16 January 2008 - The Supreme Court's decision in one of the most significant securities-litigation cases in decades was a major victory for investor welfare and the United States economy, said Mayer Brown partner Stephen Shapiro, who argued successfully for the respondents in Stoneridge Investment Partners v. Scientific-Atlanta, Inc.
"It is a win for investors because suits like this one, if successful, would take money from one group of investors at the expense of another," Shapiro said. "The Court understood that the trial lawyers' theory of 'scheme liability' was simply a scheme to rake in billions of dollars for themselves at the expense of the investors they purported to represent. The Court's opinion correctly evaluated the legal and policy issues, pointing out the economic harm that would come from acceptance of scheme liability or an expansion of the implied cause of action. This decision hews closely to prior precedent from the Supreme Court itself, the stated intention of Congress and the law in every circuit except for the Ninth Circuit," he said.
The 5-3 Court decision affirmed that third parties who do not themselves mislead investors cannot be held liable for damages under Section 10(b) of the Securities Exchange Act even if their conduct facilitates the fraud of another.
In Stoneridge, shareholders of Charter Communications alleged that Scientific-Atlanta and Motorola, Inc., both vendors to Charter, knowingly participated in a fraud by Charter to inflate its revenues and cover up an expected cash shortfall. The Court's decision rejected the notion that the respondents were liable for Charter's fraudulent financial statements, which investors relied on in making investment decisions.
Writing for the majority, Justice Anthony Kennedy said, "It was Charter, not respondents, that misled its auditor and filed fraudulent financial statements; nothing respondents did made it necessary or inevitable for Charter to record the transactions as it did."
Stoneridge was Mr. Shapiro's 27th argument before the Supreme Court and is the latest in a continuing series of major victories for the firm in the nation's highest court. In the preceding term, Mayer Brown scored landmark wins in three high profile business cases: Philip Morris USA v. Williams, Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., and Credit Suisse First Boston v. Billing. Mayer Brown's Supreme Court & Appellate practice stands atop the annual rankings in both Chambers USA and Legal 500 and wins praise for its exceptional strength and depth.
"The unequaled success of Mayer Brown's Supreme Court & Appellate practice and the high regard in which in which it is held throughout the legal profession are a direct result of the knowledge and skill of its attorneys," said James D. Holzhauer, Chairman of Mayer Brown. "Their commitment to the highest standard of excellence in legal counsel and client service is a defining characteristic of Mayer Brown."
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