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There’s a peculiar dynamic at play in Janus Capital v. First Derivative Traders, the securities case the U.S. Supreme Court is scheduled to hear Tuesday. As our own Susan Beck explained when the Court granted certiorari in June, the case is regarded as an opportunity for the Justices to re-examine the question of third-party liability for lawyers, accountants, and other investment advisers in securities class actions–a hot topic ever since the Court definitively cut off third-party liability in its 2008 opinion in Stoneridge v. Scientific-Atlanta. But here’s the weird thing: The plaintiffs in the securities class action underlying the Janus appeal say they aren’t arguing for the Supreme Court to rethink Stoneridge–which has been a giant thorn in the side of the securities class action bar–at all. “We embrace Stoneridge,” said David Frederick of Kellogg , Huber, Hansen, Todd, Evans & Figel, who will be arguing Tuesday for First Derivative Traders. (Frederick will split his time with the U.S. Solicitor General, who joined First Derivative in opposing certiorari.) “We don’t view this case as an expansion of liability for third parties,” Frederick added. Mark Perry of Gibson, Dunn & Crutcher, who will argue for Janus Capital at the high court, told us that’s not a credible interpretation of the plaintiffs case. “Of course the plaintiffs case is an extension of liability,” he said. “The plaintiffs’ theory is fundamentally inconsistent with Stoneridge and Central Bank. That’s the plaintiffs’ fundamental problem.” As we’ve reported, the underlying case in Janus grew out of the market timing scandal of 2003, when state and federal regulators accused Janus and other mutual funds of giving certain favored investors a trading advantage. First Derivative Traders asserted that Janus and its investment adviser subsidiary, Janus Capital Management, had misrepresented to investors that they would curb market timing in their funds, when in fact they secretly let certain hedge funds engage in the practice, to the detriment of long-term investors. The defendants countered that Janus wasn’t liable because it didn’t issue the prospectuses, which were put out by individual Janus funds. Nevertheless, the U.S. Court of Appeals for the Fourth Circuit held that Janus Capital Management could be held liable because it was allegedly responsible for the funds’ day-to-day management. “Interested investors would infer that JCM played a role in preparing or approving the content of the Janus fund prospectuses,” the court wrote. (The court did uphold the dismissal of certain claims against the Janus parent company.) First Derivatives’ Supreme Court counsel Frederick told us there’s nothing in the Fourth Circuit ruling that contradicts Stoneridge. “The way the court explained the situation, the requirements of primary liability are perfectly met here,” he said. (The plaintiffs were represented in the lower courts by Kirby McInerney, which is also on the Supreme Court briefs.) But Perry maintained to us that the Fourth Circuit opinion opens a pathway to liability for third parties–and not just investment advisers, but also lawyers and accountants. “No other case since Stoneridge has held that one company is liable for statements in another company’s prospectus,” he said. We’ll let you know what the Justices have to say during Tuesday’s arguments.

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