Supplemental Brief — Disher v. Citigroup Global Markets Inc.

Aux hen

RECORDS

\ AND ; _- JUN 20 2006

BRIEFS No.05-776 | Supamer er S™

IN THE

Supreme Court of the United States

RICHARD DISHER, INDIVIDUALLY AND

ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,

Petitioner,

CITIGROUP GLOBAL MARKETS INC.,

Respondent.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Seventh Circuit

SUPPLEMENTAL BRIEF FOR PETITIONER

ROBERT L. KING DAVID C. FREDERICK

701 Market Street Counsel of Record

Suite 350 F. ANDREW HESSICK III

St. Louis, Missouri 63101 KELLOGG, HUBER, HANSEN,

(314) 241-4844 TODD, EVANS & FIGEL,

P.L.L.C.

1615 M Street, N.W.

Suite 400

Washington, D.C. 20036

June 20, 2006 (202) 326-7900

Counsel for Petitioner

LIBRARY OF CONGRESS

LAW LIBRARY

SUPPLEMENTAL BRIEF FOR PETITIONER

This case presents the same question that was recently

resolved by this Court in Aircher v. Putnam Funds Trust,

No. 05-409 (June 15, 2006): whether 28 U.S.C. § 1447id)

precludes a court of appeals from exercising appellate ju

risdiction to review a district court order remanding state-

law claims for lack of subject-matter jurisdiction under

the Securities Litigation Uniform Standards Act of 1998

(SLUSA’). In Kircher. this Court held that § 1447(d) pre-

cludes appellate review of such remand orders. The same

holding apples here

Respondent argues that the Court should deny the peti-

tion for a wrt of certiorart because, in its view, this

Court's decision in Merrill Lynch, Pierce, Fenner & Smith,

Inc. v. Dabit, 126 S. Ct. 1503 (2006), foreordains the out-

come in this case. Respondent further contends that, if

the Court grants the petition and vacates the court of ap-

peals’ decision, the district court will decide in the first

instance whether Dabit requires that petitioners claims

be dismissed. Neither contention has merit. This Court

should follow its normal course and grant the petition,

vacate the Seventh Circuit's order, and remand tor fur

ther proceedings.

1. Under Kircher, the Seventh Circuit's decision in this

case cannot stand. As in Kircher, the district court in this

case remanded to state court based on its conclusion that

it lacked subject-matter jurisdiction because the criteria

for preemption under SLUSA had not been met. See Pet

App. 13a-l4a: see also td. at 12a (describing order as “re-

mand|ing] to state court for lack of subject matter ju

risdiction ).. Section 1447(d) theretore barred the court of

Respondent reiterates its contention that the district court did not

understand its remand order to be based on a lack of subject-matter

inisdiction. See Supp. Bnef Snot. But this Court held m Aircher that

SLUSA authorizes the removal only of those claims that satisfy

SLUSA's preemption criteria “as set forth im subsection (bh) ; 4a

U.S.C. § 77p. See Aircher, slip op. at § (we read authorization for the

removal mn subsectson ¢c), on which the District Court's purmdiction

lepends, as confined to cases ‘set forth im subsection (bb) (quetir =

ed = hn tee

Oe ee a tt ee ie wie Red ee me oe ee

wr

ippeais trom exercising juris tion to review the str

ourts remand order et respondent edes tha

Aircher establishes that th seventh ( ur t ma r

acKed appellate jurisdict mtn i Supp. Br

2. Nevertheless esponde mtends that he { rt

that holder claims n , ' ons

if § T7pib). See 126 8. Ct. at According -

dent, Dabit requires that the petit e denied becaus

redetermination in light Aircher will not affect the

timate outcome I the ane Ni SUuDI Ry juoting

Lau rence ex rel. Lawrer ( Aaler H | . ‘ t

(1996) (per curiam)

Dabit GQves nol sLabdiish HowevVel tha > r

laims are precluded by SLUSA. In Dabdit. this Court co

sidered onlv whether hold r ; bh,

tion with’ criterion of § 77p(h). the Court did not addr

the meaning or application of SLUSA fraud” rea

ment or any of the ner? re ‘ s for pre« jon Uu

ler SLUSA. See | B.¢.. & mit In Dai he pl

tiffs had admittedly alk ved frau ent statement i!

tihe only dispute ssuE wa whether the eve

Wronyvaoing Was I rere “ r purchase ¥r he

t securities -0 SS. ( it Here. b ira pe

loner s ims ar p nisrept tat pet

toner alleges that responders hed | . '

tract ind its [iducpar t to er j scte

legiigentiv Dv failing super “ re'se her i?

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ire ' ia ha tr

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‘ meron P

ing t p esp i A }

is rye 4 ) i ats Ih r? y ‘

" ry} +} ' tit ’ w, } ‘

re se Dh f addressed onl wi ne | ims

re ea Tf rye tf | ; wit! r pu hase

> t ine ive ! S| LSA | rt ie «? 1 % Der! ed

‘ ‘ ra lbu j Ai ‘ ait

/ “ rat ; i st tre : is i ‘ | rile :

ina whether the other criteria tor Si SAA pi sik

ee rryest thes mt Aithoug!? i e spon n

Supp. Br. 5), petitioner focused in the lower courts on tl

irzgument nat the ection wit! requireme nad

not deen satished, petitioner ha evel Di it na

, hy riter r pr lu oO ha : , And

A ise tT list t } lt remande pet MTs Claims tor

K inject-m er risdicti Kircher dictat tt

me i rurt ie rm ed I t stare | ‘

how ita Ljat affects the t rm 1 tn int t

Kis r permits the parties t tiga >

’ , b apt ; y f S| SA P v4 h 7 1 gl ‘

cate if reman wo the same at:

% R nce ther llateral argumet i

this (our acat the Seventh Circuit s orde tine sti

rt ind n rhe ite rt. whi le

stan wi re Hyadit preciud De n s claims i

ha merit. Responder is hat gument on the

fact tha r seventn ¢€ ircurt t rsed the tr

, irder ren ling th . , tats . wn ,

ma ied wit! ~ } iss th » tire

t t yurt wat mand of r al ‘ t

tw r ilmMs espon wT ; ‘ | tr

rie eT ’ i Si rok re re | firs

I ta nian i ' ta teri “avi AT t?

Jadot pre ‘ peti ‘

Res t Phe '

T a ‘4 ‘ ne ™

{wv if ? ‘ ' ‘ ; '

would be for the district court to vacate its dismissal and

to reinstate its original remand order. The state trial

court can then evaluate petitioner's claims under SLUSA

and assess not only the effect of Dabit on petitioner's

claim, but also whether the other criteria for preclusion

under SLUSA have been met. See Kircher, slip op. 14

n.15

CONCLUSION

For the foregoing reasons and those stated in the peti-

tion, the petition for a writ of certiorari should be granted.

the judgment of the court of appeals vacated, and the case

remanded for further consideration in light of Kircher

Respectfully submitted,

ROBERT L. KING DAVID C. FREDERICK

701 Market Street Counsel of Record

Suite 350 F. ANDREW HESSICK III

St. Louis, Missouri 63101 KELLOGG, HUBER, HANSEN,

(314) 241-4844 TODD, EVANS & FIGEL,

P.L.L.C.

1615 M Street, N.W

Suite 400

Washington, D.C. 20036

June 20. 2006 (202) 326-7900

Counsel for Petitioner

Supreme Coun, U.S

: \ FILE D

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- FEB 28 2006

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Jr WOE OF THE CLERK

“—— ae -a-e —-

No. 05-776 erp ey -

a

IN THE

Supreme Court of the United States

RICHARD DISHER, INDIVIDUALLY AND

ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,

Petitioner,

CITIGROUP GLOBAL MARKETs INC..,

Respondent.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Seventh Circuit

REPLY BRIEF FOR PETITIONER

ROBERT L. KING DAVID C. FREDERICK

701 Market Street Counsel of Record

Suite 350 F. ANDREW HESSICK III

St. Louis, Missouri 63101 KELLOGG, HUBER, HANSEN,

(314) 241-4844 TODD, EVANS & FIGEL,

P.L.L.C.

1615 M Street, N.W.

Suite 400

Washington, D.C. 20036

February 28, 2006 (202) 326-7900

Counsel for Petitioner

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ................ PRESS OOM EL op ill

ARGUMENT:

I. SLUSA Does Not Preempt Holder Claims............ 2

Il. The District Court Correctly Remanded

The Case Based On Its Determination That

It Lacked Subject-Matter Jurisdiction ..................3

III. The Petition Should Be Held Pending This

Court's Decision In Kircher......................<cec0.000... a

ll

TABLE OF AUTHORITIES

CASES

Blue Chip Stamps v. Manor Drug Stores. 421 US.

Fee TED citteiancesdosainhtiaptaeenic cute ide Oladaditints ubeinihces

Bragdon v. Abbott, 524 U.S. 624 (1998)...

Kircher v. Putnam Funds Trust, 1268S. Ct. 979

ee Ss, GE iid rcicccisccnincpcencthidactittttiiapsipeebcinckees

Lorillard v. Pons, 434 U.S. 575 (1978) ..............ccccceceeeee

Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit.

126 S. Ct. 34 (2005) (No. 04-1371)..............ccceeeeeeer es

Thermtron Products, Inc. v. Hermansdorfer, 423 U.S.

BUT CPTI ciestiscilieneashachsirndtlacseatnasaesbenowaibaiiigsindinesausbeincane

Things Remembered, Inc. v. Petrarca, 516 U.S. 124

SUPT tink feasicetiinnotsnabctasubiias-cniedaonintaselacigbapiampimsbkctibaedadden

STATUTES AND REGULATIONS

Securities Act of 1933, 15 U.S.C. §§ 77a et seq.:

Securities Exchange Act of 1934, 15 U.S.C. §§ 78a

Be GD. cicatasncusinctenniondabtinncepsonarndinnddctinteanmnegianieensenhins

BT. § TEI SO ss sctesicaiensnstigeecinisthindions

Securities Litigation Uniform Standards Act of 1998,

Pub. L. No. 105-353, 112 Stat. 3227........................

28 U.S.C. § 1447(d)................ PA AS igcccuacatauae

17 C.F.R. § 240.10b-5 (Rule 10b-5)..... ee cecececeeeeeceeeee

Page

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REPLY BRIEF FOR PETITIONER

Respondent acknowledges that this Court has already

agreed to resolve both questions presented in this peti-

tion. The first question, whether the court of appeals has

jurisdiction to review an order of the district court re-

manding for lack of subject-matter jurisdiction a suit re-

moved under the Securities Litigation Uniform Standards

Act of 1998 (“SLUSA”), is presented in Kircher v. Putnam

Funds Trust, 05-409, in which the Court granted certio-

rari on January 6, 2006. The second question presented,

which concerns the court of appeals’ holding that SLUSA

preempts claims brought by holders of securities, is before

the Court in Merrill Lynch, Pierce, Fenner & Smith, Inc.

v. Dabit, No. 04-1371 (argued and submitted Jan. 18.

2006), on review of the Second Circuit's conclusion that

SLUSA does not preempt such holder claims. The peti-

tion in this case should be held pending the decisions in

Kircher and Dabit and then disposed of as appropriate in

light of those decisions.

Respondent essentially agrees that this petition should

be held pending the resolution of Dabit and Kircher.

Respondent instead focuses on arguing that this Court

should hold in Dabit that SLUSA preempts claims

brought by holders of securities. It also suggests that the

district court in this case did not in fact remand for lack of

subject-matter jurisdiction, but instead based its remand

order on the substantive determination that SLUSA did

not preempt petitioner's claim. Neither position has

merit. The district court correctly held that SLUSA does

not preempt holder claims, and it clearly based its remand

order on the determination that it lacked subject-matter

jurisdiction. Finally, respondent convends that the peti-

tion should not he held pending the decision in Kircher if

the Court decides in Dabit that SLUSA preempts holder

claims. There are good reasons, howe-er, to hold the peti-

tion pending the resolution of Kircher.

2

I. SLUSA Does Not Preempt Holder Claims

Respondent does not dispute that this petition should

be held pending the resolution of Dabit. Instead, respon-

dent argues that this Court should rule in Dabit that

SLUSA preempts class actions brought by holders, as op-

posed to purchasers or sellers, of securities. Opp. 11. As

the respondent in Dabit correctly argues, however,

SLUSA does not preempt claims brought by private plain-

tiffs who neither bought nor sold any security in connec-

tion with a defendant's misconduct. SLUSA preempts

only those class actions that allege that a defendant made

“an untrue statement or omission of a material fact” or

used “any manipulative or deceptive device or contrivance

in connection with the purchase or sale of a covered secu-

rity.” 15 U.S.C. § 77p(b). The operative language in

SLUSA’s preemption provision — “in connection with the

purchase or sale” — replicates the identical phrase in

§ 10(b) of the Securities Exchange Act of 1934, 15 U.S.C.

§ 78})(b), and Rule 10b-5 (17 C.F.R. § 240.10b-5), both of

which proscribe fraudulent conduct “in connection with

the purchase or sale of any security.”

In Blue Chip Stamps v. Manor Drug Stores, 421 U.S.

723 (1975), this Court held, based on an interpretation of

that phrase, that a private party does not allege miscon-

duct “in connection with the purchase or sale of any secu-

rity” within the meaning of § 10(b) and Rule 10b-5 unless

that misconduct was in connection with the plaintiff's

own purchase or sale of a security. See id. at 730-31, 749.

“When .. . judicial interpretations have settled the mean-

ing of an existing statutory provision, repetition of the

same language in a new statute indicates. as a general

matter, the intent to incorporate its ... judicial interpre-

tations as well.” Bragdon v. Abbott, 524 U.S. 624, 645

(1998): see Lorillard v. Pons, 434 U.S. 575, 581 (1978).

The phrase “in connection with the purchase or sale” in

SLUSA’s preemption provision therefore must have the

same meaning as the identical language in § 10(b) and

Rule 10b-5. Accordingly, SLUSA’s preemption provision

does not apply to claims brought by holders of securities,

as opposed to purchasers or sellers. See generally Resp.

Br. at 21-38, No. 04-1371.

Il. The District Court Correctly Remanded The

Case Based On Its Determination That It Lacked

Subject-Matter Jurisdiction

Respondent suggests in its statement of the case that

the district court did not base its remand on a finding that

it lacked subject-matter jurisdiction under SLUSA. In-

stead, respondent asserts, the district court found that

removal was proper and then remanded after making the

substantive determination that the case “does not involve

misrepresentation or omissions of material fact ‘In connec-

tion with the purchase or sale of a covered security.” Opp.

8 (quoting Pet. App. 14a). This claim lacks merit.

SLUSA authorizes the removal only of those claims that

satisfy SLUSA’s preemption criteria “as set forth in sub-

section (b)” of § 77p. 15 U.S.C. § 77p(c). Petitioner's

claims do not satisfy those preemption criteria because, as

explained above, SLUSA does not preempt holder claims.

The district court therefore lacked subject-matter jurisdic-

tion under SLUSA to hear those claims. Indeed, the dis-

trict court itself did not agree with respondent's charac-

terization of its remand order. In its order vacating its

earlier order remanding the case to state court, the dis-

trict court explained that it had “remanded this action to

state court for lack of subject matter jurisdiction.” Pet.

App. 12a. Because the district court remanded the case

for lack of subject-matter jurisdiction, 28 U.S.C. § 1447(d)

prohibited the court of appeals from reviewing that re-

mand order. See, ¢e.g.. Things Remembered, Inc. v. Pet-

rarca, 516 U.S. 124, 127 (1995): Thermtron Products, Inc.

v. Hermansdorfer, 423 U.S. 336, 351-52 (1976). See gen-

erally Pet’rs Br. at 19-45, No. 05-409.

Ill. The Petition Should Be Held Pending This

Court’s Decision In Kircher

Although respondent agrees that this petition should be

held pending the resolution of Dabit, respondent contends

that this Court should not hold the petition pending the

decision in Kircher if the Court first holds in Dabit that

SLUSA preempts claims brought by private plaintiffs who

neither bought nor sold any security in connection with a

defendant's misconduct. That position is unpersuasive.

If this Court decides Kircher before Dabit, and rules in

Kircher that courts of appeals lack jurisdiction to review

district court orders remanding for lack of subject-matter

jurisdiction cases removed under SLUSA, the petitioner

here should get the benefit of that decision. Such a deci-

sion would require the vacatur of the court of appeals’ de-

cision in this case and would likely result in this case's

being remanded to state court, as originally ordered by

the district court.

Even if the Court decides Dabit before Kircher, it should

still hold this case for decision in Kircher. Because peti-

tioner’s position here is that this case was improperly re-

moved, the state court in the first instance should be

permitted to decide how, if at all, this Court’s decision in

Dabit will affect the outcome of this case. That is true re-

gardless of whether this Court affirms, reverses, or va-

cates the Second Circuit's decision in Dabit. Because the

question presented in Dabit addresses only whether

holder claims are affected by the “in connection with the

purchase or sale” language of SLUSA. the parties should

be permitted to argue how Dabit should be applied to the

facts alleged and claims presented in this case — but to do

so in whatever forum this Court ultimately deems is ap-

propriate in light of its disposition in Kircher. The “in

connection with the purchase or sale” language only ad-

dresses one aspect of SLUSA preemption. and a remand

would permit the parties to address whether SLUSA

properly applies to this case. The Court's decision in

Kircher will dictate whether the court of appeals had ju-

risdiction to review the district court's remand order and,

consequently, whether th.. case should appropriately be

remanded to state court. Accordingly, the Court should

hold the petition pendiny resolution of the jurisdictional

issue in Kircher.

CONCLUSION

For the foregoing reasons and those stated in the peti-

tion, the petition for a writ of certiorari should be held

pending the resolution of Merrill Lynch, Pierce, Fenner &

Smith, Inc. v. Dabit, No. 04-1371, and Kircher v. Putnam

Funds Trust, No. 05-409, and then disposed of as appro-

priate in light of those decisions.

Respectfully submitted,

ROBERT L. KING DAVID C. FREDERICK

701 Market Street Counsel of Record

Suite 350 F. ANDREW HEssIckK III

St. Louis, Missouri 63101 ~ KELLOGG, HUBER, HANSEN,

(314) 241-4844 TODD, EVANS & FIGEL.,

P.L.L.C.

1615 M Street, N.W.

Suite 400

Washington, D.C. 20036

February 28, 2006 (202) 326-7900

Counsel for Petitioner