In Wells Fargo Bank v. Superior Court, ___ Cal.App.4th ___ (Jan. 25, 2008), the Court of Appeal (First Appellate District, Division One) held that "the Securities Litigation Uniform Standards Act of 1998 (Pub.L. No. 105–353 (Nov. 3, 1998) 112 Stat. 3227) (SLUSA) precludes plaintiffs’ class action complaint," which alleged UCL, CLRA and other claims. Slip op. at 1-2. The opinion explains that:
SLUSA is a preclusion provision[, rather than a preemption provision,] because it does not displace state law with federal law, but makes some state law claims nonactionable through the class action device in both federal and state courts. (See Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit (2006) 547 U.S. 71, 87 [164 L.Ed.2d 179, 193, 126 S.Ct. 1503, 1514] (Dabit).) Thus, once a court determines that SLUSA applies to a given state law action, the action cannot be maintained on a class basis in either state or federal court. (Kircher v. Putnam Funds Trust (2006) 547 U.S. 633, ___ [165 L.Ed.2d 92, ___, 126 S.Ct. 2145, 2155].)
Id. at 3 n.2. The opinion goes on:
SLUSA provides in relevant part: “Limitations on remedies  (1) 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.” (15 U.S.C. § 78bb(f).) Congress enacted SLUSA in response to the marginal success the Private Securities Litigation Reform Act of 1995 (PSLRA) had in achieving its goal of combating strike suits and securities class actions. (See SLUSA, Pub.L. No. 105–353, § 2(1)-(5) (Nov. 3, 1998) 112 Stat. 3227; 15 U.S.C. 788bb(f).) In enacting PSLRA, Congress targeted “perceived abuses of the class-action vehicle in litigation involving nationally traded securities.” (Dabit, supra, 547 U.S. 71, 81.) However, “[r]ather than face the obstacles set in their path by [PSLRA], plaintiffs and their representatives began bringing class actions under state law,” alleging violations of state statutory or common law. (Id. at p. 82.) Subsequently, Congress passed SLUSA to prevent plaintiffs from frustrating the objectives of PSLRA. (Ibid.)
An action will be dismissed under SLUSA if it (1) is a “covered class action”; (2) is based on state law; (3) involves a “covered security”; and (4) alleges a “misrepresentation or omission of a material fact” or use of “any manipulative or deceptive device . . . in connection with the purchase or sale of a covered security.” (15 U.S.C. § 78bb(f); see, e.g., Behlen v. Merrill Lynch, supra, 311 F.3d 1087, 1092.) A “covered class action” is a lawsuit in which damages are sought on behalf of more than 50 people. (15 U.S.C. § 78bb(f)(5)(B).) A “covered security” is one traded nationally and listed on a regulated national exchange. (15 U.S.C. § 78bb(f)(5)(E).) In determining whether an alleged misrepresentation or omission “coincides” with a securities transaction, courts look at “the gravamen” – whether the complaint, as a whole, involves an untrue statement or substantive omission of a material fact, and whether that conduct coincides with a transaction involving a covered security. (Kutten v. Bank of America, N.A. (E.D.Mo., Aug. 29, 2007, Civ. No. 06-0937 (PAM)) 2007 U.S.Dist. Lexis 63897, at pp. *4–5 (Kutten).) The court focuses on the substance of the claim, not the plaintiffs’ characterization of it. (Miller v. Nationwide Life Ins. Co. (5th Cir. 2004) 391 F.3d 698, 702 [whether SLUSA applies “hinges on the context of the allegations—not on the label affixed to the cause of action”].)
Id. at 4-5. The Court then applies these rules to the case before it:
Here, it is undisputed that both the class and the mutual funds at issue are “covered” as defined by SLUSA. It is also clear from the complaint that the action is based on state law. Thus, the key question is whether the gravamen involves a misrepresentation or omission in connection with the purchase or sale of mutual funds. We conclude it does.
The essence of plaintiffs’ second amended complaint is that the Bank made misrepresentations and omitted material facts, including conflicts of interests and fees relating to the transfer of trust assets into proprietary and nonproprietary mutual funds. The complaint is replete with allegations that the Bank “failed to disclose” (i.e., omitted) details regarding fees and conflicts of interests, and that these omissions caused injury to the plaintiffs. ....
Further, each of the six causes of action hinges on harm caused by the Bank’s misrepresentations. (See Rowinski v. Salomon Smith Barney Inc. (3d Cir. 2005) 398 F.3d 294, 300 [misrepresentation prong was satisfied where the allegations of misrepresentation served as the “factual predicate” of state law causes of action].) .... The third cause of action for violation of the Consumers Legal Remedies Act and the fifth cause of action for unfair business practices contain allegations that the Bank engaged in deceptive practices in connection with its investments and trust services. .... Whether plaintiffs’ alleged omissions are couched in terms of a fiduciary duty or claims of fraud, they are, in essence, claims that the Bank misrepresented or omitted key information about the securities transactions in which they were involved, thereby causing plaintiffs’ injuries.
Id. at 7-8.
The Court concludes by holding that plaintiffs should be allowed leave to amend their complaint: "Because plaintiffs are free to pursue their claims on an individual basis, and because some of their allegations, including their allegations regarding unreasonable charges for the preparation of tax returns, are outside the scope of SLUSA, plaintiffs may amend the second amended complaint to (1) assert state claims for a group of fewer than 50 plaintiffs; or (2) exclude allegations that trigger SLUSA preclusion." Id. at 15.