U.S. Supreme Court says mutual fund suits belong in state court
Ten Madison County class action suits against mutual funds have received a half hearted boost from the United States Supreme Court.
The Justices unanimously agreed in June that all 10 suits belonged in state court, even though defendants claimed that federal law precluded the claims.
According to plaintiffs, the mutual funds timed their transactions to create revenue for themselves at the expense of investors.
In their decision the Justices betrayed exasperation over a jurisdiction battle that delayed for three years a decision on the facts of the matter.
Justice David Souter wrote, "The policy of Congress opposes 'interruption of the litigation of the merits of a removed cause by prolonged litigation of questions of jurisdiction of the district court to which the cause is removed.'"
He wrote that, "…nearly three years of jurisdictional advocacy in the cases before us confirm the conventional wisdom."
Although federal law precludes state or federal class actions over sales and purchases of securities, the Justices did not apply the law to these cases.
They left it to the Madison County Circuit Court to decide whether the plaintiffs can sue as holders of securities, outside the coverage of the law for buyers and sellers.
The Justices practically guaranteed that a trial court would follow their 2006 decision in Merrill Lynch, Pierce, Fenner & Smith v. Dabit.
Souter wrote, "Here, we have no reason to doubt that the state court will duly apply Dabit's holding that holder claims are embraced by subsection (b), but any claim of error on that point can be considered on review by this Court."
He wrote, "What a state court could do in the first place it may also do on remand; here, the funds can ask for dismissal on preclusion grounds when they return to state court."
David Frederick of Washington represented plaintiffs before the Court, along with Robert King of Korein Tillery in St. Louis.
After the Justices issued their opinion, Christine Moody of Korein Tillery moved in Madison County circuit court to administratively reopen all 10 cases.
Three suits seek damages from Putnam Funds, two seek damages from Pacific Life, and the rest seek damages from Van Kampen Funds, Artisan Funds, T. Rowe Price International, Janus Fund and Columbia Acorn Trust.