A US Supreme court ruling is set to limit litigation aimed at accountants, bankers and others, who could be held liable for participating in schemes which inflate company stock.
The 5-3 ruling, made in a case involving Charter Communications and Scientific Atlanta in which deals were made to give the impression that Charter was gaining more customers and more advertising, while executives 'backdated' the deals in order to fool auditors.
Justice Anthony Kennedy rejected the notion of 'scheme liability' and instead referred to 'secondary actors' who are 'too remote for liability.'
The ruling is set to have wider implications for securities litigation as well as those accused of being part of schemes that caused the collapse of Enron and WorldCom.
Claims brought by pension funds, who sued Enron's investment bankers for allowing the scheme, could be doomed after the ruling.
Business advocates have described the development as a victory, the Los Angeles Times reported.
'This has huge significance for companies because it prohibits a litigation free-for-all. It's not just the Enrons. These cases can involve ordinary business transactions, like when a supplier sells to another company, ' said Robin Conrad, a lawyer for the U.S. Chamber of Commerce.
Further reading:
Comments
Have your say on this article