Dist. Ct. did not err in dismissing plaintiff’s class action alleging under state-law that defendant-Bank breached parties’ contract by improperly giving its employees incentives to place clients’ money in Bank’s own mutual funds, even when those funds had higher fees or lower returns than competing funds sponsored by third-parties, and that said actions violated defendant’s promises to plaintiff to make recommendations in plaintiff’s interests. Plaintiff’s action qualified as “covered class action” for purposes of SLUSA, 15 USC section 78bb(f) since plaintiff alleged misrepresentation or omission of material fact in connection with purchase or sale of covered security, and under SLUSA, securities claims that depend on nondisclosure of material facts must proceed exclusively under federal securities law. Result would be different, and thus plaintiff could proceed on state-law breach of contract claim free from securities component, if plaintiff had alleged that defendant had broken its promise by mistake or if it had created incentive to favor its own mutual funds only after plaintiff had invested her money with defendant.
Federal 7th Circuit Court
Civil Court
Securities Litigation Uniform Standards Act