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Supreme Court sides with business again

Steve Henn Jun 21, 2007
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Supreme Court sides with business again

Steve Henn Jun 21, 2007
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TEXT OF STORY

Tess Vigeland: If you’re a corporate executive, it’s been a good year for Supreme Court decisions. If you’re an investor — not so much.

The high Court unveiled a decision today in a case called Tellabs. The 8-to-1 ruling will make it a bit more difficult for angry investors to bring class-action lawsuits alleging that they’ve been ripped off by companies committing securities fraud, Marketplace’s Steve Henn explains.


Steve Henn: It wasn’t that long ago that WorldCom, Enron and Adelphia were making front-page news with their elaborate accounting frauds and spectacular bankruptcies.

But today, the Supreme Court made it a bit tougher for investors who believe they’ve been victimized by corporate accounting shenanigans to get their cases to trial. Before today’s ruling, all you had to do to get a class-action heard in some parts of the country was succeed in:

Eric Talley: Connecting the dots between alleged fact and alleged fraud in a way that was plausible.

Eric Talley is a law professor at UC Berkeley.

Talley: This opinion says that’s not quite right.

Basically after today, in order to get a case to trail, investors will have to convince a judge that their story about how a fraud took place seems at least as cogent and convincing as any excuses the company’s executives can come up with.

Carol Gilam: I think we will see more cases being thrown out as a result of this decision.

Carol Gilam is the president of the National Association of Consumer and Shareholder Attorneys. She says the courts’ most conservative justices wanted to make it even tougher to get these suits heard.

Gilam: It will be more difficult, make no mistake about that.

For companies and their executives though, this is good news.

Robin Conrad at the National Chamber Litigation Center says these lawsuits are tremendously expensive for firms:

Robin Conrad: They incur huge discovery costs. They allow plaintiffs to go on major fishing expeditions.

Conrad says today’s decision could save innocent companies and their investors millions.

In Washington, I’m Steve Henn for Marketplace.

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