Third Circuit Holds That SLUSA Does Not Preclude Class Action Opt-Outs From Pursuing Individual Actions

In North Sound Capital, LLC v. Merck & Co, Inc., No. 18-2317, 2019 WL 4309663, 2019 U.S. App. LEXIS 27518 (3d Cir. Sept. 12, 2019), the United States Court of Appeals for the Third Circuit reversed a New Jersey district court ruling, which held that the Securities Litigation Uniform Standards Act of 1998 ("SLUSA") precluded state law claims in lawsuits brought by investors who opted-out of class action lawsuits. In reversing, the Third Circuit determined that the opt-out plaintiffs could indeed bring their state law fraud claims against the same defendants as the class action lawsuits because their subsequently filed suits did not fall within the definition of a "covered class action" under SLUSA. The decision provides helpful guidance as to whether investors who choose to opt-out of class action lawsuits may be precluded under SLUSA from proceeding with individual lawsuits seeking similar relief.