High Court Closes Lawsuit Loophole
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Yesterday the U.S. Supreme Court, in a case involving former Merrill Lynch & Company brokers, closed a class-action securities lawsuit loophole that had allowed some civil securities suits to proceed at the state level.
In an unanimous opinion written by Justice John Paul Stevens, the justices said civil lawsuits involving investors who hold onto their stocks and allege securities fraud must, under securities lawsuit reforms passed by Congress in the 1990s, litigate in federal court like investors who allege a fraud after buying or selling a security.
“This decision impacts all public companies by closing an enormous loophole created by plaintiffs, which would have led to an avalanche of state law securities fraud class actions accompanying virtually every federal securities class action,” said Jay Kasner of Skadden, Arps, Slate Meagher & Flom, who handled the case for Merrill Lynch.
