SCOTUS, Securities Law, Supreme Court, Wall Street

SCOTUS Sets Limits on Securities Fraud Cases

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Earlier this hour, the Supreme Court handed down its eagerly anticipated ruling in the Stoneridge case. See collected links below, to posts by Lyle Denniston at SCOTUSblog and Ashby Jones at the WSJ Law Blog. The opinion itself is available here (PDF).
Lyle Denniston writes:

The Supreme Court, in one of the most important securities law rulings in years, decided Tuesday that fraud claims are not allowed against third parties that did not directly mislead investors but were business partnes with those who did. The 5-3 ruling came in Stoneridge Investment Partners v. Scientific-Atlanta (06-43).

Investors, the Court said, may only sue those who issued statements or otherwise took direct action that the investors had relied upon in buying or selling stock — whether that involved public statements, omissions of key facts, manipulative trading, or conduct that was itself deceptive. One impact of the decision is likely to be the scuttling of a massive $40 billion lawsuit against financial institutions growing out of the Enron scandal.

This news will be welcomed by many in the business community. But is it bad news for business litigators? Defending dubious securities fraud lawsuits may not be very sexy. But over the years, doing battle with the Milberg Weisses of the world has kept many a large law firm busy — and profitable.
With transactional work drying up, is the Supreme Court’s business-law revolution, cutting down on litigation against corporate America, coming at a bad time for Biglaw as a business?
Court limits securities fraud lawsuits [SCOTUSblog]
Stoneridge is in! Supremes Rein in Investor Suits [WSJ Law Blog]

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