text:
    MERRILL LYNCH, PIERCE, FENNER & SMITH INC. v. DABIT
    No. 04-1371.
    Argued January 18, 2006
    Decided March 21, 2006

      Jay B. Kasner argued the cause for petitioner. With him on the briefs were Preeta D. Bansal, Edward J. Yodowitz, Scott D. Musoff, and Joanne Gaboriault.

      Deputy Solicitor General Hungar argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Clement, Daryl Joseffer, Giovanni P Prezioso, Jacob H. Stillman, Eric Summergrad, Susan S. McDonald, and Jeffrey T Too.

      David C. Frederick argued the cause for respondent. With him on the brief were Priya R. Aiyar, William B. Federman, Stuart W. Emmons, and Clell I. Cunningham 111

      Briefs of amici curiae urging reversal were filed for the Chamber of Commerce of the United States of America by Charles A. Rothfeld, Andrew J. Pincus, Stephen M. Shapiro, Timothy S. Bishop, Robin S. Conrad, and Amar D. Sarwal; for the Investment Company Institute by Theodore B. Olson and Mark A Perry; for Lord, Abbett & Co. et al. by Charles Lee Eisen, Jeffrey B. Maletta, and Nicholas G. Terris; for the Securities Industry Association et al. by Carter G. Phillips and Richard D. Bernstein; and for the Washington Legal Foundation by Donald B. Verrilli, Jr., Ronald L. Marmer, C. John Koch, Daniel J. Popeo, and David Price.

      Briefs of amici curiae urging affirmance were filed for the State of New York et al. by Eliot Spitzer, Attorney General of New York, Caitlin J. Halligan, Solicitor General, and Mariya S. Treisman, Assistant Solicitor General, and by the Attorneys General for their respective States as follows: Bill Lockyer of California, Richard Blumenthal of Connecticut, Mark J. Bennett of Hawaii, Lisa Madigan of Illinois, Thomas J. Miller of Iowa, Michael A. Cox of Michigan, Mike Hatch of Minnesota, Jim Hood of Mississippi, Mike McGrath of Montana, Peter C. Harvey of New Jersey, Patricia A. Madrid of New Mexico, Jim Petro of Ohio, W. A. Drew

        Edmondson of Oklahoma, Hardy Myers of Oregon, Henry McMaster of South Carolina, William H. Sorrell of Vermont, Rob McKenna of Washington, and Peggy A. Lautenschlager of Wisconsin; for IJG Investments et al. by Ira Neil Rickards; for the National Association of Shareholder and Consumer Attorneys et al. by Stewart M. Weltman, Kevin P. Roddy, and Deborah M. Zuckerman; and for Phillip Goldstein et al. by Robert L. King.

        Steven B. Feirson and Nory Miller filed a brief for Pacific Life Insurance Co. as amicus curiae.

   Justice Stevens

delivered the opinion of the Court.

Title I of the Securities Litigation Uniform Standards Act of 1998 (SLUSA) provides that “[n]o covered class action” based on state law and alleging “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security” “may be maintained in any State or Federal court by any private party.” § 101(b), 112 Stat. 3230 (codified at 15 U. S. C. § 78bb(f)(l)(A)). In this case the Second Circuit held that SLUSA only pre-empts state-law class-action claims brought by plaintiffs who have a private remedy under federal law. 395 F. 3d 25 (2005). A few months later, the Seventh Circuit ruled to the contrary, holding that the statute also pre-empts state-law class-action claims for which federal law provides no private remedy. Kircher v. Putnam Funds Trust, 403 F. 3d 478 (2005). The background, the text, and the purpose of SLUSA’s preemption provision all support the broader interpretation adopted by the Seventh Circuit.

I

Petitioner Merrill Lynch, Pierce, Fenner & Smith Inc. (Merrill Lynch) is an investment banking firm that offers research and brokerage services to investors. Suspicious that the firm’s loyalties to its investment banking clients had produced biased investment advice, the New York attorney general in 2002 instituted a formal investigation into Merrill Lynch’s practices. The investigation sparked a number of private securities fraud actions, this one among them.

Respondent, Shadi Dabit, is a former Merrill Lynch broker. He filed this class action in the United States District Court for the Western District of Oklahoma on behalf of himself and all other former or current brokers who, while employed by Merrill Lynch, purchased (for themselves and for their clients) certain stocks between December 1, 1999, and December 31,' 2000. See App. 27a-46a. Rather than rely on the federal securities laws, Dabit invoked the District Court’s diversity jurisdiction and advanced his claims under Oklahoma state law.

The gist of Dabit’s complaint was that Merrill Lynch breached the fiduciary duty and covenant of good faith and fair dealing it owed its brokers by disseminating misleading research and thereby manipulating stock prices. Dabit’s theory was that Merrill Lynch used its misinformed brokers to enhance the prices of its investment banking clients’ stocks: The research analysts, under management’s direction, allegedly issued overly optimistic appraisals of the stocks’ value; the brokers allegedly relied on the analysts’ reports in advising their investor clients and in deciding whether or not to sell their own holdings; and the clients and brokers both continued to hold their stocks long beyond the point when, had the truth been known, they would have sold. The complaint further alleged that when the truth was actually revealed (around the time the New York attorney general instituted his investigation), the stocks’ prices plummeted.

Dabit asserted that Merrill Lynch’s actions damaged the class members in two ways: The misrepresentations and manipulative tactics caused them to hold onto overvalued securities, and the brokers lost commission fees when their clients, now aware that they had made poor investments, took their business elsewhere.

In July 2002, Merrill Lynch moved to dismiss Dabit’s complaint. It argued, first, that SLUSA pre-empted the action and, second, that the claims alleged were hot cognizable under Oklahoma law. The District Court indicated that it was “not impressed by” the state-law argument, but agreed that the federal statute pre-empted at least some of Dabit’s. claims. Id., at 49a-50a. The court noted that the complaint alleged both “claims and damages based on wrongfully-induced purchases” and “claims and damages based on wrongfully-induced holding.” Ibid. While the “holding” claims, the court suggested, might not be pre-empted, the “purchasing” claims certainly were. The court dismissed the complaint with leave to amend to give Dabit the opportunity to untangle his “hopeless mélange of purchase-related and holding-related assertions.” Ibid, (punctuation added).

Dabit promptly filed an amended complaint that omitted all direct references to purchases. What began as a class of brokers who “purchased” the subject securities during the class period became a class of brokers who “owned and continued to own” those securities. See id., at 52a.

Meanwhile, dozens of other suits, based on allegations similar to Dabit’s, had been filed against Merrill Lynch around the country on both federal- and state-law theories of liability. The Judicial Panel on Multidistrict Litigation transferred all of those cases, along with this one, to the United States District Court for the Southern District of New York for consolidated pretrial proceedings. Merrill Lynch then filed its second motion to dismiss Dabit’s complaint. Senior Judge Milton Pollack granted the motion on the ground that the claims alleged fell “squarely within SLUSA’s ambit.” In re Merrill Lynch & Co., Inc., 2003 WL 1872820, *1 (Apr. 10, 2003).

The Court of Appeals for the Second Circuit, however, vacated the judgment and remanded for further proceedings. 395 F. 3d, at 51. It concluded that the claims asserted by holders did not allege fraud “in connection with the purchase or sale” of securities under SLUSA. Although the court agreed with Merrill Lynch that that’phrase, as used in other federal securities laws, has been defined broadly by this Court, it held that Congress nonetheless intended a narrower meaning here — one that incorporates the “standing” limitation on private federal securities actions adopted in Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723 (1975). Under the Second Circuit’s analysis, fraud is only “in connection with the purchase or sale” of securities, as used in SLUSA, if it is alleged by a purchaser or seller of securities. Thus, to the extent that the complaint in this action alleged that brokers were fraudulently induced, not to sell or purchase, but to retain or delay selling their securities, it fell outside SLUSA’s pre-emptive scope.

After determining that the class defined in Dabit’s amended complaint did not necessarily exclude purchasers, the panel remanded with instructions that the pleading be dismissed without prejudice. The court’s order would permit Dabit to file another amended complaint that defines the class to exclude “claimants who purchased in connection with the fraud and who therefore could meet the standing requirement” for a federal damages action, and to include only those “who came to hold [a Merrill Lynch] Stock before any relevant misrepresentation.” 395 F. 3d, at 45-46. Under the Second Circuit’s analysis, a class action so limited could be sustained under state law. For the reasons that follow, we disagree.

II

The magnitude of the federal interest in protecting the integrity and efficient operation of the market for nationally traded securities cannot be overstated. In response to the sudden and disastrous collapse in prices of listed stocks in 1929, and the Great Depression that followed, Congress enacted the Securities Act of 1933 (1933 Act), 48 Stat. 74, and the Securities Exchange Act of 1934 (1934 Act), 48 Stat. 881. Since their enactment, these two statutes have anchored federal regulation of vital elements of our economy.

Securities and Exchange Commission (SEC) Rule 10b-5, 17 CFR §240.10b-5 (2005), promulgated in 1942 pursuant to § 10(b) of the 1934 Act, 15 U. S. C. § 78j(b), is an important part of that regulatory scheme. The Rule, like § 10(b) itself, broadly prohibits deception, misrepresentation, and fraud “in connection with the purchase or sale of any security.” The SEC has express statutory authority to enforce the Rule. See 15 U. S. C. § 78u (2000 ed. and Supp. III). Although no such authority is expressly granted to private individuals injured by securities fraud, in 1946 Judge Kirkpatrick of the United States District Court for the Eastern District of Pennsylvania, relying on “the general purpose” of the Rule, recognized .an implied right of action thereunder. Kardon v. National Gypsum Co., 69 F. Supp. 512, 514. His holding was adopted by an “overwhelming consensus of the District Courts and Courts of Appeals,” Blue Chip Stamps, 421 U. S., at 730, and endorsed by this Court in Superintendent of Ins. of N. Y. v. Bankers Life & Casualty Co., 404 U. S. 6 (1971).

A few years after Kardon was decided, the Court of Appeals for the Second Circuit limited the reach of the private right of action under Rule 10b-5. In Birnbaum v. Newport Steel Corp., 193 F. 2d 461 (1952), a panel composed of Chief Judge Swan and Judges Augustus and Learned Hand upheld the dismissal of a suit brought on behalf of a corporation and a class of its stockholders alleging that fraud “in connection with” a director’s sale of his controlling block of stock to third parties violated Rule 10b-5. The court held that the Rule could only be invoked by a purchaser or seller of securities to remedy fraud associated with his or her own sale or purchase of securities, and did not protect those who neither purchased nor sold the securities in question but were instead injured by corporate insiders’ sales to third parties. Id., at 464. While the Birnbaum court did not question the plaintiffs’ “standing” to enforce Rule 10b-5, later cases treated its holding as a standing requirement. See Eason v. General Motors Acceptance Corp., 490 F. 2d 654, 657 (CA7 1973).

By the time this Court first confronted the question, literally hundreds of lower court decisions had accepted “Birnbaum’s conclusion that the plaintiff class for purposes of § 10(b) and Rule 10b-5 private damage actions is limited to purchasers and sellers.” Blue Chip Stamps, 421 U. S., at 731-732. Meanwhile, however, cases like Bankers Life & Casualty Co. had interpreted the coverage of the Rule more broadly to prohibit, for example, “deceptive practices touching [a victim’s] sale of securities as an investor.” 404 U. S., at 12-13 (emphasis added); see Eason, 490 F. 2d, at 657 (collecting cases). The “judicial oak which ha[d] grown from little more than a legislative acorn,” as then-Justice Rehnquist described the rules governing private Rule 10b-5 actions, Blue Chip Stamps, 421 U. S., at 737, had thus developed differently from the law defining what constituted a substantive violation of Rule 10b-5. Ultimately, the Court had to decide whether to permit private parties to sue for any violation of Rule 10b-5 that caused them harm, or instead to limit the private remedy to plaintiffs who were themselves purchasers or sellers.

Relying principally on “policy considerations” which the Court viewed as appropriate in explicating a judicially crafted remedy, ibid., and following judicial precedent rather than “the many commentators” who had criticized the Birnbaum rule as “an arbitrary restriction which unreasonably prevents some deserving plaintiffs from recovering damages,” 421 U. S., at 738, the Court in Blue Chip Stamps chose to limit the private remedy. The main policy consideration tipping the scales in favor of precedent was the widespread recognition that “litigation under Rule 10b-5 presents a danger of vexatiousness different in degree and in kind from that which accompanies litigation in general.” Id., at 739. Even weak cases brought under the Rule may have substantial settlement value, the Court explained, because “[t]he very pendency of the lawsuit may frustrate or delay normal business activity.” Id., at 740. Cabining the private cause of action by means of the purchaser-seller limitation- would, in the Court’s view, minimize these ill effects. The limitation of course had no application in Government enforcement actions brought pursuant to Rule 10b-5. See id., at 751, n. 14.

Ill

Policy considerations similar to those that supported the Court’s decision in Blue Chip Stamps prompted Congress, in 1995, to adopt legislation targeted at perceived abuses of the class-action vehicle in litigation involving nationally traded securities. While acknowledging that private securities litigation was “an indispensable tool with which defrauded investors can recover their losses,” the House Conference Report accompanying what would later be enacted as the Private Securities Litigation Reform Act of 1995 (Reform Act), 109 Stat. 737 (codified at 15 U. S. C. §§ 77z-l and 78u-4), identified ways in which the class-action device was being used to injure “the entire U. S. economy.” H. R. Conf. Rep. No. 104-369, p. 31 (1995). According to the Report, nuisance filings, targeting of deep-pocket defendants, vexatious discovery requests, and “manipulation by class action lawyers of the clients whom they purportedly represent” had become rampant in recent years. Ibid. Proponents of the Reform Act argued that these abuses resulted in extortionate settlements, chilled any discussion of issuers’ future prospects, and deterred qualified individuals from serving on boards of directors. Id., at 31-32.

Title I of the Reform Act, captioned “Reduction of Abusive Litigation,” represents Congress’ effort to curb these perceived abuses. Its provisions limit recoverable damages and attorney’s fees, provide a “safe harbor” for forward-looking statements, impose new restrictions on the selection of (and compensation awarded to) lead plaintiffs, mandate imposition of sanctions for frivolous litigation, and authorize a stay of discovery pending resolution of any motion to dismiss. See 15 U. S. C. § 78u-4. Title I also imposes heightened pleading requirements in actions brought pursuant to § 10(b) and Rule 10b-5; it “insists that securities fraud complaints ‘specify’ each misleading statement; that they set forth the facts ‘on which [a] belief’ that a statement is misleading was ‘formed’; and that they ‘state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.’ ” Dura Pharmaceuticals, Inc. v. Broudo, 544 U. S. 336, 345 (2005) (quoting 15 U.S. C. §§78u-4(b)(1), (2)).

The effort to deter or at least quickly dispose of those suits whose nuisance value outweighs their merits placed special burdens on plaintiffs seeking to bring federal securities fraud class actions. But the effort also had an unintended consequence: It prompted at least some members of the plaintiffs’ bar to avoid the federal forum altogether. Rather than face the obstacles set in their path by the Reform Act, plaintiffs and their representatives began bringing class actions under state law, often in state court. The evidence presented to Congress during a 1997 hearing to evaluate the effects of the Reform Act suggested that this phenomenon was a novel one; state-court litigation of class actions involving nationally traded securities had previously been rare. See H. R. Rep. No. 105-640, p. 10 (1998); S. Rep. No. 105-182, pp. 3-4 (1998). To stem this “shif[t] from Federal to State courts” and “prevent certain State private securities class action lawsuits alleging fraud from being used to frustrate the objectives of” the Reform Act, SLUSA §§2(2), (5), 112 Stat. 3227, Congress enacted SLUSA.

IV

The core provision of SLUSA reads as follows:

“Class Action Limitations. — No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging—
“(A) a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security; or
“(B) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.” Id., at 3230 (codified as amended at 15 U. S. C. § 78bb(f)(1)).

A “covered class action” is a lawsuit in which damages are sought on behalf of more than 50 people. A “covered security” is one traded nationally and listed on a regulated national exchange. Respondent does not dispute that both the class and the securities at issue in this case are “covered” within the meaning of the statute, or that the complaint alleges misrepresentations and omissions of material facts. The only disputed issue is whether the alleged wrongdoing was “in connection with the purchase or sale” of securities.

Respondent urges that the operative language must be read narrowly to encompass (and therefore pre-empt) only those actions in which the purchaser-seller requirement of Blue Chip Stamps is met. Such, too, was the Second Circuit’s view. But insofar as the argument assumes that the rule adopted in Blue Chip Stamps stems from the text of Rule 10b-5 — specifically, the “in connection with” language, it must be rejected. Unlike the Birnbaum court, which relied on Rule 10b-5’s text in crafting its purchaser-seller limitation, this Court in Blue Chip Stamps relied chiefly, and candidly, on “policy considerations” in adopting that limitation. 421 U. S., at 737. The Blue Chip Stamps Court purported to define the scope of a private right of action under Rule 10b-5 — not to define the words “in connection with the purchase or sale.” Id., at 749 (“No language in either [§ 10(b) or Rule 10b — 5] speaks at all to the contours of a private cause of action for their violation”). Any ambiguity on that score had long been resolved by the time Congress enacted SLUSA. See United States v. O’Hagan, 521 U. S. 642, 656, 664 (1997); Holmes v. Securities Investor Protection Corporation, 503 U. S. 258, 285 (1992) (O’Connor, J., concurring in part and concurring in judgment); id., at 289-290 (Scalia, J., concurring in judgment); United States v. Naftalin, 441 U. S. 768, 774, n. 6 (1979); see also 395 F. 3d, at 39 (acknowledging that “[t]he limitation on standing to bring [a] private suit for damages for fraud in connection with the purchase or sale of securities is unquestionably a distinct concept from the general statutory and regulatory prohibition on fraud in connection with the purchase or sale of securities”).

Moreover, when this Court has sought to give meaning to the phrase in the context of § 10(b) and Rule 10b-5, it has espoused a broad interpretation. A narrow construction would not, as a matter of first impression, have been unreasonable; one might have concluded that an alleged fraud is “in connection with” a purchase or sale of securities only when the plaintiff himself was defrauded into purchasing or selling particular securities. After all, that was the interpretation adopted by the panel in the Birnbaum case. See 193 F. 2d, at 464. But this Court, in early cases like Superintendent of Ins. of N. Y. v. Bankers Life & Casualty Co., 404 U. S. 6 (1971), and most recently in SEC v. Zandford, 535 U. S. 813, 820, 822 (2002), has rejected that view. Under our precedents, it is enough that the fraud alleged “coincide” with a securities transaction — whether by the plaintiff or by someone else. See O’Hagan, 521 U. S., at 651. The requisite showing, in other words, is “deception fin connection with the purchase or sale of any security,’ not deception of an identifiable purchaser or seller.” Id., at 658. Notably, this broader interpretation of the statutory language comports with the longstanding views of the SEC. See Zandford, 535 U. S., at 819-820.

Congress can hardly have been unaware of the broad construction adopted by both this Court and the SEC when it imported the key phrase — “in connection with the purchase or sale” — into SLUSA’s core provision. And when “judicial interpretations have settled the meaning of an existing statutory provision, repetition of the same language in a new statute indicates, as a general matter, the intent to incorporate its . . . judicial interpretations as well.” Bragdon v. Abbott, 524 U. S. 624, 645 (1998); see Cannon v. University of Chicago, 441 U. S. 677, 696-699 (1979). Application of that presumption is particularly apt here; not only did Congress use the same words as are used in § 10(b) and Rule 10b-5, but it used them in a provision that appears in the same statute as § 10(b). Generally, “identical words used in different parts of the same statute are . . . presumed to have the same meaning.” IBP, Inc. v. Alvarez, 546 U. S. 21, 34 (2005).

The presumption that Congress envisioned a broad construction follows not only from ordinary principles of statutory construction but also from the particular concerns that culminated in SLUSA’s enactment. A narrow reading of the statute would undercut the effectiveness of the 1995 Reform Act and thus run contrary to SLUSA’s stated purpose, viz., “to prevent certain State private securities class action lawsuits alleging fraud from being used to frustrate the objectives” of the 1995 Act. SLUSA §2(5), 112 Stat. 3227. As the Blue Chip Stamps Court observed, class actions brought by holders pose a special risk of vexatious litigation. 421 U. S., at 739. It would be odd, to say the least, if SLUSA exempted that particularly troublesome subset of class actions from its pre-emptive sweep. See Kircher, 403 F. 3d, at 484.

Respondent’s preferred construction also would give rise to wasteful, duplicative litigation. Facts supporting an action by purchasers under Rule 10b-5 (which must proceed in federal court if at all) typically support an action by holders as well, at least in those States that recognize holder claims. The prospect is raised, then, of parallel class actions proceeding in state and federal court, with different standards governing claims asserted on identical facts. That prospect, which exists to some extent in this very case, squarely conflicts with the congressional preference for “national standards for securities class action lawsuits involving nationally traded securities.” SLUSA §2(5), 112 Stat. 3227.

In concluding that SLUSA pre-empts state-law holder class-action claims of the kind alleged in Dabit’s complaint, we do not lose sight of the general “presum[ption] that Congress does not cavalierly pre-empt state-law causes of action.” Medtronic, Inc. v. Lohr, 518 U. S. 470, 485 (1996). But that presumption carries less force here than in other contexts because SLUSA does not actually pre-empt any state cause of action. It simply denies plaintiffs the right to use the class-action device to vindicate certain claims. The Act does not deny any individual plaintiff, or indeed any group of fewer than 50 plaintiffs, the right to enforce any state-law cause of action that may exist.

Moreover, the tailored exceptions to SLUSA’s pre-emptive command demonstrate that Congress did not by any means act “cavalierly” here. The statute carefully exempts from its operation certain class actions based on the law of the State in which the issuer of the covered security is incorporated, actions brought by a state agency or state pension plan, actions under contracts between issuers and indenture trustees, and derivative actions brought by shareholders on behalf of a corporation. 15 U. S. C. §§78bb(f)(3)(A)-(C), (f)(5)(C). The statute also expressly preserves state jurisdiction over state agency enforcement proceedings. § 78bb(f)(4). The existence of these carve-outs both evinces congressional sensitivity to state prerogatives in this field and makes it inappropriate for courts to create additional, implied exceptions.

Finally, federal law, not state law, has long been the principal vehicle for asserting class-action securities fraud claims. See, e. g., H. R. Conf. Rep. No. 105-803, p. 14 (1998) (“Prior to the passage of the Reform Act, there was essentially no significant securities class action litigation brought in State court”). More importantly, while state-law holder claims were theoretically available both before and after the decision in Blue Chip Stamps, the actual assertion of such claims by way of class action was virtually unheard of before SLUSA was enacted; respondent and his amici have identified only one pre-SLUSA case involving a state-law class action asserting holder claims. This is hardly a situation, then, in which a federal statute has eliminated a historically entrenched state-law remedy. Cf. Bates v. Dow Agrosciences LLC, 544 U. S. 431, 449 (2005) (observing that a “long history” of state-law tort remedy “add[ed] force” to the presumption against pre-emption).

V

The holder class action that respondent tried to plead, and that the Second Circuit envisioned, is distinguishable from a typical Rule 10b-5 class action in only one respect: It is brought by holders instead of purchasers or sellers. For purposes of SLUSA pre-emption, that distinction is irrelevant; the identity of the plaintiffs does not determine whether the complaint alleges fraud “in connection with the purchase or sale” of securities. The misconduct of which respondent complains here — fraudulent manipulation of stock prices — unquestionably qualifies as fraud “in connection with the purchase or sale” of securities as the phrase is defined in Zandford, 535 U. S., at 820, 822, and O’Hagan, 521 U. S., at 651.

The judgment of the Court of Appeals for the Second Circuit is vacated, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

Justice Alito took no part in the consideration or decision of this case.

       Merrill Lynch eventually settled its dispute -with the New York attorney general.

       The complaint alleged, for example, that the prices of the subject stocks were “artificially inflated as a result of the manipulative efforts” of Merrill Lynch, and that Merrill Lynch, “acting as a central nerve center in the manipulation of various stocks..., perpetrated this stock manipulation through a variety of deceptive devices, artifices, and tactics that are the hallmarks of stock manipulation.” App. 28a-29a.

       The Court of Appeals also concluded that Dabit’s lost commission claims escaped pre-emption under SLUSA because they did not “allege fraud that ‘coincided’ with the sale or purchase of a security.” 395 F. 3d, at 47 (quoting SEC v. Zandford, 535 U. S. 813, 825 (2002)). That determination is not before this Court for review.

       Section 10(b) provides as follows:
      “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—
      “(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered . . . any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe as necessary or appropriate in the public interest or for the protection of investors.” 15 U. S. C. § 78j(b).

       The text of the Rule is as follows:
      “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
      “(a) To employ any device, scheme, or artifice to defraud,
      “(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

        “(e) .To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
      “in connection with the purchase or sale of any security.” 17 CFR §240.10b-5 (2005).

       SLUSA amends the 1933 Act and the 1934 Act in substantially identical ways. For convenience and because they are more pertinent here, we quote the amendments to the 1934 Act.

       Another key provision of the statute makes all “covered class actions” filed in state court removable to federal court. 112 Stat. 3230 (codified at 15 U.S.C. § 78bb(f)(2)).

       “The term ‘covered class action’ means—
      “(i) any single lawsuit in which—
      “(I) damages are sought on behalf of more than 50 persons or prospective class members, and questions of law or fact common to those persons or members of the prospective class, without reference to issues of individualized reliance on an alleged misstatement or omission, predominate over any questions affecting only individual persons or members; or
      “(II) one or more named parties seek to recover damages on a representative basis on behalf of themselves and other unnamed parties similarly situated,- and questions of law or fact common to those persons or members of the prospective class predominate over any questions affecting only individual persons or members; or
      “(ii) any group of lawsuits filed in or pending in the same court and involving common questions of law or fact, in which—
      “(I) damages are sought on behalf of more than 50 persons; and
      “(II) the lawsuits are joined, consolidated, or otherwise proceed as a single action for any purpose.” 112 Stat. 3232 (codified at 15 U. S. C. § 78bb(f )(5)(B)).

       “The term ‘covered security’ means a security that satisfies the standards for a covered security specified in paragraph (1) or (2) of section 18(b) of the Securities Act of 1933, at the time during which it is alleged that the misrepresentation, omission, or manipulative or deceptive conduct occurred . . . .” 112 Stat. 3232 (codified at 15 U. S. C. § 78bb(f)(5)(E)). Section 18(b) of the 1933 Act in turn defines “covered security” to include securities traded on a national exchange. § 77r(b).

       In Zandford, we observed that the SEC has consistently “maintained that a broker who accepts payment for securities that he never intends to deliver, or who sells customer securities with intent to misappropriate the proceeds, violates § 10(b) and Rule 10b-5.” 535 U. S., at 819. Here, too, the SEC supports a broad reading of the “in connection with” language.

       See 2003 WL 1872820, *1 (SDNY, Apr. 10, 2003) (observing that Dabit’s holder claims rested “on the very same alleged series of transactions and occurrences asserted in the federal securities actions” filed against Merrill Lynch).

       See H. R. Rep. No. 105-640, p. 10 (1998) (the “solution” to circumvention of the Reform Act “is to make Federal court the exclusive venue for securities fraud class action litigation”); S. Rep. No. 105-182, p. 8 (1998) (identifying “the danger of maintaining differing federal and state standards of liability for nationally-traded securities”).

       Respondent points out that the Court in Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723 (1975), identified as a factor mitigating any unfairness caused by adoption of the purchaser-seller requirement that “remedies are available to nonpurchasers and nonsellers under state law.” Id., at 738, n. 9. He argues that this supports a narrow construction of SLUSA’s pre-emption provision. But we do not here revisit the Blue Chip Stamps Court’s understanding of the equities involved in limiting the availability of private remedies under federal law; we are concerned instead with Congress’ intent in adopting a pre-emption provision, the evident purpose of which is to limit the availability of remedies under state law.

       See Brief for Respondent 5 (citing Weinberger v. Kendrick, 698 F. 2d 61, 78 (CA2 1982) (approving a settlement that included holder claims brought pursuant to New York law)); see also Tr. of Oral Arg. 34-35.


source: Caselaw Access Project

author: Justice Scalia Justice Souter,

license: Public Domain

text:
    UNITED STATES v. GRUBBS
    No. 04-1414.
    Argued January 18, 2006
    Decided March 21, 2006

      Deputy Solicitor General Dreeben argued the cause for the United States. With him on the briefs were Solicitor General Clement, Assistant Attorney General Fisher, and Dan Himmelfarb.

      Mark J. Reichel argued the cause for respondent. With him on the brief were Linda C. Harter and Jeffrey T Green.

        Daniel L. Kaplan and Jeffrey L. Fisher filed a brief for the National Association of Criminal Defense Lawyers et al. as amici curiae urging affirmance.

        Ric Simmons filed a brief for the National Association of Federal Defenders as amicus curiae.

   Justice Scalia

delivered the opinion of the Court.

Federal law enforcement officers obtained a search warrant for respondent’s house on the basis of an affidavit explaining that the warrant would be executed only after a controlled delivery of contraband to that location. We address two challenges to the constitutionality of this anticipatory warrant.

I

Respondent Jeffrey Grubbs purchased a videotape containing child pornography from a Web site operated by an undercover postal inspector. Officers from the Postal Inspection Service arranged a controlled delivery of a package containing the videotape to Grubbs’ residence. A postal inspector submitted a search warrant application to a Magistrate Judge for the Eastern District of California, accompanied by an affidavit describing the proposed operation in detail. The affidavit stated:

“Execution of this search warrant will not occur unless and until the parcel has been received by a person(s) and has been physically taken into the residence .... At that time, and not before, this search warrant will be executed by me and other United States Postal inspectors, with appropriate assistance from other law enforcement officers in accordance with this warrant’s command.” App. to Pet. for Cert. 72a.

In addition to describing this triggering condition, the affidavit referred to two attachments, which described Grubbs’ residence and the items officers would seize. These attachments, but not the body of the affidavit, were incorporated into the requested warrant. The affidavit concluded:

“Based upon the foregoing facts, I respectfully submit there exists probable cause to believe that the items set forth in Attachment B to this affidavit and the search warrant, will be found [at Grubbs’ residence], which residence is further described at Attachment A.” Ibid.

The Magistrate Judge issued the warrant as requested. Two days later, an undercover postal inspector delivered the package. Grubbs’ wife signed for it and took the unopened package inside. The inspectors detained Grubbs as he left his home a few minutes later, then entered the house and commenced the search. Roughly 30 minutes into the search, Grubbs was provided with a copy of the warrant, which included both attachments but not the supporting affidavit that explained when the warrant would be executed. Grubbs consented to interrogation by the postal inspectors and admitted ordering the videotape. He was placed under arrest, and various items were seized, including the videotape.

A grand jury for the Eastern District of California indicted Grubbs on one count of receiving a visual depiction of a minor engaged in sexually explicit conduct. See 18 U. S. C. § 2252(a)(2). He moved to suppress the evidence seized during the search of his residence, arguing as relevant here that the warrant was invalid because it failed to list the triggering condition. After an evidentiary hearing, the District Court denied the motion. Grubbs pleaded guilty, but reserved his right to appeal the denial , of his motion to suppress.

The Court of Appeals for the Ninth Circuit reversed. 377 F. 3d 1072, amended, 389 F. 3d 1306 (2004). Relying on Circuit precedent, it held that “the particularity requirement of the Fourth Amendment applies with full force to the conditions precedent to an anticipatory search warrant.” 377 F. 3d, at 1077-1078 (citing United States v. Hotal, 143 F. 3d 1223, 1226 (CA9 1998)). An anticipatory warrant defective for that reason may be “cur[ed]” if the conditions precedent are set forth in an affidavit that is incorporated in the warrant and “presented to the person whose property is being searched.” 377 F. 3d, at 1079. Because the postal inspectors “failed to present the affidavit — the only document in which the triggering conditions were listed” — to Grubbs or his wife, the “warrant was . . . inoperative, and the search was illegal.” Ibid. We granted certiorari. 545 U. S. 1164 (2005).

II

Before turning to the Ninth Circuit’s conclusion that the warrant at issue here ran afoul of the Fourth Amendment’s particularity requirement, we address the antecedent question whether anticipatory search warrants are categorically unconstitutional. An anticipatory warrant is “a warrant based upon an affidavit showing probable cause that at some future time (but not presently) certain evidence of crime will be located at a specified place.” 2 W. LaFave, Search and Seizure § 3.7(c), p. 398 (4th ed. 2004). Most anticipatory warrants subject their execution to some condition precedent other than the mere passage of time — a so-called “triggering condition.” The affidavit at issue here, for instance, explained that “[execution of th[e] search warrant will not occur unless and until the parcel [containing child pornography] has been received by a person(s) and has been physically taken into the residence.” App. to Pet. for Cert. 72a. If the government were to execute an anticipatory warrant before the triggering condition occurred, there would be no reason to believe the item described in the warrant could be found at the searched location; by definition, the triggering condition which establishes probable cause has not yet been satisfied when the warrant is issued. Grubbs argues that for this reason anticipatory warrants contravene the Fourth Amendment’s provision that “no Warrants shall issue, but upon probable cause.”

We reject this view, as has every Court of Appeals to confront the issue, see, e. g., United States v. Loy, 191 F. 3d 360, 364 (CA3 1999) (collecting cases). Probable cause exists when “there is a fair probability that contraband or evidence of a crime will be found in a particular place.” Illinois v. Gates, 462 U. S. 213, 238 (1983). Because the probable-cause requirement looks to whether evidence will be found when the search is conducted, all warrants are, in a sense, “anticipatory.” In the typical case where the police seek permission to search a house for an item they believe is already located there, the magistrate’s determination that there is probable cause for the search amounts to a prediction that the item will still be there when the warrant is executed. See People v. Glen, 30 N. Y. 2d 252, 258, 282 N. E. 2d 614, 617 (1972) (“[PJresent possession is only probative of the likelihood of future possession”). The anticipatory nature of warrants is even clearer in the context of electronic surveillance. See, e. g., Katz v. United States, 389 U. S. 347 (1967). When police request approval to tap a telephone line, they do so based on the probability that, during the course of the surveillance, the subject will use the phone to engage in crime-related conversations. The relevant federal provision requires a judge authorizing “interception of wire, oral, or electronic communications” to determine that “there is probable cause for belief that particular communications concerning [one of various listed offenses] will be obtained through such interception.” 18 U. S. C. §2518(3)(b) (emphasis added); see also United States v. Ricciardelli, 998 F. 2d 8, 11, n. 3 (CA1 1993) (“[T]he magistrate issues the warrant on the basis of a substantial probability that crime-related conversations will ensue”). Thus, when an anticipatory warrant is issued, “the fact that the contraband is not presently located at the place described in the warrant is immaterial, so long as there is probable cause to believe that it will be there when the search warrant is executed.” United States v. Garcia, 882 F. 2d 699, 702 (CA2 1989) (quoting United States v. Lowe, 575 F. 2d 1193, 1194 (CA6 1978); internal quotation marks omitted).

Anticipatory warrants are, therefore, no different in principle from ordinary warrants. They require the magistrate to determine (1) that it is now probable that (2) contraband, evidence of a crime, or a fugitive will be on the described premises (3) when the warrant is executed. It should be noted, however, that where the anticipatory warrant places a condition (other than the mere passage of time) upon its execution, the first of these determinations goes not merely to what will probably be found if the condition is met. (If that were the extent of the probability determination, an anticipatory warrant could be issued for every house in the country, authorizing search and seizure ¿/contraband should be delivered — though for any single location there is no likelihood that contraband will be delivered.) Rather, the probability determination for a conditioned anticipatory warrant looks also to the likelihood that the condition will occur, and thus that a proper object of seizure will be on the described premises. In other words, for a conditioned anticipatory warrant to comply with the Fourth Amendment’s requirement of probable cause, two prerequisites of probability must be satisfied. It must be true not only that if the triggering condition occurs “there is a fair probability that contraband or evidence of a crime will be found in a particular place,” Gates, supra, at 238, but also that there is probable cause to believe the triggering condition will occur. The supporting affidavit must provide the magistrate with sufficient information to evaluate both aspects of the probable-cause determination. See Garcia, supra, at 703.

In this case, the occurrence of the triggering condition— successful delivery of the videotape to Grubbs’ residence— would plainly establish probable cause for the search. In addition, the affidavit established probable cause to believe the triggering condition would be satisfied. Although it is possible that Grubbs could have refused delivery of the videotape he had ordered, that was unlikely. The Magistrate therefore “had a ‘substantial basis for . . . conclud[ing]’ that probable cause existed.” Gates, supra, at 238-239 (quoting Jones v. United States, 362 U. S. 257, 271 (1960)).

Ill

The Ninth Circuit invalidated the anticipatory search warrant at issue here because the warrant failed to specify the triggering condition. The Fourth Amendment’s particularity requirement, it held, “applies with fall force to the conditions precedent to an anticipatory search warrant.” 377 F. 3d, at 1077-1078.

The Fourth Amendment, however, does not set forth some general “particularity requirement.” It specifies only two matters that must be “particularly describ[ed]” in the warrant: “the place to be searched” and “the persons or things to be seized.” We have previously rejected efforts to expand the scope of this provision to embrace unenumerated matters. In Dalia v. United States, 441 U. S. 238 (1979), we considered an order authorizing the interception of oral communications by means of a “bug” installed by the police in the petitioner’s office. The petitioner argued that, if a covert entry is necessary to install such a listening device, the authorizing order must “explicitly set forth its approval of such entries before the fact.” Id., at 255. This argument fell before the “‘precise and clear’” words of the Fourth Amendment: “Nothing in the language of the Constitution or in this Court’s decisions interpreting that language suggests that, in addition to the [requirements set forth in the text], search warrants also must include a specification of the precise manner in which they are to be executed.” Ibid. (quoting Stanford v. Texas, 379 U. S. 476, 481 (1965)); 441 U. S., at 257. The language of the Fourth Amendment is likewise decisive here; its particularity requirement does not include the conditions precedent to execution of the warrant.

Respondent, drawing upon the Ninth Circuit’s analysis below, relies primarily on two related policy rationales. First, he argues, setting forth the triggering condition in the warrant itself is necessary “to delineate the limits of the executing officer’s power.” Brief for Respondent 20. This is an application, respondent asserts, of the following principle: “[I]f there is a precondition to the valid exercise of executive power, that precondition must be particularly identified on the face of the warrant.” Id., at 23. That principle is not to be found in the Constitution. The Fourth Amendment does not require that the warrant set forth the magistrate’s basis for finding probable cause, even though probable cause is the quintessential “precondition to the valid exercise of executive power.” Much less does it require description of a triggering condition.

Second, respondent argues that listing the triggering condition in the warrant is necessary to “ ‘assur[e] the individual whose property is searched or seized of the lawful authority of the executing officer, his need to search, and the limits of his power to search.’” Id., at 19 (quoting United States v. Chadwick, 433 U. S. 1, 9 (1977)). The Ninth Circuit went even further, asserting that if the property owner were not informed of the triggering condition, he “would ‘stand [no] real chance of policing the officers’ conduct.’ ” 377 F. 3d, at 1079 (quoting Ramirez v. Butte-Silver Bow County, 298 F. 3d 1022, 1027 (CA9 2002)). This argument assumes that the executing officer must present the property owner with a copy of the warrant before conducting his search. See 377 F. 3d, at 1079, n. 9. In fact, however, neither the Fourth Amendment nor Federal Rule of Criminal Procedure 41 imposes such a requirement. See Groh v. Ramirez, 540 U. S. 551, 562, n. 5 (2004). “The absence of a constitutional requirement that the warrant be exhibited at the outset of the search, or indeed until the search has ended, is ... evidence that the requirement of particular description does not protect an interest in monitoring searches.” United States v. Stefonek, 179 F. 3d 1030, 1034 (CA7 1999) (citations omitted). The Constitution protects property owners not by giving them license to engage the police in a debate over the basis for the warrant, but by interposing, ex ante, the “deliberate, impartial judgment of a judicial officer . . . between the citizen and the police,” Wong Sun v. United States, 371 U. S. 471, 481-482 (1963), and by providing, ex post, a right to suppress evidence improperly obtained and a cause of action for damages.

Hs * *

Because the Fourth Amendment does not require that the triggering condition for an anticipatory search warrant be set forth in the warrant itself, the Court of Appeals erred in invalidating the warrant at issue here. The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

Justice Alito took no part in the consideration or decision of this case.

Justice Souter,

with whom

Justice Stevens and Justice Ginsburg join, concurring in part and concurring in the judgment.

I agree with the Court that anticipatory warrants are constitutional for the reasons stated in Part II of the Court’s opinion, and I join in the disposition of this case. But I would qualify some points made in Part III.

The Court notes that a warrant’s failure to specify the place to be searched and the objects sought violates an express textual requirement of the Fourth Amendment, whereas the text says,nothing about a condition placed by the issuing magistrate on the authorization to search (here, delivery of the package of contraband). That textual difference is, however, no authority for neglecting to specify the point or contingency intended by the magistrate to trigger authorization, and the government should beware of banking on the terms of a warrant without such specification. The notation of a starting date was an established feature even of the objectionable 18th-century writs of assistance, see, e. g., Massachusetts Writs of Assistance Bill, 1762, reprinted in M. Smith, The Writs of Assistance Case 567-568 (1978); Writ of Assistance (English) of George III, 1761, reprinted in id., at 524-527. And it is fair to say that the very word “warrant” in the Fourth Amendment means a statement of authority that sets out the time at which (or, in the case of anticipatory warrants, the condition on which) the authorization begins.

An issuing magistrate’s failure to mention that condition can lead to several untoward consequences with constitutional significance. To begin with, a warrant that fails to tell the truth about what a magistrate authorized cannot inform the police officer’s responsibility to respect the limits of authorization, see Groh v. Ramirez, 540 U. S. 551, 560-563, and n. 4 (2004), a failing assuming real significance when the warrant is not executed by the official who applied for it and happens to know the unstated condition. The peril is that if an officer simply takes such a warrant on its face and makes the ostensibly authorized search before the unstated condition has been met, the search will be held unreasonable. It is true that we have declined to apply the exclusionary rule when a police officer reasonably relies on the product of a magistrate’s faulty judgment or sloppy practice, see Massachusetts v. Sheppard, 468 U. S. 981, 987-991 (1984). But when a government officer obtains what the magistrate says is an anticipatory warrant, he must know or should realize when it omits the condition on which authorization depends, and it is hard to see why the government should not be held to the condition despite the unconditional face of the warrant. Cf. Groh v. Ramirez, supra, at 554-555, 563, and n. 6 (declaring unconstitutional a search conducted pursuant to a warrant failing to specify the items the government asked the magistrate permission to seize in part because “officers leading a search team must ‘make sure that they have a proper warrant that in fact authorizes the search and seizure they are about to conduct’ ” (brackets omitted)).

Nor does an incomplete anticipatory warrant address an owner’s interest in an accurate statement of the government’s authority to search property. To be sure, the extent of that interest is yet to be settled; in Groh v. Ramirez, supra, the Court was careful to note that the right of an owner to demand to see a copy of the warrant before making way for the police had not been determined, id., at 562, n. 5, and it remains undetermined today. But regardless of any right on the owner’s part, showing an accurate warrant reliably “assures the individual whose property is searched or seized of the lawful authority of the executing officer, his need to search, and the limits of his power to search.” United States v. Chadwick, 433 U. S. 1, 9 (1977), quoted in Groh v. Ramirez, supra, at 561. And if a later case holds that the homeowner has a right to inspect the warrant on request, a statement of the condition of authorization would give the owner a right to correct any misapprehension on the police’s part that the condition had been met when in fact it had not been. If the police were then to enter anyway without a reasonable (albeit incorrect) justification, the search would certainly be open to serious challenge as unreasonable within the meaning of the Fourth Amendment.

       This issue is “predicate to an intelligent resolution of the question presented.” Ohio v. Robinette, 519 U. S. 33, 38 (1996) (internal quotation marks omitted). It makes little sense to address what the Fourth Amendment requires of anticipatory search warrants if it does not allow them at all. Cf. Wilkinson v. Austin, 545 U. S. 209, 221 (2005) (addressing whether inmates had a liberty interest in avoiding assignment to a “Super-max” prison, despite the State’s concession that they did, because “[w]e need reach the question of what process is due only if the inmates establish a constitutionally protected liberty interest”).

       For this reason, probable cause may cease to exist after a warrant is issued. The police may learn, for instance, that contraband is no longer located at the place to be searched. See, e. g., United States v. Bowling, 900 F. 2d 926, 932 (CA6 1990) (recognizing that a fruitless consent search could “dissipat[e] the probable cause that justified a warrant”). Or the probable-cause showing may have grown “stale” in view of the time that has passed since the warrant was issued. See United States v. Wagner, 989 F. 2d 69, 75 (CA2 1993) (“[T]he facts in an affidavit supporting a search warrant must be sufficiently close in time to the issuance of the warrant and the subsequent search conducted so that probable cause can be said to exist as of the time of the search and not simply as of some time in the past”); see also Sgro v. United States, 287 U. S. 206, 210-211 (1932).

      Federal Rule of Criminal Procedure 41(e)(2)(A) in fact requires that an issued warrant command the executing officer to “execute the warrant within a specified time no longer than 10 days.”