Court Dismisses Class Action based on SLUSA

Court Dismisses Class Action Based on State Law Claims

SLUSA preemption found in variable annuities claim

By John M. Baker, Esq.

The U.S. Court of Appeals for the Second Circuit recently ruled that the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) preempts class actions based on state law claims for fraud in the sale of variable annuities. Lander v. Hartford Life & Annuity Insurance Co., Docket No. 00-7849 (May 25, 2001).

The Second Circuit opinion apparently is the first ruling on the issue by any appellate court. SLUSA provides that no covered class action based upon a state law fraud claim in connection with the purchase or sale of a “covered security” may be maintained. The statute was intended to promote uniformity in the securities markets by mandating that such actions must be litigated in federal court under federal law.

“Covered securities” include securities issued by registered investment companies. Plaintiffs in this case had filed suit in Connecticut Superior Court on behalf of a nationwide class of purchasers of variable annuities, alleging various state statutory and common law claims. The defendants removed the case to federal court, where the claims were dismissed under SLUSA. On appeal, plaintiffs argued that Congress never intended variable annuities to be within the preemptive reach of SLUSA and that, by virtue of the McCarran-Ferguson Act (which generally defers to state insurance laws), SLUSA cannot be interpreted to invalidate private causes of action brought under Connecticut state law. The court rejected both contentions.

The case is available online at

Copyright 2001, John M. Baker, Esq., Stradley, Ronon, Stevens & Young, LLP, 1220 19th Street, N.W., Suite 700, Washington, DC 20036 – (202) 822-9611- Fax (202) 822-0140 This article was originally posted to the FundLaw List, To subscribe to FundLaw, send a blank e-mail to

Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.

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