On January 15, 2008, the Supreme Court ruled that there is no private right of action under Section 10(b) of the 1934 Securities Exchange Act (“Exchange Act”) against secondary actors (e.g., accounting firms, lawyers, suppliers, and investment banks) who knowingly participated in sham transactions that helped another company violate Section 10(b) by issuing misleading public statements, but who did not themselves issue misleading public statements. The Stoneridge decision is the third from the Supreme Court in the last few years to address the reach of private class action securities claims under Section 10(b) of the Exchange Act. James Wilson discusses the implications of the Supreme Court’s decision in Stoneridge and the immediate and long term effects. Mr. Wilson writes:

[T]he Court specifically rejected the suggestion from the Eighth Circuit decision that there must be specific oral or written statements before there can be liability under section 10(b) or Rule 10b-5, noting that ‘conduct can be deceptive, as respondents concede.’ But, the theory, for private litigants, in light of the Court’s analysis of reliance in securities cases, has been rendered extremely difficult to assert against secondary actors.

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