In re Tyco International, Ltd. MDL

2008 DNH 040

• Court: District Court, D. New Hampshire
• Decided: February 20, 2008
• Docket: MD-02-1335-B
• Status: Published

Opinion

In re Tyco International, Ltd. MDL MD-02-1335-B 02/20/08

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

In Re: Tyco International, Ltd. Multidistrict Litigation Case N o . 02-md-1335-PB ALL CASES Opinion N o . 2008 DNH 040

O R D E R

Scott Davis and Jay Korach have filed a class action

complaint against Tyco International, Ltd., asserting state law

securities claims on behalf of a class of holders (as opposed to

purchasers) of Tyco’s stock. Tyco has challenged the complaint

in a motion to dismiss based on the Securities Litigation and

Uniform Standards Act (“SLUSA”). Plaintiffs respond by claiming

that SLUSA is inapplicable because they have limited the size of

the proposed class to 50 shareholders. The parties agree that

their dispute turns on whether the complaint is a “covered class

action” as that term is used in SLUSA.

A “covered class action” is defined in SLUSA as

(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.

15 U.S.C. § 77p(f)(2)(A); 15 U.S.C. § 78bb(f)(5)(B).

Tyco argues that the complaint qualifies as a covered class

action under subsection (i)(II) because plaintiffs are attempting

to recover damages on a representative basis on behalf of unnamed

parties and common questions of law and fact predominate over

individual issues. Plaintiffs contend that subsection (i)(II)

does not apply to cases such as theirs, which are limited to

classes of fifty or fewer people. To succeed with this argument,

plaintiffs must demonstrate that the 50-person size limitation

-2- found in subsection (i)(I) also applies to subsection (i)(II).

Plaintiffs offer three arguments to support their

interpretation, none of which are persuasive. First, they claim

that their interpretation is supported by the Supreme Court’s

recent decisions in Merrill Lynch, Pierce, Fenner & Smith, Inc.

v . Dabit, 547 U.S. 71 (2006) and Kircher v . Putnam Funds Trust,

547 U.S. 633 (2006). I disagree. The Supreme Court did not

address the issue that is before me in either Dabit or Kircher.

Thus, the court has not yet had an opportunity to make a

considered evaluation of the interpretive question on which this

case turns.

Plaintiffs next argue that their interpretation of

subsection (i)(II) is required in order to prevent subsection

(i)(I) from being superfluous. This argument is simply wrong.

Subsection (i)(I) covers cases that are not covered under

subsection (i)(II), regardless of whether the latter subsection

is construed to include the 50-person size requirement.

Subsection (i)(I) covers cases in which multiple named plaintiffs

have joined their claims in a single action, whereas subsection

(i)(II) applies only to claims in which named plaintiffs have

brought representative claims on behalf of unnamed parties.

Subsection (i)(I) also applies to certain cases in which a

-3- finding that common issues predominate would be precluded by

questions of individual reliance, whereas subsection (i)(II)

applies only to cases in which common issues predominate when all

aspects of the claim are considered. These differences persist

whether or not subsection (i)(II) is construed to include the 50-

person size requirement. Thus, subsection (i)(I) is not

superfluous simply because subsection (i)(II) does not contain a

class size limitation.

Finally, plaintiffs argue that 50-person size requirement

should be “read into” subsection (i)(II) because its omission

must have been a drafting error. I disagree with the premise on

which this argument is based. SLUSA draws distinctions between

actions in which named plaintiffs are suing on their own behalf

(subsections (i)(I) and (ii)) and actions in which plaintiffs are

suing to recover damages on a representative basis for unnamed

parties (subsection (i)(II)). Only the former cases are subject

to the more than 50-person size requirement. SLUSA’s legislative

history does not suggest that this rational distinction was the

result of a drafting error. Accordingly, I will not take the

extraordinary step of reading into subsection (i)(II) a

limitation that the provision does not contain.

-4- Tyco is correct in contending that plaintiffs’ complaint

qualifies as a covered class action under SLUSA. Because the

parties agree that the class claims must be dismissed under these

circumstances, Tyco’s motion to dismiss with prejudice (Doc. N o .

1142) is granted.1

SO ORDERED.

/s/Paul Barbadoro Paul Barbadoro United States District Judge

February 2 0 , 2008

cc: Counsel of Record

1 I am also unpersuaded by plaintiffs’ alternative argument that I should permit them to proceed only on their individual claims if the class claims are barred by SLUSA. This is the second time that this case is before m e . Plaintiffs elected to plead their claims as a class action despite the fact that I dismissed their original class action complaint on similar grounds. The claims as drafted are barred by SLUSA. That ends the matter.

-5-