Originally published June 22, 2007 at 12:00 AM | Page modified June 22, 2007 at 2:01 AM
Ruling makes it tougher for shareholders to sue
Investors who already had lost money on their stocks lost again at the Supreme Court on Thursday when the justices imposed a strict standard...
The Associated Press
WASHINGTON — Investors who already had lost money on their stocks lost again at the Supreme Court on Thursday when the justices imposed a strict standard for shareholders suing companies accused of fraud.
The 8-1 opinion written by Justice Ruth Bader Ginsburg makes it easier for companies and business executives to seek dismissal of investor lawsuits at the very start of a case.
A lawsuit will proceed only if the facts alleged in it are "cogent and compelling" in pointing to an intent to deceive investors, she wrote. Those factual allegations must be at least as compelling as "any opposing inference" suggesting innocence, she added.
Plaintiffs' attorneys said almost all cases already meet the standard the court adopted.
And investors "can breathe a sigh of relief" that the justices did not embrace a more stringent rule favored by Justices Antonin Scalia and Samuel Alito in a concurring opinion, said attorney Barbara Hart, who represents institutional investors in major securities-fraud cases.
Class-action lawsuits against public companies have helped shareholders recover billions of dollars after the wave of corporate scandals. The corporate world is pushing regulators to roll back some safeguards put in place after those scandals, which brought down companies such as Enron and WorldCom.
Thursday's ruling came in a shareholders suit against high-tech company Tellabs.
The firm misled investors by engaging in a scheme to inflate Tellabs' stock price from December 2000 to June 2001, according to the lawsuit. It said the company's CEO provided false assurances of robust demand for Tellabs products.
The business community says the Tellabs case is the kind of meritless investors' claim that Congress intended to prohibit when it changed securities law 12 years ago.
Under the 1995 changes, a securities-fraud complaint must allege facts giving rise to a "strong inference" that defendants acted with an intent to deceive investors.
The 7th U.S. Circuit Court of Appeals had ruled against Tellabs, saying the complaint should go forward if a reasonable person could infer from the allegations that defendants' conduct was intentionally deceptive.
"That one-sided approach, we hold, was erroneous," Ginsburg said in court.
![]()
The justices sent the case back so that the lower courts can assess whether the lawsuit should stand.
In dissent, Justice John Paul Stevens suggested the court had adopted too high a standard.
"There are times when an inference can easily be deemed strong without any need to weigh competing inferences," he wrote.
On Monday, the court dealt another setback to investors when it sided with Wall Street investment banks that allegedly colluded to drive up the price of 900 technology stocks in the late 1990s. Shareholders subsequently lost billions when the dot-com bubble burst.
Copyright © 2007 The Seattle Times Company
Boeing: 787 fix is complete on first plane
NEW - 10:32 PM
Retail Report: Nordstrom joins tie-in trend with Twilight movie
Lenders are yanking consumers' credit cards
NEW - 10:25 PM
Price cuts fuel profits at Wal-Mart, Kohl's
NEW - 10:32 PM
Analysis: Happy Friday the 13th. Seriously.

Video shows violent arrest by SPD
The SPD has opened an internal investigation into the violent arrest of a suspect.
nwjobs

Post a comment

Michelle Goodman blogs about work/life balance.
How to tell your office you're gravely ill
Post a comment
nwautos

Choosing a new sedan? Weigh the impact of your choice on your wallet and on the planet.
Post a comment
- Ivar's undersea billboards a hoax devised as marketing ploy
- Ichiro thrilled that Ken Griffey Jr. is back for another Mariners season
- Man charged with killing police officer is paralyzed
- Seattle 'Jon Doe' shows up in New Mexico with amnesia
- State Democrats facing revolt by labor
- Russell Branyan passes on Mariners' offer
- Huskies sign California prep forward Desmond Simmons
- Capitol Hill's War Room for sale
- The Hot Stone League | Ken Griffey Jr. will be a Mariner in 2010
- Costco Wholesale opens first Manhattan store
- State Democrats facing revolt by labor
490 - Ivar's undersea billboards a hoax devised as marketing ploy
262 - Do not slander Islam after Fort Hood
216 - Aggravated murder charge filed against man accused of killing officer
214 - U.S. envoy in Kabul isn't sold on adding to forces
124 - Salute those Muslim-Americans who stand up for their country
116 - Lou Dobbs says he is leaving CNN
96 - Obama announces summit in December on finding jobs
59 - City Light rate increase of 13.8 percent proposed
54 - Scouting Oregon State
50
- Ivar's undersea billboards a hoax devised as marketing ploy
- Ichiro thrilled that Ken Griffey Jr. is back for another Mariners season
- Costco Wholesale opens first Manhattan store
- State Democrats facing revolt by labor
- Chefs offer holiday recipes and preparation tips
- The Hot Stone League | Ken Griffey Jr. will be a Mariner in 2010
- Ski areas opening early, here and B.C.
- Kayak on Kitsap Peninsula's Miller Bay to get friendly with the chum (salmon)
- Capitol Hill's War Room for sale
- Evergreen Bank given a deadline to fix capital shortage








