Client Alert
| January 16, 2008
U.S. Supreme Court Rejects Securities-Fraud Liability for Secondary Actors Absent Reliance
On January 15, 2008, the United States Supreme Court issued its eagerly awaited decision in Stoneridge Investment Partners v. Scientific-Atlanta, Inc., which raised the question whether and to what extent secondary actors who allegedly participate in a scheme to misstate another company's financials, but who do not themselves make any misrepresentations, can be held liable in damages to private plaintiffs under § 10(b) of the Securities Exchange Act of 1934 and the SEC’s Rule 10b-5. The Court held that § 10(b)'s implied private right of action does not extend to secondary actors who neither make alleged misstatements nor engage in deceptive conduct on which investors rely. While the Court's decision does not directly address whether so-called "scheme" liability could ever support a § 10(b) claim against secondary actors, it rejects private plaintiffs' use of scheme liability against secondary actors in the absence of either reliance on those actors' allegedly deceptive conduct or the secondary actors' independent duty to speak.
For more information, please contact your Dewey & LeBoeuf relationship partner, or one of the following:
This memorandum is intended only as a general discussion of these issues. It is not considered to be legal advice. We would be pleased to provide additional details or advice about specific situations. For additional information on this important topic, please feel free to call upon your Dewey & LeBoeuf relationship partner. No part of this publication may be reproduced, in whole or in part, in any form, without our prior written consent.
For further information on Dewey & LeBoeuf, please visit www.dl.com. +1 888 532 6383