As noted here and here, Senator Arlen Specter (D-PA) is sponsoring a $1.6 billion tax break for trial lawyers, allowing them early deductions for loans to finance contingency fee lawsuits.
The Senator has now introduced another bill that benefits the litigation industry, in this case, the class-action securities lawyers. (Remember “King of Torts” William Lerach, who went to federal prison for his schemes.) The bill, S. 1551, is called the Liability for Aiding and Abetting Securities Violations Act and is is meant to overturn the U.S. Supreme Court’s 2008 decision in Stoneridge Investment Partners LLC v. Scientific-Atlanta Inc.
The Wall Street Journal’s opinion page today describes what that means. From “The Specter of Unlimited Liability“:
In 2000, Scientific-Atlanta and Motorola agreed to sell cable boxes to Charter Communications, which was creative in booking these deals and had to restate its financial results. Scientific-Atlanta and Motorola had done nothing more than enter into contracts with its customer, Charter, on terms requested by that customer, and had accounted for the deals properly. Nonetheless, the Stoneridge investment firm sued the two suppliers, alleging a “scheme” against Charter investors.
In striking down this suit, the High Court called the case “a private cause of action against the entire marketplace in which the issuing company operates.” It also pointed out that Congress decided not to provide a private cause of action against secondary parties when it passed the Private Securities Litigation Reform Act in 1995 and Sarbanes-Oxley in 2002. The Securities and Exchange Commission already has the authority to punish fraud and distribute fines to victims. Private lawsuits are about trying to use expansive liability claims that distort justice and harm the shareholders of innocent but deep-pocketed companies.
And private lawsuits are what the bill from Senator Specter and Senator Jack Reed (D-RI) would encourage.
The NAM filed an amicus brief in the Stoneridge case. More …
