Supreme Court in Stoneridge rejects application of “scheme liability” to customers and vendors of issuers accused of securities fraud — impact on professionals and securities market participants less clear

On January 15, 2008, the Supreme Court issued its eagerly anticipated decision in Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., No. 06-43. The outcome—a ruling in favor of defendants—was no surprise, but the Court’s reasoning was somewhat unexpected. The Court’s majority—and the dissenters—rejected the Eighth Circuit’s reasoning that only misstatements, omissions by those with a duty to disclose, and manipulative securities trading practices could create liability in a Section 10(b) action brought by a private plaintiff.