Broker-Dealer Litigation - Greenberg Traurig LLP

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Broyles v. Cantor Fitzgerald & Co., 2011 WL 4737197 (M.D. La. Sept. 14, 2011).
In a state law class action that was removed to federal court, the magistrate judge
recommended that plaintiff’s motion to remand the action to state court should be denied. The
named plaintiff sought damages on behalf of a class of investors who had purchased defendants’
investment funds and suffered damages resulting from various allegedly wrongful investment
transactions related to “troubled” mortgage-backed securities held by the funds and the sale of
those assets to form a collateralized debt obligation (“CDO”). The magistrate judge found that
plaintiff’s claims sufficiently coincided with the purchase or sale of covered securities because
he had alleged that he liquidated his retirement portfolio of covered securities due to
misrepresentations that the investment funds would hold conservative securities similar to those
he sold. Thus, plaintiff had specifically asserted a claim based on misrepresentations in
connection with the sale of covered securities and the Securities Litigation Uniform Standards
Act of 1998 (“SLUSA”) applied. The magistrate judge rejected plaintiff’s argument that these
allegations were personal to him and that his sale of his retirement portfolio was not the crux of
the class’s claims against defendants. The magistrate judge noted that plaintiff had included the
allegations about his retirement portfolio in a section of his complaint entitled “Allegations
Applicable to All Claims For Relief” and that as a class representative his claims should fairly
represent those of the purported class. The magistrate judge further found that the sale of
plaintiff’s investment portfolio was “the beginning of a chain of events that ma[de] up the
plaintiff’s claim” and, thus, it was germane to his overall claims against defendants.
Accordingly, the magistrate judge found that SLUSA preclusion was appropriate and
recommended that plaintiffs motion to remand should be denied.
Richek v. Bank of Am., 2011 WL 3421512 (N.D. Ill. Aug. 4, 2011).
Plaintiff’s claims which arose from alleged non-disclosure of fees charged by the
defendant bank to customers whose cash balances were automatically “swept” on a daily basis
into certain customer-selected investment vehicles were held to be precluded by the Securities
Litigation Uniform Standards Act of 1998 (“SLUSA”). Plaintiff alleged that defendant had
undisclosed fee arrangements with various money market mutual funds and other mutual fund
investment vehicles on its “approved list” from which plaintiff and similarly situated customers
could select investments for daily cash “sweeps.” These sweep fees were alleged to be as much
as .35 or .45 percent of the average daily cash balance swept from plaintiff’s account. Plaintiff
alleged that these fees were being charged for a number of years beginning as early as 1985 and
that he first learned of the sweep fees on June 30, 2009, when defendant wrote to inform him that
it was eliminating the fees. Plaintiff did not dispute that the action was a “covered class action,”
that it was based on state law, or that the securities in question were “covered securities” under
SLUSA. Instead, plaintiff argued that any purchase or sale of covered securities was
“incidental” to the alleged misrepresentations and omissions of fact in the complaint. Plaintiff
argued that this did not meet SLUSA’s requirement that defendant misrepresented or omitted a
material fact “in connection with” the purchase or sale of a covered security. However, the court
found that the “essence” of the complaint was alleged misrepresentations and omissions of
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