United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS April 22, 2004
FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 03-20575
JACOB BLAZ, On behalf of Himself and all others Similarly
Situated,
Plaintiff-Appellant,
versus
ROBERT A. BELFER; NORMAN P. BLAKE, JR.; RICHARD B. BUY; RICHARD
A. CAUSEY; RONNIE C. CHAN; JOHN H. DUNCAN; ANDREW S. FASTOW; JOE
H. FOY; WENDY L. GRAMM; KEN L. HARRISON; ROBERT K. JAEDICKE;
KENNETH L. LAY; CHARLES A. LAMAISTRE; JEROME J. MEYER; JEFFREY S.
SKILLING; JOHN A. URQUHART; JOHN WAKEHAM; CHARLES E. WALKER;
BRUCE G. WILLISON; HERBERT S. WINOKUR, JR.; ARTHUR ANDERSEN LLP,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Texas
(H-02-CV-1150)
Before DAVIS, BARKSDALE, and PRADO, Circuit Judges.
RHESA HAWKINS BARKSDALE, Circuit Judge:
At issue is the claimed impermissible retrospective
application of the Securities Litigation Uniform Standards Act,
Pub. L. No. 105-353, 112 Stat. 3227 (1998) (codified as amended at
15 U.S.C. §§ 77p & 78bb)(SLUSA), which provides for the removal and
dismissal of certain state law securities class actions. Jacob
Blaz challenges SLUSA’s application to his putative state law
securities class action arising out of pre-enactment conduct. The
application is permitted because SLUSA governs only secondary
conduct — procedural requirements for filing certain state law
securities claims — and not the primary conduct that is the subject
of those claims. AFFIRMED.
I.
In January 2002, more than three years after SLUSA’s
enactment, Blaz filed this putative state law class action in Texas
state court. Blaz presented state law claims for fraud,
misrepresentation, and conspiracy in connection with the purchase
of publicly traded securities (Enron Corporation) from 11 April
1997 to 15 October 1998 (class period).
The action was removed to federal court pursuant to SLUSA,
which provides for removal and dismissal of certain state law
securities class actions. See 15 U.S.C. § 78bb(f)(1)(A), (B) &
(f)(2) (class actions based on state common or statutory law
misrepresentation, omission, or deception with respect to purchase
of securities subject to removal and dismissal). The parties do
not dispute that, under SLUSA, Blaz’ state law action is a “covered
class action” involving a “covered security”. See 15 U.S.C. §
78bb(f)(5)(B) & (E).
The class period designated by Blaz ends shortly before
SLUSA’s enactment on 3 November 1998; Blaz claims the alleged fraud
was not discovered until 16 October 2001, almost three years after
that enactment. Blaz moved to remand, contesting removal and
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dismissal on the basis that applying SLUSA to the pre-enactment
conduct would have the impermissible retroactive effect of
preempting his state law claims. Moreover, acknowledging that the
three-year statute of repose under the Securities Exchange Act of
1934 barred his pursuing a federal class action, Blaz contended
SLUSA’s application effectively denied the putative class
meaningful relief.
Remand was denied; the putative state law class action was
dismissed with prejudice. Blaz v. Belfer, et al., No. H-01-3624
(S.D. Tex. 16 Aug. 2002). In its quite comprehensive and well-
reasoned opinion, the district court held: SLUSA’s provisions are
procedural and do not impair the substantive rights of Blaz or the
putative class members individually to pursue their claims in state
court; consequently, SLUSA does not have an impermissible
retroactive effect. Id. at 22-23.
II.
In our deciding whether applying SLUSA to the pre-enactment
conduct at issue has an impermissible retrospective effect, the
remand-denial and dismissal are reviewed de novo. E.g., Morris v.
TE Marine Corp., 344 F.3d 439, 443 (5th Cir. 2003) (citing Miller
v. Diamond Shamrock Co., 275 F.3d 414, 417 (5th Cir. 2001)). For
essentially the reasons stated by the district court, we hold that
such application is permissible.
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Landgraf v. USI Film Products, 511 U.S. 244 (1994), provides
the well-settled framework for determining the issue at hand.
“[T]he presumption against retroactive legislation is deeply rooted
in our jurisprudence, and embodies a legal doctrine centuries older
than our Republic.” Id. at 265 (emphasis added). Nevertheless,
“[c]hanges in procedural rules may often be applied in suits
arising before their enactment without raising concerns about
retroactivity ... [b]ecause rules of procedure regulate secondary
rather than primary conduct”. Id. at 275 (citations omitted). See
also Hughes Aircraft v. United States ex rel. Schumer, 520 U.S. 939
(1997) (applying Landgraf analysis to action filed after amendment
to statute, but challenging pre-enactment conduct). A two-part
alternative analysis is used for determining whether the
presumption against retroactivity is rebutted.
First, retroactive application is not impermissible where
there is an express congressional intent favoring it. Landgraf,
511 U.S. at 280. In SLUSA, Congress did not expressly provide for
such application.
Second, such application is permissible if it does not “impair
rights a party possessed when he acted, increase a party’s
liability for past conduct, or impose new duties with respect to
transactions already completed”. Id. (emphasis added). Blaz
claims SLUSA’s application impairs the substantive rights of
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defrauded securities purchasers to pursue class relief in state
court.
In this regard, relying on W.R. Huff Asset Management Co., LLC
v. BT Securities Corp., 190 F. Supp. 2d 1273 (N.D. Ala. 2001), Blaz
contends SLUSA has an impermissible retroactive effect by unfairly
depriving class members of meaningful access to the courts. As in
the action at hand, the BT Securities plaintiffs: filed an action
post-SLUSA’s enactment, involving pre-enactment conduct, id. at
1275; and could no longer pursue a federal securities class action
because it would be time-barred by the three-year statute of
repose, see Section 18(c) of the Securities Exchange Act of 1934,
48 Stat. 881, 898 (codified at 15 U.S.C. § 78(i)(e)). (Pursuant to
the Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, § 804(a) &
(b), 116 Stat. 801 (codified at 28 U.S.C. § 1658(b)), this statute
of repose has been extended to five years after the conduct
accrues.) BT Securities concluded:
[T]he practical effect of a retrospective
application of SLUSA would be to trim down
[plaintiffs’] case to a virtual nothing. Not
taking this eventuality into account when
measuring the impact of retrospective
application in this case would be holding
[plaintiffs] accountable for [their] “failure”
to bring [their] state law claims within the
periods of repose and limitation applicable to
federal claims that are preemptive only if
retroactive.... The reasonable expectations
[plaintiffs] had at the time of the allegedly
actionable conduct cannot be reconciled with
such a relinquishment of a substantive right.
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BT Securities, 190 F. Supp. 2d at 1281 (emphasis added).
Blaz contends: this analysis applies with even greater force
here because defendants fraudulently concealed their wrongdoing
until 16 October 2001 and therefore prevented filing a federal
securities class action within the statute of repose; and it is
unfair to permit such fraudulent concealment likewise to deny him
a class action in state court, by application of SLUSA. Blaz
acknowledges that he and other putative class members individually
may pursue their claims in state court; but, he maintains this
access to those courts will not be meaningful because potential
individual recoveries are comparatively small. According to Blaz,
this causes SLUSA to operate to create “new legal consequences”,
not present before its enactment, that transform its retrospective
effect from procedural to substantive. Blaz notes that, although
there is no right to “litigate” a claim as a class action, Rule 23
of the Federal Rules of Civil Procedure confers the right to “seek”
certification of a class action, including the rights to have the
district court consider a class certification motion and to appeal
an order denying such certification. See FED. R. CIV. P. 23.
A.
Obviously, Blaz’ attempt to distinguish “litigating” a class
action from “seeking” one fails; for purposes of the issue at hand,
there is no difference. Nor is there a substantive right to pursue
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a class action, in either Texas state or federal court. As the
Texas Supreme Court explained:
The class action is a procedural device
intended to advance judicial economy by trying
claims together that lend themselves to
collective treatment. It is not meant to
alter the parties’ burdens of proof, right to
a jury trial, or the substantive prerequisites
to recovery under a given tort.
Soutwestern Ref. Co., Inc. v. Bernal, 22 S.W.3d 425, 437 (Tex.
2000) (emphasis added); see also Frazar v. Gilbert, 300 F.3d 530,
545 (5th Cir. 2002) (“A class action is merely a procedural device;
it does not create new substantive rights....”), rev’d on other
grounds, Frew ex rel. Frew v. Hawkins, 124 S. Ct. 899 (2004).
In his state court complaint, Blaz defines the class period as
ending on 15 October 1998 and claims that the alleged fraudulent
conduct was not discovered until 16 October 2001 — exactly one day
past the then three-year statute of repose for a federal securities
claim. In the light of his class period and discovery date, Blaz
could not pursue a federal class action. Of course, it is the
defined class period and claimed fraudulent concealment, not
SLUSA’s retroactive application, that causes this result. In any
event, there is no right to pursue a state class action; and,
again, despite SLUSA’s application, each plaintiff may pursue
individual relief in state court.
B.
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As Landgraf explained, retrospective changes to “procedural
rules” do not raise retroactivity concerns because they regulate
secondary, rather than primary, conduct. Landgraf, 511 U.S. at
275. SLUSA provides a procedural framework for the secondary
conduct of filing certain state securities claims; it does not
regulate the primary conduct that is the subject of those claims.
Again, there is no substantive right to a class remedy; a class
action is a procedural device. As such, SLUSA’s regulating filing
certain state securities claims is not impermissibly retroactive.
Except for the BT Securities court, all others that have
evaluated the retrospective application of SLUSA have reached this
conclusion. See, e.g., Professional Management Assoc., Inc. v.
KPMG LLP, 335 F.3d 800, 803-04 (8th Cir. 2003) (applying SLUSA to
pre-enactment conduct presents no retroactivity concern because
SLUSA regulates only “secondary conduct, the filing of the lawsuit,
not the primary, allegedly illegal pre-enactment conduct”); see
also Winne v. Equitable Life Assurance Society, 2003 WL 22434215,
*9 (S.D.N.Y. 2003) (“since SLUSA governs only procedural
requirements and is not substantive in scope, it may be applied to
suits ... that were filed after ... the statute’s enactment, even
if those suits concern pre-enactment conduct”) (citing Gray v.
Seaboard Securities, Inc., 241 F. Supp. 2d 213, 217-18 (N.D.N.Y.
2003)).
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For the foregoing reasons, the judgment is
AFFIRMED.
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