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Univ. of Toledo College of Law

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Sunday, October 21, 2007

Black on Stoneridge

Stoneridge Investment Partners v. Scientific-Atlanta (8th Cir. 2006) What Makes it the Most Important Securities Case in a Decade?, by BARBARA BLACK, University of Cincinnati - College of Law, was recently posted on SSRN.  Here is the abstract:

Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc. is scheduled for oral argument before the U.S. Supreme Court on October 9, 2007. It has been described as “arguably the most important securities law case to reach the Court in a decade” and as securities lawyers' “Roe v. Wade.” What is the legal issue that has occasioned this much attention? Phrased as a technical legal argument, plaintiff asserts that it may establish that outside actors committed a Rule 10b-5 violation on a theory of “scheme liability;” in contrast, defendants assert that Central Bank of Denver v. First Interstate Bank of Denver, which found no statutory basis for aiding and abetting liability, precludes plaintiff's theory of liability.

What is on trial before the Supreme Court, however, may be the future of private securities fraud litigation. Beyond the legal issue, the parties' positions reflect the differing views in the ongoing debate on the value of private securities fraud litigation. Does scheme liability enhance the compensatory and deterrent functions of private litigation or does it contribute to abusive private litigation that jeopardizes the US markets' competitive position? Thirty one amicus briefs have been filed in the case, about equally divided between the plaintiff's and the defendant's position. There was disagreement within the executive branch as to which side the Solicitor General should support. Most recently, the SEC announced that it would hold a spring 2008 roundtable to debate the various positions on private securities litigation.

This paper will first analyze the legal issue in Stoneridge, describe the policy issues from the perspective of the amicus briefs and then provide some commentary on the case's significance to the law and policy of private securities fraud litigation. This paper is a work-in-progress, to be continued upon the Court's opinion.

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