Stoneridge ruling deals a serious blow to secondary suits: Stoneridge might be the most important finance case the Supreme Court decides this year, extending a winning streak for business and Wall Street in shareholder class actions that began in 2004.(LEGAL ISSUES)

Financial Executive, April, 2008 by Vallario, Cynthia Waller

In a controversial verdict, the U.S. Supreme Court has refused to expand liability to a class of defendants in a major shareholder securities fraud case, citing precedent and Congressional intent, thus declining to open up a new avenue to punish "scheme liability" scams. This decision may significantly affect the future of private rights of action under federal securities laws.

Does participation in a scheme to manipulate earnings and stock price convert secondary actors into primary violators who are liable to defrauded investors under federal securities laws? That is a difficult argument to prove, and the stringent pleading requirements mandated in these cases recently became even tougher.

In a 5-3 opinion delivered in January in Stoneridge...