Supreme Court Says SLUSA Only Applies Where the Purchased Securities Are Covered

In Chadbourne & Park LLP v. Troice (, the Supreme Court considered whether the Securities Litigation Uniform Standards Act (SLUSA) applied to preempt a state court class action.  SLUSA generally preempts class actions in state court or under state law alleging misrepresentations in connection with a covered security.  In Chadbourne, the plaintiff class acquired securities from a bank that were conceded to be "uncovered" under SLUSA.  However, the plaintiff class alleged that the misrepresentation was that the securities they purchased were backed by covered securities.  Defendants alleged that the fact that the alleged misrepresentation was that the acquired securities were backed by covered securities was sufficient to invoke SLUSA.  The Supreme Court disagreed, squarely holding that securities purchased had to themselves be covered for SLUSA to apply.