Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc. case brief

Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc. case brief summary
128 S.Ct. 761 (2008)

CASE SYNOPSIS

Petitioner investors sued respondent suppliers and customers under S.E.C. Rule 10b-5, 17 C.F.R. § 240.10b-5, and the Securities Exchange Act of 1934, 15 U.S.C.S. § 78j(b), alleging respondents' arrangements allowed the investors' company to mislead its auditor and issue a misleading financial statement. A writ of certiorari was issued to the United States Court of Appeals for the Eighth Circuit on its affirmance of the dismissal of respondents.

DISCUSSION

• The Eighth Circuit correctly ruled that the allegations did not show respondents made misstatements relied upon by the public or that they violated a disclosure duty. 
• The § 78j(b)implied private right of action did not extend to aiders and abettors. 
• Respondents had no role in preparing or disseminating the financial statements.
• Respondents had no duty to disclose and their deceptive acts were not communicated to the public. 
• No member of the investing public had knowledge of respondents' deceptive acts during the relevant times. 
• Thus, reliance could not be shown except in an indirect chain that was too remote for liability. 
• The company, not respondents, misled its auditor and filed fraudulent financial statements. 
• Nothing respondents did made it necessary or inevitable for the company to record the transactions as it did, thus, the investors' "scheme liability" theory failed. 
• In 15 U.S.C.S. § 78t(e), Congress amended the securities laws to provide for limited coverage of aiders and abettors, in actions to be brought by the Securities and Exchange Commission, but not by private parties. 
• Concerns with the judicial creation of a private cause of action cautioned against its expansion.

CONCLUSION

The judgment of the Eighth Circuit was affirmed.

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