U.S. Supreme Court Hands Down Stoneridge DecisionReliance Returns to 10b-5 Cases
January 17, 2008
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.