U.S. Chamber Urges Supreme Court to Reject Drastic Expansion of Securities Laws

Lower court ruling would drive capital away from U.S. markets and make American businesses less competitive

WASHINGTON, D.C.— Today, the U.S. Chamber of Commerce filed an amicus curiae brief with the U.S. Supreme Court, arguing that the 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.

“Expanding liability to a whole new class of defendants will put U.S. businesses at a significant competitive disadvantage for raising capital,” said Robin Conrad, executive vice president of the National Chamber Litigation Center, the U.S. Chamber’s public policy law firm. “In an extremely uncertain environment, this is one more reason for businesses to be discouraged from raising capital in the U.S. if it means footing the bill for a new wave of costly American-style class actions.”

The case arises out of a 2003 class action lawsuit against a mutual fund service provider 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 misstatements, but the Fourth Circuit reversed, and extended primary liability under §10(b) of the U.S. securities laws to service providers. In its amicus brief to the Supreme Court, the Chamber argued that the U.S. securities laws do not allow service providers to 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.

“If the Fourth Circuit’s ruling is left to stand, American businesses will face a new era of potentially ruinous securities class action litigation,” said Conrad. “It makes no sense to expose businesses to more costly and frivolous class actions at a time when our capital markets are still recovering. Our focus must be on creating new jobs, not creating new types of lawsuits.”

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.

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.

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