U.S. Supreme Court limits fraud liability

Jan. 15, 2008 at 5:08 PM

WASHINGTON, Jan. 15 (UPI) -- The U.S. Supreme Court Tuesday disallowed securities lawsuits against corporations not directly involved in fraud.

The case of Stoneridge Investment Partners vs. Scientific-Atlanta Inc. and Motorola Inc. involved an alleged scheme that inflated revenues for Charter Communications Inc. Motorola and Scientific-Atlanta, now owned by Cisco Systems Inc., are vendors for Charter Communications, which was not named in the lawsuit, court records showed.

Attorney Steve Shapiro said the decision protects investors from attorneys who bring class-action lawsuits "to rake in billions of dollars for themselves."

In the majority opinion, Justice Anthony Kennedy wrote, "The private action does not reach the customer/supplier companies, because the investors did not rely upon their statements or representations."

The 5-3 decision maintains a winning streak for business in securities cases at the Supreme Court, which has consistently ruled in favor of business since 2004.

Justices John Paul Stevens, David Souter and Ruth Bader Ginsburg dissented.

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