Nielen-Thomas v. Concorde Investment Services, LLC
Posted on Categories Class Actions, Court Decisions

By James L. Komie

A class action filed in state court asserting state law claims may be a “covered class action,” as defined by SLUSA, and thus subject to removal to federal court and dismissal, even if the putative class contains less than 50 persons.

Nielen-Thomas vs. Concorde Investment Services, LLC, No. 18-2875 (7th Cir., 1/24/19).

Plaintiff filed a putative class action in Wisconsin state court against her former investment adviser, his firm and other entities alleging claims under Wisconsin state law relating to the handling of her investment account. Plaintiff alleged that defendant purchased a variety of investments not suitable for an individual investor like her, including exchange-traded funds. Plaintiff alleged that there were 35 - 49 potential class members – i.e., less than the 50 class members referred to in SLUSA’s definition of “covered class action.” Defendants nevertheless removed the case to federal court and moved to dismiss under SLUSA on the grounds that the case was an impermissible attempt to maintain a securities fraud class action under state law. The district court agreed and dismissed the case (SOLA 2018-35).

On appeal, the Seventh Circuit affirms. SLUSA’s definition of “covered class action” has two parts. Subsection (I) refers to an action where “damages are sought on behalf of more than 50 persons or prospective class members.” Subsection (II) refers to an action where “one or more named parties seek to recover damages on a representative basis on behalf of themselves and other unnamed parties similarly situated” and contains no numerical limitation. Crucially, the statutory definition includes the word “or” between the two subsections, “meaning a lawsuit can satisfy SLUSA’s ‘covered class action’ requirement via either subparagraph.” Subsection II clearly encompasses any class action and contains no requirement that the class be at least 50 persons. As such, it was proper to remove the case to federal court and dismiss it on SLUSA pre-emption grounds as an improper effort to maintain a class action asserting state law claims relating to securities fraud.

(J. Komie)

(SOLA Ref. No. 2019-12-05)

NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA), from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis. 

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