Scheme Liability, Section 10(b), and Stoneridge Investment Partners v. Scientific Atlanta:

On October 9, the Supreme Court is will hear what is likely the most important securities law case in years: Stoneridge Investment Partners v. Scientific Atlanta. In this case, the Court will consider whether primary liability under Section 10(b) of the Securities Exchange Act extends to third-parties, such as auditors, attorneys, or vendors, who engage in allegedly fraudulent transactions with a public corporation. In a prior case the Court held that there is no aider or abettor liability under Section 10(b), but some courts have held (and academics have argued) that this leaves open the question of whether third parties could still be liable to a company’s shareholders under a theory of “scheme liability.” So, for example, when, if ever, should Enron’s shareholders be able to sue other companies for allegedly engaging in fraudulent transactions with Enron that inflated Enron’s earnings? It is an interesting and important question.

Next Friday, the Center for Business Law & Regulation at the Case Western Reserve University School of Law and the Federalist Society’s Corporate Law practice group are co-sponsoring a preview of the case: “Scheme Liability, Section 10(b), and Stoneridge Investment Partners v. Scientific Atlanta.” The event is free and open to the public. (3.5 hours of Ohio CLE are also available for a modest charge.) For those who can’t make it, the entire event will be webcast. Details here.