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
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
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.
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