The Securities Litigation Uniform Standards Act of 1998 (SLUSA) is a federal legislative act in the United States regarding private class action lawsuits for securities fraud. SLUSA amended portions of the Securities Act of 1933 and the Securities Exchange Act of 1934 to preempt certain class actions that alleged fraud under state law "in connection with the purchase or sale" of securities. Such lawsuits cannot be filed in state or federal court.
In 1995, Congress passed the Private Securities Litigation Reform Act (PSLRA), claiming that the class action device was being used to injure "the entire U.S. economy" through nuisance filings, targeting of deep-pocket defendants, vexatious discovery requests, and "manipulation by class action lawyers of the clients whom they purportedly represent." The PSLRA accordingly imposed new restrictions that included a heightened pleading standard for securities class actions, damage caps, and mandatory sanctions for frivolous litigation.
The consequence was that many securities fraud plaintiffs sought to escape the new strictures under the PSLRA by avoiding federal court altogether. While historically securities cases were rare in state court, state law-based class actions for securities fraud now became common. Congress conducted a hearing in 1997 to evaluate these effects of the PSLRA, and subsequently enacted SLUSA to stem this... Read More