Chamber Urges Supreme Court to Reject Scheme Liability in Landmark Securities Case

WASHINGTON, D.C.—The Chamber's National Chamber Litigation Center (NCLC) filed a friend-of-the-court brief in the Supreme Court today in Stoneridge Investment Partners v. Scientific-Atlanta, Inc., warning against expanding securities liability in cases brought by private parties to include a theory called "scheme liability."

"Scheme liability is nothing but aiding and abetting in disguise," said Robin Conrad, executive vice president for NCLC. "Ever since Congress and the Court limited aiding and abetting liability to suits brought by the federal government, the plaintiffs' bar has been searching for new ways to circumvent the law."

The Supreme Court ruled in a seminal 1994 case called Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A. that Congress did not intend to impose liability on those who aided and abetted violators of securities laws. Congress responded by granting the Securities and Exchange Commission (SEC) the sole authority to sue aiders and abettors. For more than a decade the class action bar has searched for ways to sue secondary actors, such as commercial parties, who were not themselves primarily liable under the securities laws.

This latest effort by the securities class action bar could subject commercial partners to private litigation never intended by Congress. In its brief, NCLC explains that "scheme liability" places pressure on secondary actors to incorporate the cost of litigation risk into every business transaction and provides yet another reason for foreign companies to refuse to list on American exchanges or to do business with American companies.

"Congress authorized the SEC to enforce securities laws against third parties and disburse funds to harmed investors," said Conrad. "The Supreme Court should not upset that legislative decision by allowing class action lawyers to increase litigation risk and further hamper the competitiveness of American markets."

The National Chamber Litigation Center, the public policy law firm of the U.S. Chamber of Commerce, is a membership organization that advocates fair treatment of business in the courts and before regulatory agencies. The U.S. Chamber of Commerce is the world's largest business federation representing more than 3 million businesses and organizations of every size, sector, and region.

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