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Weighing what has been billed as the securities fraud case of the decade, the U.S. Supreme Court seemed poised to slam the door shut on investor class actions aimed at deep-pocket, third-party defendants such as accountants, lawyers and bankers. The hourlong oral arguments on Oct. 9 in Stoneridge Investment Partners v. Scientific-Atlanta, No. 06-43, played out before a Supreme Court chamber packed with spectators, including Enron plaintiffs, who have a big stake in the outcome. Chief Justice John G. Roberts Jr. took a leading role in the arguments, repeatedly asserting that the high court should “get out of the business” of expanding private causes of action for investors without the express say-so of Congress. “Congress has taken over,” Roberts said, citing recent legislation aimed at curtailing investor class actions. Roberts and Justice Stephen G. Breyer had recused themselves from the case, presumably because they owned stock in Cisco Systems Inc., the parent company of both Scientific-Atlanta Inc. and Motorola Inc., also a party to the case. Roberts apparently sold his holdings to re-enter the case, although he made no public explanation for his return. On the resulting eight-member court, Justice Samuel A. Alito Jr. could be the key vote, and his questions seemed to indicate he thought that “aiders and abettors” in securities fraud, who can be sued by the U.S. Securities and Exchange Commission, shouldn’t be viewed in the same way as the principal defrauders. He asked no questions of lawyers arguing for the corporate defendants � sometimes a signal of support. Justices Ruth Bader Ginsburg and David H. Souter appeared to be looking for middle ground that would allow private lawsuits in some instances. The Bush administration and an array of corporate and professional entities and associations hope that the court won’t allow suits against those who play a secondary role in big-time corporate fraud. In his brief to the court, U.S. Solicitor General Paul Clement warned that siding with investor-plaintiffs would expose “customers, vendors, and other actors far removed from the market to billions of dollars in liability.” Stanley Grossman of New York’s Pomerantz Law Firm appeared to gain little traction with his argument on behalf of investor-plaintiffs that third parties, far from being “innocent bystanders,” can be integral to fraud and should be held to account in private litigation. Arguing on the other side was Chicago-based Mayer Brown’s Stephen Shapiro. “Congress wanted cases like this one to be handled by an expert and disinterested administrative agency,” he said, not through private litigation that would harm the economy.

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