DRI Files Amicus Brief Seeking U.S. Supreme Court Review in Securities Fraud Case of Roland v. Green
DRI filed an amicus brief today seeking U.S. Supreme Court review of the Fifth Circuit’s decision in Roland v. Green (DRI’s brief was filed in a case captioned Willis of Colorado v. Troice, No. 12-86).
This case arises out of the massive Ponzi scheme perpetrated by Allen H. Stanford and his affiliated corporate entities. The plaintiffs purchased certificates of deposit from the Antigua-based Stanford International Bank (SIB) based on misrepresentations by Stanford and SIB that the CDs were backed by highly liquid, publicly traded securities. Because Allen Stanford and his affiliated companies were all insolvent, plaintiffs brought class action complaints against several deep-pocketed third-party actors with remote connections to Stanford or SIB. For example, Willis (the petitioner here) is an insurance broker that helped SIB to procure ordinary commercial insurance. Willis had no role whatsoever in developing, marketing, or selling the SIB CDs. Yet the plaintiffs allege that Willis aided and abetted the fraud by writing letters confirming (accurately) that SIB had purchased commercial insurance.
The Supreme Court has held in a series of cases that claims under Rule 10b-5 of the Private Securities Litigation Reform Act may be brought against only primary wrongdoers (not alleged aiders and abettors or other third parties). Many plaintiffs’ attorneys sought to evade these restrictions by instead filing class action complaints that were limited to state law securities claims. Congress in turn enacted the Securities Litigation Uniform Standards Act (SLUSA), which precludes any state law class actions alleging “a” misrepresentation “in connection with” the purchase or sale of a covered security.
The Fifth Circuit concluded that the plaintiffs' complaint was not precluded because it also contained other alleged misrepresentations that were not made in connection with a covered securities transaction. If allowed to stand, the Fifth Circuit’s decision will create a gaping loophole in SLUSA by allowing plaintiffs to load up their complaints with extraneous allegations unrelated to transactions in covered securities.
The brief’s authors, Linda T. Coberly (Chicago) and Gene C. Schaerr (Washington) of Winston & Strawn LLP are available for interview or for expert comment through DRI’s Communications Office.
For the full text of the brief, click here.