The FINANCIAL — WASHINGTON, D.C.—Today, the U.S. Chamber of Commerce applauded the U.S. Supreme Court’s decision that U.S. securities laws do not allow private individuals to sue service providers such as lawyers, accountants, and investment advisers, for allegedly false or misleading statements made by others.
The case is Janus Capital Group, Inc., v. First Derivative Traders.
“We are pleased that the nation’s highest court issued a ruling that will prevent yet another roadblock to our global competitiveness,” said David Hirschmann, president and CEO of the Chamber’s Center for Capital Markets Competitiveness. “Expanding liability would have opened up the floodgates to even more costly and frivolous class action suits for businesses and give additional reasons for companies to raise capital outside the U.S. This decision is a significant step in bringing greater certainty for these important market participants.”
The decision arises out of a 2003 class action lawsuit against a mutual fund investment adviser claiming that the company should be held liable for the alleged misstatements made by a separate company. A federal district court dismissed the lawsuit because the plaintiffs failed to show that the defendants themselves made any misleading statements, but the Fourth Circuit reversed, and extended primary liability under §10(b) of the U.S. securities laws to service providers. The U.S. Chamber filed an amicus brief in the case last September. Today, the U.S. Supreme Court agreed with the Chamber that service providers cannot be held liable for allegedly false or misleading statements they did not make. The Chamber also argued that the Fourth Circuit’s decision conflicts with established Supreme Court precedent that the implied private right of action under the securities laws should not be extended by the courts beyond what was available when Congress enacted the Private Securities Litigation Reform Act (PSLRA) in 1995.
“The Supreme Court correctly concluded, as the Chamber urged, that private liability under the securities laws must be construed quite narrowly,” said Robin Conrad, executive vice president of the National Chamber Litigation Center, the public policy law firm of the U.S. Chamber. “The plaintiffs’ legal theory in this case was very aggressive, and would have exposed a whole new class of companies to frivolous securities lawsuits, from accountants to investment advisers to law firms.”
NCLC is the public policy law firm of the U.S. Chamber of Commerce that advocates fair treatment of business in the courts and before regulatory agencies.
Since its inception in 2007, the Center for Capital Markets Competitiveness has led a bipartisan effort to modernize and strengthen the outmoded regulatory systems that have governed our capital markets. The CCMC is committed to working aggressively with the administration, Congress, and global leaders to implement reforms to strengthen the economy, restore investor confidence, and ensure well-functioning capital markets.