Thursday, November 7, 2013

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)

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.


  • 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.


The judgment of the Eighth Circuit was affirmed.

Suggested Study Aids For Securities Regulation Law
Securities Regulation in a Nutshell, 10th (Nutshell Series)
Securities Regulation: Examples & Explanations, 5th Edition
Securities Regulations: The Essentials

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