United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                  ___________

                              Nos. 07-1899/07-1906
                                  ___________

George Siepel; Phyllis Siepel; H. Craig *
Williams; Elinor Tama Williams;         *
Constance Elaine Williams; Donna N.     *
Reinke; Robert Cohen; Carl M. Page;     *
and all others similarly situated,      *
                                        *
            Plaintiffs-Appellants/      *
            Cross-Appellees,            *
                                        *
     v.                                 *
                                        *
Bank of America, N.A.,                  * Appeals from the United States
                                        * District Court for the
            Defendant-Appellee/         * Eastern District of Missouri.
            Cross-Appellant,            *
                                        *
and                                     *
                                        *
Columbia Funds Series Trust, formerly *
known as Nations Funds Trust; Bank      *
of America Corporation; Columbia        *
Management Advisors, LLC; Columbia *
Management Distributors, Inc.; Bank     *
of America Investment Services, Inc., *
                                        *
            Defendants-Appellees.       *
                                   ___________

                            Submitted: January 17, 2008
                                Filed: May 19, 2008
                                ___________
Before COLLOTON and SHEPHERD, Circuit Judges, and GOLDBERG,1 Judge.
                          ___________

SHEPHERD, Circuit Judge.

       Several beneficiaries of trust accounts maintained by Bank of America, N.A.,
filed a class action complaint against the Bank, its holding corporation, and affiliated
investment companies. In addition to alleging claims under federal securities laws,
the Plaintiffs alleged state-law claims that the Defendants were unjustly enriched and
breached fiduciary duties they owed to the beneficiaries. On the Defendants’ motion,
the district court2 dismissed the federal claims on the merits and dismissed the state-
law claims as preempted by the Securities Litigation Uniform Standards Act of 1998
(SLUSA), 15 U.S.C. § 78bb(f).

      In this appeal, the Plaintiffs mainly call upon us to answer whether SLUSA
preempts state-law claims that a trustee breached its fiduciary duty by failing to
disclose conflicts of interest in its selection of nationally-traded investment securities.
As a dismissal for failure to state a claim, we review the district court’s decision de
novo. Sofonia v. Principal Life Ins. Co., 

, 876 (8th Cir. 2006). The
Supreme Court’s broad holding in Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
Dabit, 

(2006), compels us to conclude that SLUSA applies.

                                            I.

       On review of a dismissal for failure to state a claim, we assume that the
allegations in the Amended Complaint are true and construe them in the light most


      1
        The Honorable Richard W. Goldberg, United States Court of International
Trade, sitting by designation.
      2
       The Honorable Paul A. Magnuson, United States District Judge for the District
of Minnesota, sitting by designation in the Eastern District of Missouri.

                                            -2-
favorable to the Plaintiffs’ claims. See Kottschade v. City of Rochester, 

, 1040 (8th Cir. 2003). According to the complaint, the Bank implemented a plan
to consolidate the trust management activities of other banks it had acquired. Existing
and prospective trust customers were allegedly led to believe that their assets were
being managed on an individualized basis, when in fact the assets were being invested
in shares of the Nations Funds mutual fund, managed by an investment company
substantially owned by the Bank. Even though higher-yielding and better-managed
mutual funds were available in the marketplace, according to the Plaintiffs, the Bank
favored Nations Funds because it could then indirectly extract additional fees and
profits.

       To help effectuate this plan, the Bank allegedly sent misleading letters to co-
trustees and beneficiaries touting the advantages of the move to Nations Funds and
threatening “adverse tax consequences” if the recipients objected. Not disclosed were
the conflicts of interest, higher expenses, and increased tax liability that would result
from the Bank’s diversion of trust assets to Nations Funds. Consequently, the
Plaintiffs claim, the Bank acted in its own self-interest to the detriment of the trust
beneficiaries, in breach of its fiduciary duties under state law.

        The Plaintiffs filed this class action, alleging: breach of fiduciary duty; unjust
enrichment; and violations of the the Investment Advisers Act of 1940, Securities
Exchange Act of 1934, and Securities Act of 1933. They asserted federal jurisdiction
over the state-law claims based on the minimum diversity provisions of the Class
Action Fairness Act of 2005, and as supplemental to the federal claims. 28 U.S.C. §§
1332(d)(2), 1367(a). On behalf of themselves and all others similarly situated, the
Plaintiffs seek class certification, money damages, attorneys’ fees, and injunctive
relief.

       The Defendants moved to dismiss the action for several reasons. Because the
Plaintiffs and their lawyers had already filed at least five class actions in various

                                           -3-
jurisdictions seeking redress for the same alleged injuries, the Defendants asked the
court to decline jurisdiction based on impermissible judge shopping. Further, the
Defendants requested an award of costs and attorneys’ fees they had incurred in
defending one of those actions in a Florida court. They also moved to dismiss the
federal claims on the merits, and the state-law claims as preempted by SLUSA. The
Plaintiffs opposed all of the motions except as to the federal claims, which they
proposed to eliminate by moving for leave to file a Second Amended Complaint.

       Finding “ample evidence that Plaintiffs are forum shopping,” the district court
awarded $71,972.79 in costs and $923,990.35 in attorneys’ fees to the Bank.
Thereafter, the court was notified that the Florida court had already entered a decision
on the same issue. To prevent a duplicative recovery, the district court vacated the
award so that the Florida court could determine the appropriate amount of costs and
attorneys’ fees.

       Due to the Plaintiffs’ failure to oppose, the court dismissed the federal claims
with prejudice and denied leave to amend based on futility. As for the issue of
SLUSA preemption, the district court found that misrepresentations and omissions of
material facts were central to the Plaintiffs’ state-law claims. The court further held
that, regardless of the Plaintiffs’ status as trust beneficiaries and not purchasers or
sellers, the alleged misrepresentations and omissions were “in connection with the
purchase or sale of a covered security” as defined by Dabit, 

. As such, the
court concluded that SLUSA mandated dismissal of the state-law claims.

       On appeal, the Plaintiffs argue that the district court erred in concluding that
SLUSA preempts their state-law claims. They also protest that they were improperly
denied an opportunity to file a second amended complaint to delete the federal claims.
In the event we reverse, the Bank counters with a protective cross-appeal to restore
the award of costs and attorneys’ fees.



                                          -4-
                                          II.

       There has long been tension between the federal interest of protecting investors
in nationally traded securities and the practical need to protect normal business
activity from vexatious litigation. See 

; Blue Chip Stamps v.
Manor Drug Stores, 

, 739-44 (1975). Federal regulation of the securities
market is anchored by the Securities Act of 1933 and the Securities Exchange Act of
1934, both of which Congress passed in the wake of the 1929 stock market collapse.

. Rule 10b-5, promulgated under Section 10(b) of the 1934 Act,
makes it unlawful for any person, in connection with the purchase or sale of any
security, to (a) employ any device, scheme or artifice to defraud, (b) make an untrue
statement of material fact or omit material facts from a statement, or (c) engage in a
fraudulent or deceptive course of business. 17 C.F.R. § 240.10b-5; see 15 U.S.C. §
78j. In 1946, federal courts began to hold that Section 10(b) of the 1934 Act
implicitly granted a private right of action to individual investors. See Blue Chip

. The Supreme Court confirmed this holding in 1971.
Superintendent of Ins. v. Bankers Life & Cas. Co., 

, 13 n.9 (1971).

      With the recognition of a private right of action, it became desirable to delimit
the scope of that right. Due to the costs of discovery and the risk of a massive
judgment, even a meritless lawsuit could extract a sizeable settlement from a
defendant. See Blue Chip 

. Aiming to deter such nuisance
actions, the Supreme Court adopted a rule that excluded Section 10(b) claimants who
were not purchasers or sellers of securities. 

As a limitation resting on
considerations of policy, see 

of Blue Chip Stamps had no effect on the
scope of criminal liability under Section 10(b) and Rule 10b-5. United States v.
O’Hagan, 

, 655 (1997); see 

.




                                          -5-
       For reasons similar to those underlying Blue Chip Stamps, Congress passed the
Private Securities Litigation Reform Act of 1995 (PSLRA),3 enacting “procedural
reforms to enable district courts to weed out meritless class actions alleging fraud in
the purchase and sale of securities.” Dudek v. Prudential Sec., Inc., 

, 877
(8th Cir. 2002); see 

. Although the PSLRA met its goal of
reducing the number of federal securities class actions, it had an unintended
consequence of herding plaintiffs into state courts, where they filed class actions based
on state laws. 

; 

. Congress responded to
this phenomenon by enacting SLUSA, Pub. L. 105-353, 112 Stat. 3227 (1998)
(codified as amended in scattered sections of 15 U.S.C.).

                                          III.

       An amendment to the 1933 and 1934 Acts, SLUSA expressly preempts all
“covered” state-law class actions that allege: (1) an untrue statement or omission of
a material fact, or (2) use of a manipulative or deceptive device or contrivance, “in
connection with the purchase or sale of a covered security.” 15 U.S.C. §§ 77p(b),
77bb(f)(1); 

. There is no dispute that the Plaintiffs’ action
seeks damages on behalf of 50 or more people, and thus is a “covered class action”
under SLUSA. 15 U.S.C. §§ 77p(f)(2), 78bb(f)(5)(B). Likewise, there is no dispute
that the Nations Funds mutual fund described in the Plaintiffs’ Amended Complaint
is traded nationally and listed on a regulated national exchange, thereby meeting
SLUSA’s definition of “covered security.” 15 U.S.C. §§ 77p(f)(3), 77r(b),
78bb(f)(5)(E); 

n.9. In their reply brief, the Plaintiffs concede
that the Amended Complaint contains allegations that the Bank misrepresented and
omitted material facts.




      3
          Pub. L. No. 104-67, 109 Stat. 737 (codified at 15 U.S.C. §§ 77z-1, 78u-4).

                                           -6-
        The controversy is whether the alleged misrepresentations and omissions were
“in connection with” the purchase or sale of securities. Because the same phrase
appears in the Section 10(b) of the 1934 Act, we rely on judicial interpretations of
Section 10(b) and Rule 10b-5 when construing “in connection with” as used in
SLUSA. 

; 

. The rules governing
private Rule 10b-5 actions, however, followed a different path than the law defining
substantive violations of Rule 10b-5. See 

. The private right of
action is a judicially-created remedy, fashioned in the image of Rule 10b-5 but also
shaped by policy considerations. See Blue Chip 

, 749; Karson
v. Nat’l Gypsum Co., 

, 514 (E.D. Pa. 1946) (relying on general
principles of tort law, in addition to statutory interpretation). For policy reasons,
courts limited the private right of action, so as to minimize the danger of vexatious
litigation. E.g., Blue Chip 

. Such dangers do not exist in
the context of criminal liability, so the Supreme Court deemed those limitations to not
apply in the criminal context. E.g., 

. Thus, the question
that faced the Supreme Court: Do judicial limitations on private actions also limit the
scope of SLUSA?

       In Dabit, the Supreme Court instructed that SLUSA should be read with the
“presumption that Congress envisioned a broad construction,” so that the most
troublesome class actions would be subject to the PSLRA’s procedural reforms.

. The Plaintiffs contend that Dabit only decides whether SLUSA
preemption is confined to claims by plaintiffs who have standing to meet the
purchaser-seller limitation of Blue Chip Stamps. See 

. Asserting
that the “in connection with” issue was not before the Court, see 

n.3, the
Plaintiffs posit that we may rely on cases interpreting “in connection with” narrowly,
as in the context of private Rule 10b-5 actions. E.g., Green v. Ameritrade, Inc., 

(8th Cir. 2002).




                                          -7-
       When it rejected the Blue Chip Stamps limitation, the Supreme Court rejected
wholesale the proposition that limitations on private Rule 10b-5 actions may be
applied to limit the scope of SLUSA. To the extent that we have suggested, pre-Dabit,
that the scope of SLUSA preemption is equal to that of the right to a private Rule 10b-
5 action, see 

, the Court has corrected our course. 

. SLUSA’s coverage follows the contours of Section 10(b) and Rule
10b-5 when enforced by an agency of the United States. See 

the policy considerations that can limit the private right of
action, the “in connection with” standard of Section 10(b) is construed flexibly, not
technically or restrictively. SEC v. Zandford, 

, 819 (2002); 

. It applies to a fiduciary who misappropriates information, and then uses
that information to gain no-risk profits through a securities transaction. 

. It covers allegations that an agent made unauthorized sales of a
customer’s securities for his own benefit. 

. According
to the Plaintiffs, the Bank purchased securities as a trustee on their behalf without
disclosing that the Bank profited from the transactions.

       The Plaintiffs argue that the Bank’s non-disclosure was not “in connection
with” the purchase of the securities, such that the non-disclosure did not relate to a
decision whether to purchase a security. See O’Brien v. Cont’l Ill. Nat’l Bank & Trust
Co., 

, 60 (7th Cir. 1979). Under Dabit, however, “it is enough that the
fraud alleged ‘coincide’ with a securities transaction—whether by the plaintiff or by
someone else.” 

. The Plaintiffs’ complaint alleges non-
disclosures that clearly coincided with the Bank’s purchase of shares in the Nations
Funds mutual fund. Given the identical coverage of Section 10(b) and SLUSA, it
follows that the Plaintiffs’ state-law claims are preempted.




                                          -8-
                                         IV.

        We briefly address the Plaintiffs’ argument that they were erroneously denied
leave to amend their complaint. The proposed Second Amended Complaint would
have eliminated the federal claims that had been asserted. Although leave to amend
should ordinarily be granted, a party should at least show how the complaint could be
amended to save a meritless claim. Wisdom v. First Midwest Bank, 

,
409 (8th Cir. 1999). When leave is denied on grounds of futility, we review de novo
the underlying legal conclusion of whether the proposed amendment would have been
futile. Marmo v. Tyson Fresh Meats, Inc., 

, 755 (8th Cir. 2006). In their
brief, the Plaintiffs admit that they made no changes to the state-law claims, and that
their challenge to the futility finding is wrapped up in the district court’s SLUSA
determination. Having already determined that SLUSA was correctly applied, we
affirm the denial of leave to amend.

                                          V.

      We dismiss the Bank’s protective cross-appeal as moot. In all other respects,
we affirm the judgment of the district court.
                     ______________________________




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