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Nielen-Thomas v. Concorde Investment Services, LLC

United States District Court, W.D. Wisconsin

July 26, 2018

SUSAN NIELEN-THOMAS, on behalf of herself and all others similarly situated, Plaintiff,
v.
CONCORDE INVESTMENT SERVICES, LLC, FORTUNE FINANCIAL SERVICES, INC., TD AMERITRADE, INC., WISCONSIN RIVER BANK, and WISCONSIN INVESTMENT SERVICES, LLC, Defendants.

          OPINION & ORDER

          JAMES D. PETERSON DISTRICT JUDGE

         This is a proposed class action in which plaintiff Susan Nielen-Thomas asserts claims under federal and state law concerning defendants' alleged involvement in an investment advisor's fraudulent handling of his customers' investment accounts. Nielen-Thomas and the unnamed plaintiffs are the defrauded customers. Nielen-Thomas filed the case in state court, and defendants Fortune Financial Services, Inc., and TD Ameritrade, Inc., removed it under the Securities Litigation Uniform Standards Act (SLUSA), 15 U.S.C. § 78bb(f)(2). Dkt. 3. A flurry of motions followed removal, all of which are now ripe for the court's ruling. Several defendants move to dismiss Nielen-Thomas's state-law claims as barred by SLUSA, see Dkt. 15 and Dkt. 39, and they move to dismiss all of her claims, including the federal-law claim, for failure to state a claim, see Dkt. 15; Dkt. 19; Dkt. 39; Dkt. 45. Nielen-Thomas opposes these motions and seeks to remand the case to the Circuit Court for Dane County. Dkt. 42.

         Most of these motions hinge on whether SLUSA applies to Nielen-Thomas's claims. Because it does, the court will not remand the case, but it will dismiss the state-law claims with prejudice. And because Nielen-Thomas fails to state a claim under federal law, the court will dismiss that claim with prejudice, too. As a result, the court will dismiss defendant Wisconsin River Bank's crossclaims without prejudice and close the case.

         ANALYSIS

         The parties agree that the future of this case hinges on SLUSA's application: if SLUSA applies, as defendants contend, then removal is proper and the state-law claims must be dismissed; if SLUSA does not apply, as Nielen-Thomas contends, then removal was not proper and the court must remand the case to the state court for further proceedings.

         SLUSA is the latest legislation addressing how and where private individuals may bring litigation involving nationally traded securities. The history of this area of legislation is recounted in Cyan, Inc. v. Beaver County Employees Retirement Fund, 138 S.Ct. 1061, 1066-67 (2018), but for the purposes of this case, the court need only focus on the statutory provisions currently in force, which provide that certain securities class actions may be removed to federal court and then dismissed:

(1) No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging-
(A) a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security; or (B) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.
(2) Any covered class action brought in any State court involving a covered security, as set forth in paragraph (1), shall be removable to the Federal district court for the district in which the action is pending, and shall be subject to paragraph (1).

15 U.S.C. § 78bb(f).

         The issue is whether this case is a “covered class action.” (There's no question that Nielen-Thomas's state-law claims meet the other requirements for removal.) Under SLUSA, a “covered class action” is

         any single lawsuit in which-

(I) damages are sought on behalf of more than 50 persons or prospective class members, and questions of law or fact common to those persons or members of the prospective class, without reference to issues of individualized reliance on an alleged misstatement or omission, predominate over any questions affecting only individual persons or members; or
(II) one or more named parties seek to recover damages on a representative basis on behalf of themselves and other unnamed parties similarly situated, and questions of law or fact common to those persons or members of the prospective class predominate over any ...

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