Proskauer Rose Ll,p. v. Samuel Troice

Questions presented

SCOTUS records, cert granted 18 Jan 2013

1. Does the Securities Litigation Uniform Standards Act of 1998 ("SLUSA"), 15 U.S.C. §§ 77p(b), 78bb(f)(1), prohibit private class actions based on state law only where the alleged purchase or sale of a covered security is "more than tangentially related" to the "heart, crux or gravamen" of the alleged fraud?
2. Does SLUSA preclude a class action in which the defendant is sued for aiding and abetting fraud, but a non-party, rather than the defendant, made the only alleged misrepresentation in connection with a covered securities transaction?

Opinion summary

Etalia.ai summary of the majority opinion

The case involved the applicability of the Securities Litigation Uniform Standards Act (SLUSA) to a class action lawsuit filed by investors against Proskauer Rose LLP and other defendants. The investors alleged that they were defrauded in a Ponzi scheme orchestrated by Allen Stanford, who sold certificates of deposit not covered under SLUSA because they were not considered 'covered securities.' The Supreme Court held that SLUSA did not preclude state-law class actions alleging fraud related to uncovered securities, even if the fraudulent scheme also involved misrepresentations about transactions in covered securities. This decision allowed plaintiffs to pursue their claims under state law rather than being forced into federal court or having their cases dismissed.

Dissent summary

Etalia.ai summary of the dissenting opinions

In the dissenting opinion for Proskauer Rose LLP v. Samuel Troice, Justice Kennedy argued that the majority's interpretation of the Securities Litigation Uniform Standards Act (SLUSA) was too narrow and undermined its purpose to prevent state-law class actions from circumventing federal securities laws. He contended that SLUSA should preclude claims where misrepresentations are material to a transaction in covered securities, even if those transactions were not directly involved in fraud schemes like Stanford’s Ponzi scheme. By allowing these state-law claims to proceed, Kennedy warned it would lead to inconsistent legal standards and increased litigation costs, ultimately harming investors by creating uncertainty in financial markets. The dissent emphasized Congress's intent for uniformity across jurisdictions regarding securities fraud cases.