The plaintiffs filed a securities class action lawsuit against a computer chip manufacturer, alleging violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The plaintiffs alleged that the defendant’s executives knowingly made false public statements that the high price of its products was due to market forces, when, in reality, the executives knew that illegal price fixing led to the increasing prices. The plaintiffs further alleged that the defendant’s deception increased its stock price, but, when allegations of price fixing surfaced, its stock price dropped significantly.
The defendant moved for judgment on the pleadings with respect to plaintiffs’ “scheme claim” under Rule 10b-5, arguing that the Supreme Court’s recent decision in Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., _ U.S. _, 128 S. Ct. 761 (2008), precluded the claim. In particular, the defendant argued that Stoneridge stood for the propositions that: (i) reliance by the plaintiff upon the defendant’s deceptive acts is an essential element of a Section 10(b) claim, (ii) there can be no such reliance where no member of the investing public had knowledge of the deceptive acts during the relevant times, and (iii) knowledge cannot be presumed if the deceptive acts were not communicated to the public. The defendant claimed that the plaintiffs’ claims did not satisfy the Stoneridge standard. The court disagreed and held that Stoneridge was inapplicable to the facts of the case.
The court rejected the defendant’s argument, ruling that the Stoneridgeholding was limited to secondary actors, such as a defendant’s supplier or customer. According to the court, the Stoneridge decision merely restated the Supreme Court’s holding in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (2004), that there is no private right of action against a secondary actor who allegedly aided and abetted the fraudulent scheme. Because the defendant was not a secondary actor, the court concluded that Stoneridge did not apply, and therefore denied the defendant’s motion for judgment on the pleadings. (In re Micron Technology, Inc., 2009 WL 453917 (D. Idaho Feb. 23, 2009))