Today's Supreme Court ruling in Stoneridge Investment Partners v Scientific-Atlanta Inc. and Motorola Inc. has triggered an avalanche of reaction from interested parties on both sides. The ruling shields so-called "third parties" from being sued in investor class actions if they had only a tangential role in a corporation's fraud.
Here is a small sampling of what we have received on this decision, which had been billed in advance as the Roe v. Wade of securities law.
“As the author of the Private Securities Litigation Reform Act, I stand second to none in my commitment to protect American businesses from frivolous litigation. But today’s decision goes beyond that common-sense law. Instead of protecting innocent businesses, it would protect wrongdoers from the consequences of their actions. Such a misguided standard will do nothing to strengthen the competitive position of America's businesses and capital markets.”
— Sen. Christopher Dodd, (D-Conn.), chairman of the Senate Committee on Banking, Housing, and Urban Affairs
“Employing the blunt tool of private securities fraud actions threatens to undermine efficient business conduct without addressing underlying issues. Instead, as the Court noted today, Congress has placed enforcement authority in a federal regulatory agency, the SEC, to punish aiders and abettors.”
— Robin Conrad, executive vice president of the National Chamber Litigation Center
“The Court clearly stated that defrauded investors still have an avenue for recourse under this country’s securities laws. It was very careful to make the distinction between secondary actors involved in the financial spheres, as opposed to the goods and services industry. We are hopeful that this means that the investors defrauded in the Enron case still have the opportunity to recover and rebuild their lives. For the thousands of families who lost their pensions and retirement savings in that debacle, we find it encouraging the Court acknowledged the securities laws do protect them. However, we are disappointed that the Court’s decision will prevent investors from holding all knowing participants in a fraud — no matter what industry they are a part of — for actively engaging in fraudulent schemes.”
— Kathleen Flynn Peterson, president of the American Association for Justice (formerly the Association of Trial Lawyers of America)
“Had the petitioner prevailed in this case, it would have opened the floodgates for litigation and have a chilling effect throughout our economy... Without question, a company must give accurate information about its own stock. But the actions of third parties are not covered by this provision in the law. The Securities and Exchange Commission has authority to punish companies that aid and abet illegal activities. The petitioners in this case were seeking an opening to go far beyond the law in search of deep pockets, and we really don’t need any more of that in our country. This decision will prevent creeping liability in this area of securities law.”
— John Engler, president of the National Association of Manufacturers
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