The Supreme Court Rejects "Scheme" Liability For Secondary Actors In The Absence Of Actual Reliance On The Deceptive Conduct Or A Separate Duty To Speak
Earlier today, the Supreme Court affirmed 5-3 the Eighth Circuit’s decision in Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., -- S.Ct. --, No. 06-43, 2008 WL 123801 (2008). The Court held that secondary actors are not liable under Section 10(b) of the Securities Exchange Act and Rule 10b-5 where plaintiffs cannot prove reliance. Through its opinion, the Court dealt a firm blow to private plaintiffs suing secondary actors for violations of the securities laws on the basis of “scheme” liability at a time when courts have been faced with an increasing number of such cases. Although it does not address whether “scheme” liability ever supports a violation of Section 10(b), the Court’s decision in Stoneridge rejects private plaintiffs’ use of “scheme” liability against secondary actors in the absence of actual reliance on the deceptive conduct or a separate duty to speak.
To view the Supreme Court's decision in Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., -- S.Ct. --, No. 06-43, 2008 WL 123801 (2008), please click here.