Atkinson v. Morgan Asset Mgmt., Inc., No. 09-6265 (6th Cir. 2011)
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Plaintiffs held shares in three mutual funds issued by an open-end investment company (15 U.S.C. 80a-5(a)(1)). The shares were "redeemable securities," entitling the holders to redemption at any time for their proportionate share of the issuer's current net assets. Like most investments, the shares lost value between 2007 and 2008. Plaintiffs attributed their losses to defendants' taking unjustified risks in allocating assets and concealing those risks. They filed a class action, bringing state-law claims for breach of contract, violations of the Maryland Securities Act, breach of fiduciary duty, negligence, and negligent misrepresentation. The district court dismissed, holding that the action was barred by the Securities Litigation Uniform Standards Act of 1998, 15 U.S.C. 77p(b), (f)(2)(A), (f)(3). The Sixth Circuit affirmed, rejecting an argument that the case fell within an exemption, known as the first Delaware carve-out, which preserves a class action otherwise facing SLUSA preclusion if it involves "purchase or sale of securities by the issuer or an affiliate of the issuer exclusively from or to holders of equity securities of the issuer."
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