Monday, May 17, 2010
Senate proposal would eliminate protection for lawyers against private lawsuits
The Washington Post is reporting today (here) that a proposed amendment to the larger financial regulatory overhaul bill would allow shareholders to file private lawsuits against anyone who aids or abets corporate fraud -- potentially exposing lawyers who advise public companies to a category of litigation to which they have previously been immune. According to the report, the amendment was introduced by Sen. Arlen Specter (D-Pa.) with the support of 11 other Democratic senators. It provides that "any person that knowingly provides substantial assistance" to individuals and companies committing securities fraud would be as liable as those they were assisting, which would essentially overturn the US Supreme Court's decision in Stoneridge Investment Partners v. Scientific-Atlanta (2008), which held that third parties are not liable in private lawsuits for participating in corporate wrongdoing if they did not directly mislead investors.