• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Free Market Dodges Trial Lawyer Bullet

    In what has been billed the ‘Roe v. Wade‘ of securities law, the Supreme Court narrowly declined to create a new investor claim against any company that did business with a fraudulent company. The Court ruled 5-3 in Stoneridge Investment Partners v. Scientific Atlanta that investors may sue only those who issued statements or otherwise took direction that investors relied upon when buying or selling stock. The decision is a huge blow to trial lawyers eager to cash in on $40 billion in lawsuits against financial institutions that did business with Enron.

    The case involved tech bubble company Charter Communications who was successfully sued for fraud by Stoneridge for $144 million after four employees plead guilty to federal conspiracy charges. Stoneridge wanted to find some deep pockets though and went after Motorola and Scientific-Atlanta claiming the two participated in a scheme with Charter to defraud investors even though there was zero evidence the two suppliers played any role in producing Charter’s financial statements.

    Justice Kennedy wrote for the majority:

    In effect [Stoneridge] contends that in an efficient market investors rely not only upon the public statements relating to a security but also upon the transactions those statements reflect. Were this concept of reliance to be adopted, the implied cause of action [for aiding and abetting] would reach the whole marketplace in which the issuing company does business

    Posted in Legal [slideshow_deploy]

    One Response to Free Market Dodges Trial Lawyer Bullet

    1. Pingback: Claim Blog » Blog Archive » Free Market Dodges Trial Lawyer Bullet

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.