The Supreme Court dealt a new blow today to investors suing companies over accusations of fraud when it set a higher standard to prevent the lawsuits from being dismissed.
The decision was the second this week by the court that was a defeat for shareholders and a victory for the defendant companies. On Monday, the justices ruled that securities underwriters on Wall Street are generally immune from civil antitrust lawsuits.
It comes as senior officials including Treasury Secretary Henry M. Paulson Jr. have been pushing for the imposition of new limits on shareholder lawsuits. Mr. Paulson, along with other Bush administration officials and some senior Congressional Democrats and Republicans, have maintained that shareholder lawsuits and regulations written in the aftermath of the corporate scandals involving such companies as Enron and Worldcom may be causing too many companies to look to overseas markets to raise capital.
Earlier this week, Mr. Paulson told a Congressional committee that investors should not be permitted to sue third parties accused of assisting a company that engages in fraud. Mr. Paulson, a former chief executive at the investment bank Goldman Sachs, was responding to a question about a case before the Supreme Court that could determine whether investors will be able to sue law firms, investment banks and others that work with companies accused of fraud. The administration has also been considering a request by the nation’s top accounting firms to impose new limits on their liability from lawsuits.