U.S. Supreme Court Hands Down Stoneridge DecisionReliance Returns to 10b-5 Cases

Kelley Drye’s Litigation Practice Group has prepared a client advisory regarding the Stoneridge Investment Partners v. Scientific Atlanta decision, in which the U.S. Supreme Court handed down its long-awaited decision determining the scope of liability under the securities law for third parties. The Court rejected ​“scheme liability” and held that third parties who contract with companies that commit securities fraud are not liable to shareholders of those companies as primary violators of Rule 10b-5 absent a showing that the plaintiff investors relied on the third-party’s conduct or statements. As the advisory explains, the case should provide comfort to companies which have been fearful of being drawn into prolonged class-action litigation as a result of their business dealings with public companies who are later accused of securities fraud.