The U.S. Supreme Court put new limits on shareholder suits against a company’s banks and business partners in a ruling that may thwart efforts to recoup billions of dollars lost in frauds at Enron Corp. and HealthSouth Corp.
The justices, voting 5-3, threw out a lawsuit by Charter Communications Inc. investors against two of its suppliers, Motorola Inc. and Scientific-Atlanta Inc. The court said the shareholders didn’t show they relied on the alleged deception by the suppliers in making investment decisions.
The ruling is a triumph for business groups in what they called their highest priority in the court’s 2007-08 term. Trade groups representing banks, accounting firms and law firms took an
especially keen interest, saying their members might present tempting targets for shareholder lawyers.
“It is a complete and thorough victory for the defendants,” said Donald Langevoort, a securities-law professor at Georgetown University in Washington. He previously called the case “securities law’s Roe v. Wade.”