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Stoneridge: Court Slaps Down Scheme Liability

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Breaking: The Supreme Court ruled against scheme liability in the closely watched Stoneridge case. The result is a blow to self-styled shareholder advocates and their friends in the plaintiff's bar but ultimately a win for actual shareholders who faced losses from a potential litigations explosion under the scheme liability theory. Here and hear (heh) are two early reports from DealBreaker on the case.
What's "scheme liability?" It was the idea that third parties could be held liable for securities fraud committed by companies with whom they do business. This would have made investment bankers, accountants law firms and suppliers liable for fraud committed by their public company clients. Today's decision greatly curbs this risk.
We'll probably have more to say on this once we've properly digested the opinions.
Update: The Associated Press tags the story with a stupidly misleading headline: "Court Rules Against Investors." Hey, AP, pay attention: not all investors were on the side of the plaintiff's bar in this case that threatened to let shareholders of companies that misstate earnings and commit fraud raid the treasuries of other companies that did business with them.
Shareholder Suits Against Vendors, Banks Limited by High Court [Bloomberg]