Supreme Court Limits Lawsuits by Shareholders

[DeepModem Mom]

Source: New York Times

By LINDA GREENHOUSE
Published: January 16, 2008

WASHINGTON — Ruling in its most important securities fraud case in years, the Supreme Court on Tuesday placed a towering obstacle in the path of shareholders looking for someone to sue when a stock purchase turns sour.

The decision in the case, Stoneridge Investment Partners v. Scientific-Atlanta Inc., was a major and ardently sought victory for investment banks, accountants and vendors — the deep pockets that have become nearly automatic targets of class-action lawsuits that accuse them of having engaged in a fraudulent scheme with the company that actually issued the stock. The notion of “scheme liability,” as the theory behind such lawsuits is known, now appears to be dead.

The 5-to-3 decision held that in order to proceed with such a lawsuit, plaintiffs must be able to show that they had relied, in making their decision to acquire or hold stock, on the deceptive behind-the-scenes behavior of these financial institutions, often called secondary actors. But behavior that was never communicated to the marketplace cannot be said to have induced reliance, Justice Anthony M. Kennedy wrote for the majority.

Without such a limitation on the concept of reliance, potential liability “would reach the whole marketplace in which the issuing company does business,” Justice Kennedy said. He added that Section 10(b) of the Securities Exchange Act, the legal foundation for securities fraud cases, “does not reach all commercial transactions that are fraudulent and affect the price of a security in some attenuated way.”

“Section 10(b) does not incorporate common-law fraud into federal law,” he said....

Read more: http://www.nytimes.com/2008/01/16/washington/16bizcourt.html?_r=1&ref=todayspaper&oref=slogin

[benld74]

1. GEE, I wonder how the vote was broken down in that one?

[aquart]

2. And this is why it doesn't matter which Democrat.

[jaybeat]

3. More death for democracy

Shareholders can't sue the corporations they own (or the henchmen those corporations hire)

Citizens can't sue the government they elect. (Or contest their imprisonment if the government says they can't.)

Looks like about the only "rights" we'll soon have are the right to spend. That's all we're really good for anyway, as far as most corporations are concerned.

[harmonicon]

5. no, spending isn't your right, it's your duty!

if it were your right, you could conceivably opt out, but that simply isn't allowed.

[rockybelt]

4. I tell you what

Why don't everybody just dump all their stock now. It is not going to be worth a shit after these ruthless corporations and their CEOs get through raping all you investors.