603 F.3d 144
PROCEDURAL POSTURE: Plaintiff investors appealed the U.S. District Court for the Southern District of New York's dismissal of their 15 U.S.C.S. §§ 78j(b), 78t(a), 17 C.F.R. § 240.10b-5, claims against defendants, a law firm and one of its attorneys, arguing the alleged false statements did not have to be attributed to defendants when disseminated, and the "scheme" rendered the public disclosures misleading and thus distinguishable from Stoneridge.
HOLDING: Defendants, as "secondary actors," could only be held liable for false statements in a private securities fraud action if the statements were attributed to them when the statements were disseminated.
A "creator" standard, that would hold a defendant liable for creating a false statement that investors relied on, regardless of whether that statement was attributed to the defendant at the time of dissemination, was rejected as being indistinguishable from the rejected "substantial participation" test. A secondary actor was not liable for merely assisting in drafting and filing allegedly false statements. None of the alleged statements were attributed to defendants, and the mere mention of the firm's representation could not be considered an "articulated statement" by defendants adopting the company's statements as their own. Absent such attribution, no reliance could be shown. The fact that the sham transactions (or "scheme") allegedly facilitated by defendants rendered the company's public financial disclosures false or misleading did not materially distinguish the case from Stoneridge. Since no primary violation was stated, the § 78t(a) controlling person claims necessarily failed.
OUTCOME: The judgment of the district court was affirmed.
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