• Supremes Rule Against Investors

    By • Jan 16th, 2008 • Category: Pure Content

    More from the corporate lawyers at Wachtell Lipton via the Harvard Law Corporate Governance blog.
    …Because the actions of those third parties were “not disclosed to the investing public” and “not relied upon by the investors”, the Court ruled that the third parties’ conduct was not within the scope of a private action under Section 10(b) or Rule 10b-5…The Court also pointed out that “[s]econdary actors” may be subject to criminal penalties, SEC enforcement, fines and restitution under state law, certain express rights of action under the securities laws, and even Section 10(b) liability for “primary violations.”

    From the WSJ
    The Supreme Court curbed investor lawsuits against businesses accused of scheming fraudulently to inflate stock prices. In a 5-3 ruling, the court gave a measure of protection from securities suits to suppliers, banks, accountants and law firms that do business with publicly traded companies. The court ruled against investors who accused two suppliers of colluding with Charter Communications to deceive Charter’s stockholders and manipulate the price of the cable-TV company’s stock.

    About five minutes after receiving the above alert from the WSJ, I received this email:

    Dear Francine,
    The United States Chamber of Commerce today applauded the Supreme Court’s decision to halt the expansion of securities liability cases in Stoneridge Investment Partners v. Scientific-Atlanta, Inc. The Chamber filed an amicus brief in August warning against expanding securities liability in cases brought by private parties to include a theory called “scheme liability.”


    Under this expansive theory, companies could have been exposed to class action litigation just because they did business with another company that allegedly violated the securities laws.Notwithstanding the rhetoric that will be used to try to pressure lawmakers to reverse this important decision, the Court’s action today is a positive step for businesses, shareholders, and all those concerned about America’s competitive position in the global marketplace.To view our press release, click here.

    To view oral arguments, click here.

    To view the National Chamber Litigation Center’s amicus brief, click here.

    Whatever the National Chamber is for, I’m against.

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    3 Responses »

    1. Francine: I’m DISGUSTED with Scalia over this. He was on the three-judge panel that upheld conspiratorial civil liability in Halberstam v. Welch, 705 F2d 472 (1983), a very famous and carefully reasoned decision. He knows the law! That “Pretty Boy Roberts” and Alito voted as they did, was no surprise. That’s why Bush put them on the court: to protect Wall Street. If it happens, I hope President Hillary tries to reverse this fiasco.

    2. […] to the contrary, that there is something greater inside of us.” It’s no secret that my hope for the Stoneridge decision was related specifically to the potential for the Big 4 to be held responsible for their […]

    3. […] I've written quite a bit about the impact of third party liability on the auditors in fraud claims and the Stoneridge decision. […]