Release Date: Mar 21, 2006Contact: 888-249-NEWS
NCLC Applauds Supreme Court Decision in Securities Case
WASHINGTON, D.C.—The National Chamber Litigation Center applauded today's unanimous U.S. Supreme Court decision in Merrill Lynch, Pierce, Fenner & Smith v. Dabit that reasserts the supremacy of federal law in cases of class action securities fraud.
"This ruling shuts the door on clever tactics used by plaintiffs' lawyers to circumvent Congress' intent to limit securities class actions," said Robin Conrad, NCLC senior vice president. "The justices made clear that all state law-based class action claims are preempted by the Securities Litigation Uniform Standards Act (SLUSA) of 1998."
In the case, stockbroker Shadi Dabit filed suit on behalf of himself and other investors claiming they were fraudulently induced to hold underperforming stocks, and that SLUSA only pertained to investors induced to buy or sell stock.
NCLC, in an amicus brief filed in the case, pointed out that so-called "holder" class action lawsuits are often used to extract large settlements through the strategy of alleging speculative injuries, which are typically proven through unsupported oral testimony.
"This is a critical decision because abusive lawsuits, if allowed to stand, have an enormous drain on the national economy," said Conrad. "Securities class action abuse reduces the overall competitiveness of our securities markets, impedes job creation, and injures investors."
NCLC, a membership organization that advocates fair treatment of business in the courts and before regulatory agencies, is the public policy law firm of the U.S. Chamber of Commerce. The U.S. Chamber is the world's largest business federation representing more than 3 million businesses and organizations of every size, sector, and region.
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