existing statutory provision, repetition of the same language in a new statute indi- cates, as a general matter, the intent to incorporate its administrative and judicial interpretations as well.” Bragdon v. Abbott, 524 U.S. 624, 645 (1998); see NLRB v. Amax Coal Co., 453 U.S. 322, 329 (1981); Lorillard v. Pons, 434 U.S. 575, 580-581 (1978). Accordingly, “[e]very court of appeals to encounter SLUSA has held that its language has the same scope as its antecedent in Rule 10b-5.” Kircher v. Putnam Funds Trust, 403 F.3d 478, 482 (7th Cir. 2005), petition for cert. pending, No. 05-409 (filed Sept. 29, 2005); see Pet. App. 19a-20a; Disher, 419 F.3d at 654; Rowinski, 398 F.3d at 299; Riley, 292 F.3d at 1342-1343; Green v. Ameritrade, Inc., 279 F.3d 590, 597 (8th Cir. 2002). As the court of appeals noted, both parties to this case have agreed with those holdings. Pet. App. 17a, 26a; see Pet. 13; Br. in Opp. 12-13; Resp. C.A. Br. 19. The conclusion is inescapable that the “in connection with” requirement in SLUSA has the same meaning as the corresponding phrase in Section 10(b) and Rule 10b-5. B. The Amended Complaint Alleges Fraud “In Connection With” The Purchase And Sale Of Securities Under the standards governing Rule 10b-5 actions, the amended complaint alleges numerous misrepresen- tations and omissions “in connection with the purchase or sale of a covered security.” 15 U.S.C. 78bb(f)(1). 11 1. Rule 10b-5 is construed “not technically and re- strictively, but flexibly to effectuate its remedial pur- poses.” SEC v. Zandford, 535 U.S. 813, 819 (2002) (quot- ing Affiliated Ute Citizens v. United States, 406 U.S. 128, 151 (1972)); accord Superintendent of Ins. v. Bank- ers Life & Cas. Co., 404 U.S. 6, 10-12 & n.7 (1971); Pet. App. 22a. It prohibits not only “garden variety” fraud, but “all fraudulent schemes in connection with the pur- chase or sale of securities.” Superintendent of Ins., 404 U.S. at 11 n.7 (quoting A.T. Brod & Co. v. Perlow, 375 F.2d 393, 397 (2d Cir. 1967)). Under Rule 10b-5, all misrepresentations “touching” (Superintendent of Ins., 404 U.S. at 12-13) or “coincid- [ing]” (Zandford, 535 U.S. at 825) with securities trans- actions are “in connection with” them, such as when a misrepresentation and a sale are “part of the same fraudulent scheme,” Alley v. Miramon, 614 F.2d 1372, 1378 n.11 (5th Cir. 1980) (Wisdom, J.), or otherwise “{ajre not independent events,” Zandford, 535 U.S. at 820. See United States v. O’Hagan, 521 U.S. 642, 655- 656 (1997); Pet. App. 23a. Thus, Rule 10b-5 is violated “whenever [false] assertions are made * * * in aman- ner reasonably calculated to influence the investing pub- lic” in their decisions regarding the purchase or sale of securities. SEC v. Texas Gulf Sulfur Co., 401 F.2d 833, 862 (2d Cir. 1968) (en banc), cert. denied, 394 U.S. 976 (1969); accord, e.g., McGann v. Ernst & Young, 102 F.3d 390, 393-394 (9th Cir. 1996) (citing cases), cert. denied, 520 U.S. 1181 (1997). 2. The amended complaint alleges that petitioner employed “the hallmarks of stock manipulation” in order to “caus[e] [certain] stocks to trade at artificially in- flated prices.” J.A. 53a (emphasis added). According to the amended complaint, petitioner’s “ratings, reports, 12 and recommendations regarding [certain] stocks were false and contained misleading statements.” J.A. 59a. Those allegedly false representations included “buy rec- ommendations” and “strong buy recommendations.” J.A. 62a, 64a; see J.A. 63a. In order to mislead “not only investors who were brokerage customers * * * but also individual investors,” petitioner “continually pro- moted the * * * [s]tocks in the press, on television and the internet.” J.A. 63a. “[T]hese deceptive reports were disseminated * * * in an effort to artificially support the stocks[’] prices.” J.A. 54a. The amended complaint further alleges that peti- tioner and its agents “traded against [petitioner’s] pub- lished research recommendations”—.e., sold the stocks while encouraging others to buy them. J.A. 54a; see J.A. 64a. At the same time, petitioner allegedly “refus[ed] to execute * * * [its customers’) orders to sell these stocks.” J.A. 54a. “As a result of [petitioner’s] efforts, * * * laffected] companies were better able to use their stock as currency in transactions.” J.A. 55a. Those allegations not only assert fraud coinciding with securities transactions, which is sufficient under Zandford, they assert that petitioner succeeded in “causing * * * stocks to trade”—+.e., to be purchased and sold—“at artificially inflated prices.” J.A. 53a; see O'Hagan, 521 U.S. at 664. Petitioner’s alleged selling of the securities at fraudulently inflated prices likewise constitutes fraud in connection with the purchase or sale of securities. See Wharf (Holdings) Ltd. v. United Intl Holdings, Inc., 532 U.S. 588, 596 (2001). 3. Even if the amended complaint had not included express references to trading and selling, it would still have alleged fraud in connection with the purchase or sale of securities. As the court of appeals held, preemp- 13 tion turns on the “substance” of the allegations, not whether the complaint uses any particular terminology. Pet. App. 16a; see, e.g., Miller v. Nationwide Life Ins. Co., 391 F.3d 698, 702 (5th Cir. 2004); Dudek v. Pruden- tial Sec., Inc., 295 F.3d 875, 879-880 (8th Cir. 2002). A contrary approach “would allow artful pleading to un- dermine SLUSA’s goal of uniformity—a result mani- festly contrary to congressional intent.” Rowinski, 398 F.3d at 300. As the Third Circuit explained in a materially identi- cal case, the scheme alleged by respondent “necessarily ‘coincides’ with the purchase or sale of securities” be- cause “(flor [it] to work, investors must purchase the misrepresented securities.” Rowinski, 398 F.3d at 302 (quoting Zandford, 535 U.S. at 825); see Disher, 419 F.3d at 655 (holding materially identical claims pre- empted by SLUSA). If the alleged fraudulent misrepre- sentations or omissions did not lead investors to pur- chase the affected securities at inflated prices, the price inflation that is an essential component of the alleged fraudulent scheme and respondent’s alleged injury sim- ply could not occur.’ Thus, claims like those at issue here are preempted even when they are artfully drafted to disguise their necessary relationship to the purchase or sale of securities.” ' Although the alleged fraud in this case involved a manipulation, publicly disseminated fraudulent representations concerning a publicly traded security would affect market purchases and sales irrespective of whether there were a manipulation. . This case therefore does not require the Court to explore the outer limits of the “in connection with” requirement. The Court need not determine, for example, whether that requirement could be satisfied by fraud that did not induce any investors to purchase or sell securities, but instead induced them only to hold securities they already owned. 14 C. The “In Connection With” Requirement Is Satisfied Re- gardiess Of Whether Respondent Or The Class Members Purchased Or Sold Securities Although respondent’s amended complaint plainly alleges fraud “in connection with the purchase or sale” of covered securities, the court of appeals held that re- spondent could avoid preemption by “exclud[ing] from the class claimants who purchased in connection with the fraud and who therefore could meet the standing requirement for maintenance of a 10b-5 action.” Pet. App. 43a. In other words, the court concluded that SLUSA does not preempt claims that allege fraudulent misrepresentations in connection with the purchase or sale of securities if the claims are brought by people who lack standing to bring Rule 10b-5 actions because they did not purchase or sell securities. That conclusion is incorrect. By its plain text, SLUSA preempts class actions alleging misrepresenta- tions or omissions “in connection with the purchase or sale” of securities, regardless of whether the plaintiff class would have standing to pursue that violation under federal law. The court of appeals’ contrary holding would open a gaping and illogical loophole by permitting potentially the most abusive securities class actions to escape SLUSA and the PSLRA, contrary to Congress’s expressed intent to require such class actions to proceed only under uniform federal standards. See SEC Br. at 6, 16-17, Blue Chip, supra. Nor need the Court deter- mine whether or under what circumstances the requirement could be satisfied by brokers’ misrepresentations to their customers relating to the customers’ brokerage accounts. See Zandford, 535 U.S. at 819, 825 n.4; Rowinski, 398 F 3d at 301-302. 15 1. The Blue Chip purchaser/seller rule does not apply to the determination whether a fraud is “in connection with” the purchase or sale of a security Neither Section 10(b) nor Rule 10b-5 affords an ex- press private right of action. See Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 748-749 (1975). Al- though this Court has long recognized an implied right of action for private parties, see, e.g., Superintendent of Ins., 404 U.S. at 13 n.9, it has held that the implied right of action does not extend to individuals who “neither purchased nor sold any of the offered shares,” including those who “allege that they decided not to sell their shares because of an unduly rosy representation or a failure to disclose unfavorable material.” Blue Chip, 421 U.S. at 725, 737-738. But whether a particular plaintiff has standing to pursue a private right of action is an altogether different question from whether a defendant violated the law. See, e.g., Cannon v. University of Chicago, 441 U.S. 677, 688 (1979). The Blue Chip Court repeatedly emphasized that its holding applies only to standing and is not a limi- tation on the scope of Rule 10b-5’s prohibition against fraud in connection with the purchase or sale of a secu- rity. Accordingly, the Blue Chip purchaser/seller rule is irrelevant in determining the coverage of the “in con- nection with” requirement. Indeed, the Blue Chip Court analyzed the language of Section 10(b) and Rule 10b-5, including the “in con- nection with” requirement, and chose not to rest its deci- sion on a textual foundation because “[nJo language in either of those provisions speaks at all to the contours of a private right of action.” 421 U.S. at 749; see id. at 733- 737. Instead, the Court decided—“as a matter of pol- icy”—that extending the implied right of action to plain- 16 tiffs who neither purchased nor sold securities in reli- ance on an alleged violation would present an unwar- ranted “danger of vexatious litigation” in light of the ease of alleging, but difficulty of disproving, that a plain- tiff had relied on public statements in not taking action. Id. at 739, 740; see id. at 739-749. Thus, “Blue Chip Stamps came out as it did not because § 10(b) and Rule 10b-5 are limited to situations in which the plaintiff itself traded securities, but because a private right of action to enforce these provisions is a judicial creation and the Court wanted to confine these actions to situations where litigation is apt to do more good than harm.” Kircher, 403 F.3d at 483; see SEC v. Rana Research, Inc., 8 F.3d 1358, 1364 (9th Cir. 1993); United States v. Newman, 664 F.2d 12, 17 (2d Cir. 1981); Pet. App. 24a- 25a. Indeed, the Blue Chip Court implicitly recognized that the substantive coverage of Rule 10b-5 extends far- ther than the universe of suits brought by private plain- tiffs with standing. The Court acknowledged that “a disadvantage” of its policy-based standing rule is that it “prevents some deserving plaintiffs from recovering damages which have in fact been caused by violations of Rule 10b-5.” 421 U.S. at 738 (emphasis added). The Court later reiterated that its rule “undoubtedly ex- cludes plaintiffs who have in fact been damaged by viola- tions of Rule 10b-5.” Jd. at 743. The Court thus made clear that “(t]he purchaser/seller standing limitation * * * does not stem from a construction of the phrase ‘in connection with the purchase or sale of any secu- rity,’” but instead relates solely to the standing of pri- vate plaintiffs, and that the scope of private lawsuits is narrower then the substantive scope of the “in connec- tion with” prohibition. Holmes v. Securities Investor 17 Prot. Corp., 503 U.S. 258, 284 (1992) (O’Connor, J., con- curring in part and in the judgment); see id. at 289-290 (Scalia, J., concurring in the judgment); O’Hagan, 521 U.S. at 664-665; SEC v. National Sec., Inc., 393 U.S. 453, 467 n.9 (1969) (distinguishing between the “cover- age” of Rule 10b-5 and the “standing” of private plain- tiffs). The Blue Chip Court underscored those points by explaining that its “purchaser-seller rule imposes no limitation on the standing of the SEC.” 421 U.S. at 751 n.14; accord O’Hagan, 521 U.S. 642, 664-665 (1997); United States v. Naftalin, 441 U.S. 768, 774 n.6 (1979); National Sec., 393 U.S. at 467 n.9; In re Engelman, 52 S.E.C. 271, 283 n.43 (1995) (“The purchaser-seller stand- ing requirement does not apply to Commission-insti- tuted cases.”). In a suit for civil penalties or a criminal prosecution, the government must establish that the defendant “violated” Rule 10b-5, including its “in con- nection with” requirement. 15.U.S.C. 78u(d)(3)(A); see _ 15 U.S.C. 78ff(a) (Supp. II 2002). The government’s ability to pursue such actions even when a private plain- tiff would be barred by the Blue Chip standing rule nec- essarily means that the “in connection with” and stand- ing inquiries are distinct. As Judge Easterbrook ex- plained for the Seventh Circuit, the government’s “{iJnvocation of [Rule 10b-5] does not depend on proof that the agency or the United States purchased or sold securities; instead the ‘in connection with’ language en- sures that the fraud occurs in securities transactions rather than some other activity.” Kircher, 403 F.3d at 483; cf. O'Hagan, 521 U.S. at 660 (“§ 10(b) refers to ‘the purchase or sale of any security,’ not to identifiable pur- chasers or sellers of securities”). 18 2. SLUSA’s text expressly ties preemption to the scope of Rule 106-5’s “in connection with” requirement, not to whether a particular plaintiff would have standing to sue for a violation of Rule 10b-5 Because the Blue Chip purchaser/seller rule is a ju- dicially crafted, prudential standing requirement that is premised on policy grounds rather than an interpreta- tion of the statutory “in connection with” requirement, it does not limit the scope of that statutory phrase. The court of appeals appeared to recognize as much when it stated that Blue Chip’s “limitation on standing to bring private suit(s] for damages * * * is unquestionably a distinct concept from the general statutory and regula- tory prohibition on fraud in connection with the pur- chase or sale of securities,” and “should not be conflated with the question of whether the ‘in connection with’ requirement ha[s] been met.” Pet. App. 27a (quoting Ontario Pub. Serv. Employees Union Pension Trust Fund v. Nortel Networks Corp., 369 F.3d 27, 34 (2d Cir. 2004) (internal quotation marks omitted), cert. denied, 125 S. Ct. 919 (2005)). But the court of appeals then veered off course by concluding that “[bJecause only purchasers and sellers have a federal private damages remedy, itis * * * natural to suppose that Congress meant to import the settled standing rule along with the ‘in connection with’ phras* as a substantive standard” in delimiting SLUSA’s preemptive scope. Jd. at 28a (em- phasis added). Nothing in the text or history of SLUSA justifies creation of such a limitation on the scope of SLUSA preemption.’ > The two other courts of appeals that held claims by non-purchasers and non-sellers not to be preempted under SLUSA erroneously rea- soned that Blue Chip interpreted Rule 10b-5’s “in connection with” 19 a. The court of appeals did not (and could not) iden- tify anything in SLUSA’s text that “import[s]” the standing rule “along with” the separate “in connection with” requirement. Pet. App. 28a. Congress easily could have limited preemption to cases involving allega- tions of fraud “in connection with the purchase or sale of covered securities by the plaintiff.” It did not do so. Likewise, Congress could have limited its focus to the claims of purchasers or sellers, rather than “any private party,” 15 U.S.C. 78bb(f)(1)(A). Again, it did not do so. Instead, Congress intentionally employed broad statu- tory language that ties the preemptive force of SLUSA directly to the full scope of the prohibitions contained in Section 10(b) and Rule 10b-5 themselves. As already explained, no standing requirement limits the scope of those prohibitions. See supra pp. 15-17. Congress also tailored the scope of SLUSA preemp- tion by crafting several express exceptions to preemp- tion, none of which applies here. See 15 U.S.C. 78bb(f)(3) and (5)(C). Those exceptions relate te deriva- tive actions; actions based on some contractual rights; actions brought by States, political subdivisions of States, and state pension plans; and certain actions aris- ing under the law of the issuer’s state of incorporation. Ibid. Congress’s express inclusion of those exceptions further confirms that it did not intend any others. See, e.g., TRW Inc. v. Andrews, 534 U.S. 19, 28 (2001) (“Where Congress explicitly enumerates certain excep- tions to a general prohibition, additional exceptions are requirement. See Riley, 292 F.3d at 1343-1345; Green, 279 F.3d at 597- 598. The Second Circuit is the only court of appeals to reach the incon- gruous conclusion that Blue Chip does not interpret that language but nonetheless does limit the seope of SLUSA preemption. 20 not to be implied, in the absence of evidence of a con- ___trary legislative intent.”). The court of appeals was not “moved by the observa- tion that the standing rule is merely a judge-made gloss on the statute and the Rule, because private Rule 10b-5 damages actions are themselves a creature of judicial implication.” Pet. App. 28a. But the relevant factor of the Blue Chip rule is not that it was judge-made, but that it is a rule-about the scope of standing as opposed to an interpretation of the substantive scope of the prohibi- tions in Rule 10b-5. Moreover, there is no need to infer anything about SLUSA’s explicit text. Congress focused on the preemption issue and could have linked the scope of preemption to the scope of standing, but instead chose to key the scope of preemption to the conduct alleged. The court of appeals sought support from a footnote in Blue Chip stating that the “disadvantage” of the pur- chaser/seller rule—.e., its tendency to prevent some victims of Rule 10b-5 violations from recovering dam- ages—is “attenuated to the extent that remedies are available to nonpurchasers and nonsellers under state law.” 421 U.S. at 738 n.9; see Pet. App. 29a. According to the court of appeals, “SLUSA’s wholesale importation of the language that gave rise to this balancing judg- ment must * * * be presumed to represent a ratifica- tion of that judgment.” /d. at 30a. This Court’s passing observation in the cited foot- note, which merely reflects the pre-SLUSA reality that state-law claims were not preempted, cannot sustain the weight placed on it by the court of appeals. The Blue Chip Court made no “balancing judgment” that standing should be denied under federal law only because and only to the extent that it was available under state law—much less that standing should be denied because 21 it was available in state-law class actions, which are the only actions preempted by SLUSA. To the contrary, this Court emphasized at length the danger of permit- ting suits by non-purchasers and non-sellers to proceed at all. See 421 U.S. at 742-748. Far from conditioning application of the purchaser/seller rule on the availabil- ity of state remedies, the Blwe Chip Court adopted that standing limitation as a uniform requirement applicable to all private plaintiffs under Section 10(b) and Rule 10b-5, without regard to the'r state-law remedies. 421 U.S. at 749, 755. Even if this Court had based the Blue Chip standing rule on the assumption that non-purchasers and non- sellers could assert securities fraud claims in some States, moreover, Congress could not have “ratified” that judgment by preempting all class actions based on Section 10(b)’s “in connection with” requirement. The ratification doctrine applies only to congressional re- enactment of statutory texts with settled interpreta- tions. See generally Department of Transp. v. Public Citizen, 541 U.S. 752, 770 n.4 (2004). Blue Chip does not interpret the “in connection with” requirement, how- ever, and SLUSA does not address standing. Thus, the purported “balancing judgment” would not have been an interpretation of the statutory text at issue here, and the ratification doctrine provides no support for the court of appeals’ reasoning. /bid.* * The extent to which suits by “holder” classes would be actionable under state law but for the preemptive effect of SLUSA is unclear. States vary in their receptiveness to holder claims. See Jn re World- com, Inc. Sec. Litig., 336 F. Supp. 2d 310, 319-323 (S.D.N.Y. 2004) (sur- veying state laws); Pet. App. 38a n.14. In those States that permit holder actions, moreover, SLUSA permits individual and derivative actions to proceed, and persons injured by holding stock may also bene- 22 b. Lacking a textual basis for its conclusion, the court of appeals turned to an “assumption that the his- toric police powers of the States were not to be super- seded by the Federal Act unless that was the clear and manifest purpose of Congress.” Pet. App. 30a-3la (quot- ing City of Milwaukee v. Illinois, 451 U.S. 304, 316 (1981)). But that “‘assumption’ of nonpre-emption is not triggered when the State regulates in an area where there has been a history of significant federal presence.” United States v. Locke, 529 U.S. 89, 108 (2000). The federal government has extensively regulated the na- tional securities markets and securities transactions for many decades, and Congress determined that the inter- state (and increasingly international) character of those markets confirms the propriety of and need for uniform national regulation of securities fraud class actions. See S. Rep. No. 182, 105th Cong., 2d Sess. 3-5 (1998). The “assumption” of non-preemption is therefore inapplica- ble here. Indeed, Congress enacted SLUSA for the very purpose of preempting state-law class action claims. Even if such an “assumption” were applicable in this case, “[t]he purpose of Congress [remains] the ultimate touchstone” and “primarily is discerned from the lan- guage of the pre-emption statute and the statutory framework surrounding it.” Medtronic, Inc. v. Lohr, 518 U.S. 470, 485-486 (1996) (internal quotation marks omitted). Thus, the “assumption” is overcome when, as here, the statutory text is clear. See ibid.; Cipollone v. Liggett Group, Inc., 505 U.S. 504, 522-523 (1992) (plural- ity opinion); 7d. at 548-549 (Scalia, J., concurring in part and dissenting in part); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97 (1983). fit from state and federal enforcement actions. See pp. 3-4, 19, supra. 23 The court of appeals thought that “[tJhere is no clear support in the legislative history for the conclusion that Congress intended SLUSA to preempt claims that do not satisfy the Blwe Chip rule” because the legislative history “contains no specific mention of holding claims or other non-purchaser/non-seller claims.” Pet. App. 31a. Even if the court of appeals’ analysis of the legisla- tive history were correct (but see pp. 23-26, znfra), the absence of relevant legislative history would reveal noth- ing about Congress’s intent and could not overcome the plain statutory text, which is keyed to the conduct al- leged, not the plaintiff's status. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 385 n.2 (1992); Shaw, 463 U.S. at 97. “[I]t would be a strange canon of statutory construction that would require Congress to state in committee reports or elsewhere in its deliberations that which is obvious on the face of a statute.” Harrison v. PPG Indus., Inc., 446 U.S. 578, 592 (1980); see Patenaude v. Equitable Life Assurance Soc’y, 290 F.3d 1020, 1025 (9th Cir. 2002) (holding that SLUSA’s defini- tion of “covered security” encompasses variable annu- ities even though they are not mentioned in the legisla- tive history). 3. The legislative history and the policies underlying SLUSA confirm that Congress did not exempt from pre- emption the claims of plaintiffs who would lack standing to pursue a Rule 106-5 claim The court of appeals also erred in concluding that “to the extent the legislative history casts any light on the question, it suggests that Congress intended to preempt only those state claims that had migrated from federal court in response to the PSLRA.” Pet. App. 32a. Be- cause people who neither purchased nor sold securities 24 lacked standing to pursue Rule 10b-5 actions before Congress enacted the PSLRA, the court concluded that Congress did not intend to affect their state-law class action claims. See ibid. That result, however, would turn congressional intent on its head by exempting an especially abusive category of securities fraud class ac- tions from the uniform national standards that Congress adopted to prevent abuse. a. The court of appeals was correct insofar as it rec- ognized that Congress was concerned that plaintiffs were evading the PSLRA by bringing securities fraud class actions in state instead of federal courts. See SLUSA § 2(2) and (3), 112 Stat. 3227; H.R. Conf. Rep. No. 803, 105th Cong., 2d Sess. 1 (1998); S. Rep. No. 182, supra, at 3-4. But Congress responded to that develop- ment not only by permitting the removal of affected cases from state to federal courts, see 15 U.S.C. 78bb(f)(2), but “[a]dditionally” by “establish{ing] uni- form national rules for securities class action litigation involving our national capital markets.” H.R. Conf. Rep. No. 803, supra, at 138. Concerned about the “dangers of maintaining differing federal and state standards of lia- bility for nationally-traded securities,” Congress chose to give “due consideration to the benefits flowing to in- vestors from a uniform national approach.” S. Rep. No. 182, supra, at 3. Congress recognized that “[sJome crit- ics of establishing a uniform standard of liability have attacked such legislation as being an affront on Federal- ism,” but it “found the interest in promoting efficient national markets to be the more convincing and compel- ling consideration in this context.” /d. at 4. Thus, there is no support for the improbable conclu- sion that Congress intended to preempt only those state- law claims that can be pursued successfully under fed- 25 eral law, while leaving intact all state-law claims that are legally meritless under federal law. Rather, Congress intended to apply uniform federal standards to securi- ties class actions, which it perceived to be the source of most abusive securities litigation, “while preserving the appropriate enforcement powers of State securities reg- ulators and not changing the current treatment of indi- vidual lawsuits.” SLUSA § 2(5), 112 Stat. 3227. Con- gress thus drew the line between class actions and other types of securities litigation, a line that has nothing to do with whether a class action plaintiff would have standing to pursue a claim under federal law. The court of appeals relied on a floor statement by Senator Dodd to the effeet that SLUSA would work “in a very targeted and narrow way, essentially preempting only those class actions that have recently migrated to State court, while leaving traditional State court actions and procedures solidly in place.” Pet. App. 32a-33a (quoting 143 Cong. Rec. 21,357 (1997)) (emphasis added). That floor statement of a single legislator pro- vides no support for the court’s conclusion because Sen- ator Dodd expressly identified the “traditional State court actions and procedures” he had in mind, and ac- tions by “holders” were not among them. /bid. See also Consumer Prod. Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 118 (1980) (“{O}rdinarily even the contem- poraneous remarks of a single legislator who sponsors a bill are not controlling in analyzing legislative his- tory.”). Moreover, it is not clear that Senator Dodd used the term “migrate” narrowly to exclude claims like re- spondent’s that presumably would have been brought in federal court on behalf of purchasers before the PSLRA, migrated to state court to avoid the PSLRA, and were 26 later partially transmogrified into a “holder” suit to cir- cumvent both the PSLRA and SLUSA. More illuminating is the Senate Committee report, which explains that SLUSA is to be “interpreted broadly” to effectuate Congress’s intent to “effectively reach[{] those actions that could be used to circumvent” the PSLRA. S. Rep. No. 182, supra, at 8. Because state-law “holder” actions would circumvent the uniform federal standards of Rule 10b-5 and the PSLRA, ex- empting such suits from preemption would be contrary to that intent. See generally Rowinski, 398 F.3d at 299 (“Congress envisioned a broad interpretation of SLUSA to ensure the uniform application of federal fraud stan- dards.”); Newby v. Enron Corp., 338 F.3d 467, 472 (5th Cir. 2003) (“{I)n enacting SLUSA Congress sought to curb all efforts to circumvent the reforms put into place by PLSRA.”); Miller, 391 F.3d at 702 (same).° . The court of appeals also pointed to Senator Dodd’s statement that SLUSA affects only “those types of class actions that are appropriately heard on the Federal level.” 143 Cong. Rec. at 21,357; see Pet. App. 33a. As the committee reports explain, Congress concluded that class action claims regarding nationally traded securities are appropriately heard on the federal level because of the need for uniform national stan- dards. See p. 24, supra. That such claims may be dismissed for lack of standing when they pose a particularly high risk of abuse does not mean that they should be heard on the state level; it means that they uniformly should be dismissed by federal courts. Standing is far from the only reason that a claim might fail under federal but not state law. Federal securities fraud plaintiffs must satisfy heightened pleading requirements, 15 U.S.C. 78u-4(b), establish scienter in some cases, Ernst & Ernst v. Hochfelder, 425 U.S. 185, 199 (1976), and prove in some cases that the alleged misrepresentations fall outside of the PSLRA’s safe harbor for forward-looking statements, 15 U.S.C. 78u-5(c)(1). A plaintiff class's failure to satisfy such require- ments does not mean that the class should be able to take advantage of less stringent state-law standards. Instead, it means that the suit is 27 b. Recognition of an implicit exception to SLUSA’s preemptive scope would be particularly inappropriate in the context of this case, because an exception for claims brought by those who neither purchased nor sold securi- ties would directly frustrate Congress’s goals in enact- ing the statute. i. The need for uniform national standards, like the text of SLUSA’s preemption provision, does not turn on the identity of the plaintiff in a particular case. In order to “encourage the voluntary disclosure of information by corporate issuers,” the PSLRA created a “safe harbor” for forward-looking statements. S. Rep. No. 98, 104th Cong., 2d Sess. 4-5 (1995); see 15 U.S.C. 78u-5. That safe harbor could not accomplish its purpose of encour- aging disclosure if some plaintiffs could evade it by filing under state law. Similarly, “to encourage plaintiffs’ law- yers to pursue valid claims for securities fraud and to encourage defendants to fight abusive claims,” the PSLRA adopted a modified proportionate liability stan- dard, heightened pleading requirements, and a stay of discovery pending the resolution of motions to dismiss. S. Rep. No. 98, supra, at 6-7 (emphasis omitted); see 15 U.S.C. 78u-4(b), (c) and (f). Those and other require- ments would likewise fail to discourage the filing of meritless suits if such suits could be brought under state law on behalf of people who did not purchase or sell se- curities. The artificiality of any distinction based on an indi- vidual plaintiff's trading activity (or lack thereof) is fur- precisely the type of class action that Congress targeted. As Judge Easterbrook explained, SLUSA’s “pre-emptive effect is not confined to knocking out state-law claims by investors who have winning federa! claims * * * It covers both good and bad securities claims—especially bad ones.” Kircher, 403 F.3d at 484. 28 ther underscored by the fact that a single securities fraud scheme will frequently victimize purchasers, sell- ers, and holders—and there will often be substantial overlap among those classes, because purchasers gener- ally become holders, and sellers tend to be former hold- ers. Thus, in related proceedings before the district court that dismissed this case, purchasers and sellers are pursuing actions against petitioner based on the same underlying transactions. Pet. App. 55a. The origi- nal and amended complaints in this case likewise allege a class of purchasers and sellers, as well as holders. Id. at 4a-5a, 40a-41a; cf. id. at 42a-43a (recognizing the “close relationship” between claims based on purchases and those based on holdings as well as the difficulty in disentangling the two). To apply uniform national! standards in cases brought by purchasers and sellers, but differing state-law stan- . dards in cases brought by holders based on the same underlying conduct, would deprive the uniform national standards of any semblance of uniformity. In cases in which some of the misrepresentations occurred before a plaintiff's purchase of a security, it would also elevate artful pleading over substance, because such plaintiffs might attempt to avoid preemption by focusing on mis- representations made between their purchases and sales and limiting the scope of requested damages. Respon- dent has done just that: after the district court dis- missed respondent’s original complaint because it al- leged that he purchased securities in reliance on a fraud- ulent scheme, respondent recast himself as a “holder” in his amended complaint in hopes of avoiding preemption. See pp. 4-5, supra. As explained above, SLUSA was intended in part to combat artful pleading, not to en- courage it. See pp. 12-13, supra. That is another reason 29 why a plaintiff should not be able to “avoid preemption by asserting it is only claiming damages suffered as a result of holding its stock.” Professional Mgmt. Assocs., Inc. Employees’ Profit Sharing Plan v. KPMG, 335 F.3d 800, 803 (8th Cir. 2003), cert. denied, 540 U.S. 1162 (2004). ii. If any set of plaintiffs were to be exempted from preemption, it would not be those who neither purchased nor sold securities. As the court of appeals appeared to recognize, such an exemption would “allow the very cat- egory of claims that the Supreme Court identified in Blue Chip as posing a particularly high risk of vexatious litigation.” Pet. App. 29a. Although private securities class actions are an important supplement to govern- ment enforcement actions, this Court recognized in Blue Chip that “[t]he risk of strike suits is particularly high” in eases not brought by purchasers or sellers because such plaintiffs could reach trial merely by asserting that they relied on a public misrepresentation or material omission in not buying or selling stock. 421 U.S. at 742. The potential for abuse is further underscored by respondent’s theory of injury and damages. Although some persons who are fraudulently induced not to pur- chase or sell securities may be injured thereby, see Blue Chip, 421 U.S. at 738, 743, the amended complaint al- leges that respondent was injured by petitioner’s failure to disclose that it had fraudulently inflated the stock prices because respondent would have sold his shares before the prices declined had he known the truth, see J.A. 58a-54a. That is not even a cognizable injury. Ab- sent the alleged fraud, the prices never would have be- come fraudulently inflated. And if petitioner had dis- closed the alleged fraud, the stock prices likely would have fallen immediately to reflect that information, pre- 30 venting respondent from selling at the inflated levels. See Crocker v. FDIC, 826 F.2d 347, 351 (5th Cir. 1987), cert. denied, 485 U.S. 905 (1988); Arent v. Distribution Scis., Inc., 975 F.2d 1370, 1374 (8th Cir. 1992); Levine v. Seilon, Inc., 489 F.2d 328, 333-334 (2d Cir. 1971) (Friendly, J.); ef. Basic, Inc. v. Levinson, 485 U.S. 224, 246-247 (1988). In any event, respondent “could hardly be heard to claim compensation for the premium he might have extracted from some innocent victim if he had known of the fraud and the buyer did not.” Levine, 439 F.2d at 333. Respondent had no legally-protected right to benefit from the alleged fraud. Because Blue Chip and SLUSA constrain potentially abusive suits in compatible ways, and suits by plaintiffs who neither purchased nor sold securities in connection with alleged fraud epitomize the potential for abusive suits that this Court and Congress sought to combat, “(i]t would be more than a little strange if [this] Court’s decision to block private litigation by non-traders be- came the opening by which that very litigation could be pursued under state law.” Kircher, 403 F.3d at 484. Permitting SLUSA and Blue Chip to complement one another would be far more consistent with congressional intent than treating the judicial restriction as annulling the congressional one. CONCLUSION The judgment of the court of appeals should be re- versed. Respectfully submitted. 31 PAUL D. CLEMENT GIOVANNI P. PREZI080 Solicitor General General Counsel THOMAS G. HUNGAR Jacos H. STILLMAN Deputy Solicitor General Solicitor DARYL JOSEFFER ERIC SUMMERGRAD Assistant to the Solicitor Deputy Solicitor General SUSAN S. MCDONALD Senior Litigation Counsel JEFFREY T. TAO Senior Counsel Securities and Exchange Commission NOVEMBER 2005 FILED (7) NOV 14 2005 No. 04-1371 OFFICE OF THE CLERK In the Supreme Court of the Gnited States MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Petitioner, v. SHADI DABIT, on behalf of himself and all others similarly situated Respondents. On Writ of Certiorari to the United States Court of Appeals for the Second Circuit BRIEF OF THE CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA AS AMICUS CURIAE IN SUPPORT OF PETITIONER ROBIN S. CONRAD CHARLES A. ROTHFELD AMAR D. SARWAL Counsel of Record National Chamber Litiga- ANDREW J. PINCUS tion Center, Inc. Mayer, Brown, Rowe & 1615 H Street, NW Maw LLP Washington, DC 20062 1909 K Street, NW (202) 463-5337 Washington, DC 20006 (202) 263-3000 STEPHEN M. SHAPIRO Timothy S. BISHOP Mayer, Brown, Rowe & Maw LLP 71 South Wacker Drive Chicago, IL 60606 (312) 782-0600 QUESTION PRESENTED - Whether the Securities Litigation Uniform Standards Act of 1998 preempts state law class action claims brought by persons who assert that they were induced by fraudulent ma- terial statements or omissions to “hold,” rather than purchase or sell, securities. (i) QUESTION PRESENTED TABLE OF AUTHORITIES ETT, sccdcupniscerssmestistcinintinnnanindineeniagitins FE Siicictiptesiseiscbiaiintineaiinaiasaviniinitinptiniaiabtibainansiesiibiaii 1. THE PLAIN LANGUAGE OF THE SLUSA PREEMPTS “HOLDER” CLASS ACTIONS BASED UPON STATE LAW .......00....cceseeeeeee Il. THE POLICY AND UNAMBIGUOUS TABLE OF CONTENTS CONGRESSIONAL INTENT UNDERLY- ING THE SLUSA PREEMPTS “HOLDER” CLASS ACTIONS BASED UPON STATE A. The Pressure To Settle Even Meritless Securities Class Actions Imposes An Enormous Toll On The National B. The PSLRA Adjusted Litigation In- centives And Reoriented Securities Class Action Litigation To Deter Fraud And Compensate Investors Who Trby Were Enjuated.........00ccscccssseseserseeees os The SLUSA Was Enacted To Prevent Frustration Of The PSLRA’s Reforms.... D. Excepting State-Court “Holder” Suits From SLUSA Preemption Would Frustrate The Congressional Purpose..... CONCLUSION SEER EERE EEE EERE EE EEE EEE EEE EEE HEHEHE HEHE EE EHD ill TABLE OF AUTHORITIES Page(s) Cases: Arent v. Distribution Scis., Inc., 975 F.2d 1370 PIs UTC cccisctaparisinstapititdnesccimeibesticsbibinnbennhinicinesiteloctaen, 24 Basic, Inc. v. Levinson, 485 U.S. 224 (1988)............:c:cc0 25 Birnbaum v. Newport Steel Corp., 193 F.2d 461 (2d Cir.), cert. denied, 343 U.S. 956 (1952)... 26 Blue Chip Stamps v. Manor Drug Stores, 421 SRA FER TIED arehsssicnctibiiatisupessctinbitnmniestnemniashapoanaaes passim Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994) ooo. cece cecceeeeees ll Crocker v. FDIC, 826 F.2d 347 (Sth Cir. 1987) ........... 24, 25 Dirks v. SEC, 463 U.S. 646 (1983) ........cccceeeceeseeeeeeeeeeeeenes 12 Dura Pharms., Inc. v. Broudo, 125 S. Ct. 1627 IIIT chsiicouniiidisdsnihteccidinidiahianpaincdaiiatbaniiliinioeseaeds 15, 16, 24 Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258 Eee nisncctceddobccnatnabshanalidstiabalieddpelinipdiatiuiigabachesdyidédbiies 6, 24 Huddleston v. Herman & MacLean, 640 F.2d 534 (Sth Cir. 1981), aff'd in part and rev’d in part on other grounds, 459 U.S. 375 (1983) .0.....ccceeeceeeeeeeees 15 In re Philip Morris Sec. Litig., 8372 F. Supp. 97 (S.D.N.Y. 1995), aff'd in part and rev’d in part, 75 F.3d 801 (2d Cir. 1996) ...c.cccccssscsscessssecessesssnseee 13, 14 SEC v. Texas Gulf Sulphur Co., 401 F.2d 833 (2d I i re no 5, 24 ~ SEC v. Zandford, 535 U.S. 813 (2002) ..csccc..ccscsvecsesseseevee 5,6 Santa Fe Indus., Inc. v. Green, 430 U.S. 462 (1977)............ 5 iv TABLE OF AUTHORITIES — (Cont’d) Superintendent of Ins. v. Bankers Life & Cas. Co., Bee CEE ye cececenisbcincsaictnstiabbonniptniiiiindesincniintnidadin 5 TSC Indus. v. Northway, Inc., 426 U.S. 438 (1976) ........... 12 United States v. Naftalin, 441 U.S. 768 (1979)........ccccccceeees 6 United States v. O'Hagan, 521 U.S. 642 (1998)..............06. 6 STATUTES, RULES, AND REGULATIONS Private Securities Litigation Reform Act of 1995, Pub. L. No. 104-67, 109 Stat. 737 0.......eeccceceseeeeeeeeeesee 3 Securities Litigation» Uniform Standards Act of 1998, Pub. L. No. 105-353, 112 Stat. 3227 oo... eee eee 2, 21 SS EEL. Be sntotnccinlsesssshosinsiahctlieaipieaiaipedaaaae 26 BS SIL. 6 FGD