Plaintiff Bar Landmark Case Finding Little Sympathy Among Supreme Court Justices

Things looked grim for class-action lawyers this week, after only two of eight justices of the Supreme Court - David Sorter and Ruth Badder Ginsburg - expressed sympathy over the notion that private investors should have the right to seek compensation from third parties involved in stock fraud, the Wall Street Journal (subscription required) reported this week.

In the case Stoneridge Investment Partners LLC vs. Scientific-Atlanta, Inc., arguments were made by plaintiffs’ lawyers on Tuesday that a third division of defendants, who had a hand in a scheme alleging that telecommunication vendors were paid by TV cable company Charter Communications to boost advertising payments to Charter, should be considered liable, despite the fact they may have not directly mislead.

Ginsburg said that the rule itself could leave several victims of stock-fraud with no recovery. Sorter, on the other hand, while sympathetic to the investors, rhetorically asked if there was any difference between fraud committed to deceive the public and that for other purposes.  The case itself weighs heavily on the fact that it could determine whether or not investors could seek damages from third parties when a principal company is bankrupt.

A decision from the Supreme Court on the case--which could have a large impact on businesses that provide services to companies such as accounting firms, law firms, and consultancies--in the coming days.