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Arnold v. Bank of America: SECURITIES - no error dismissing suit as preempted by Securities Litigation Uniform Standards Act 98

United States Court of Appeals
No. 07-3565
Ellen Jane Kutten, individually *
and on behalf of her daughters, *
Plaintiff, *
Mary Ann Arnold; Elise Mahler *
Scharff, on behalf of themselves *
and all others similarly situated, * Appeal from the United States
* District Court for the
Plaintiffs-Appellants, * Eastern District of Missouri.
v. **
Bank of America, N.A.; Bank of *
America Corporation, *
Defendants-Appellees. *
Submitted: June 11, 2008
Filed: June 16, 2008
Before MURPHY, BYE, and SHEPHERD, Circuit Judges.
SHEPHERD, Circuit Judge.
This case is one of the at least five class actions in various jurisdictions
seeking redress for the same alleged injuries as claimed by the plaintiffs in Siepel v.
Bank of America, N.A., Nos. 07-1899/07-1906, 2008 U.S. App. LEXIS 10667, at *6
1 The Honorable Paul A. Magnuson, United States District Judge for the District
of Minnesota, sitting by designation in the Eastern District of Missouri.
(8th Cir. May 19, 2008). Finding the case nearly identical to Siepel, which it had
earlier dismissed, the district court1 dismissed all of the Appellants class action
claims as preempted by the Securities Litigation Uniform Standards Act of 1998
(SLUSA), 15 U.S.C. 77p(b), 78bb(f)(1). We affirmed the district court in Siepel,
and do so again in this case.
Just as in Siepel, the Appellants class action claims center on Bank of
Americas alleged plan to funnel trust assets into a mutual fund substantially owned
by the Bank. See id. at *4-*5. In their Amended Complaint, the Appellants asserted
twelve class action claims, including breach of fiduciary duty, aiding and abetting a
breach of fiduciary duty, unjust enrichment, breach of contract, violation of the
California Probate Code, violation of the California Business and Professions Code,
and violation of the California and Missouri Prudent Investor Acts. Each of the
substantive claims repeat[ed] and reallege[d] the allegations made in the previous
pages of the complaint.
The Siepel plaintiffs conceded that their complaint contained allegations that
the Bank misrepresented and omitted material facts. Id. at *11. Although their
complaint also rests on the same alleged plan by the Bank, the Appellants attempt to
distinguish their complaint from the one in Siepel. In filings with this court, they
assert that their complaint does not contain any allegations that facts were concealed.
Nor does the Complaint in this action allege there were any omissions of facts or
misrepresentations made to Plaintiffs. [D]ifferent results can be reached based upon
changes in the language used in the complaint, they urge.
We review a district courts dismissal based on SLUSA preemption de novo,
as a dismissal for failure to state a claim. Siepel, 2008 U.S. App. LEXIS 10667 at *4.
SLUSA preempts state-law class actions that allege an untrue statement or omission
of a material fact, or the use of a manipulative or deceptive device or contrivance in
connection with the purchase or sale of a covered security. 15 U.S.C. 77p(b),
78bb(f)(1); Siepel, 2008 U.S. App. LEXIS 10667, at *10. In determining whether
SLUSA applies, we do not rely on the names of the causes of action that the plaintiff
alleges. Instead we look at the substance of the allegations, based on a fair reading.
See Sofonia v. Principal Life Ins. Co., 465 F.3d 873, 879-80 (8th Cir. 2006); Dudek
v. Prudential Sec., Inc., 295 F.3d 875, 879-80 (8th Cir. 2002). SLUSA preemption is
based on the conduct alleged, not the words used to describe the conduct.
In the hearing on the Banks motion to dismiss, Judge Magnuson attempted to
purge the allegations of fraudulent conduct from the Appellants Amended Complaint,
and decide whether their complaint was different from that in Siepel. The Appellants
counsel explained:
[The Banks transfers of fiduciary account assets to Nations Funds] in
fact were a cloak for self-dealing and engaging in conflict of interest
transactions . . . . Its a breach of fiduciary duty case, and that duty
includes disclosing to beneficiaries certain information.
After further argument, Judge Magnuson asked if the complaint was no more than
a regurgitation of the words of the misrepresentation. Counsel replied:
[C]ertainly one of the components [of a fiduciary duty] is . . . a duty to
disclose, a duty to be candid, a duty to be honest with your beneficiaries,
to let your beneficiaries have the straight scoop with respect to the
handling of their assets. . . . That is not the same thing as saying we were
misrepresented to and this is what you lied about. . . . Thats the failing
to disclose. Thats the failing to be candid. Thats the failing to be
honest. Thats what we allege the bank failed to do repeatedly in the
context of its wholesale conversion of common trust funds into their own
mutual funds . . . .
We agree with the district court that the Appellants failed to distinguish their
case from Siepel. Whatever the distinction between deceiving and failing to be
honest, or between omitting a material fact and failing to disclose, it does not
bear on whether SLUSA preempts the claim containing those allegations. In this case,
the district court correctly found that without allegations of deceptive and misleading
conduct, the Appellants complaint was empty of any non-preempted class action
In all other respects, the Appellants argument is the same as was asserted by
the plaintiffs in Siepel. We therefore reach the same result, and affirm the judgment
of the district court.


  What day were you injured?

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Traffic/Bicycle Accident
Work-Related Injury
Wrongful Death
Dog Bite
Slip and Fall

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  professionals have you seen?


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  Is Insurance Involved?
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        may cover this.

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Bystanders Witnessed This.
Police Responded and Filed
        a Police Report

Police Responded but Did
        Not File a Police Report



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