Two law firms are heading to battle as defendants in the high court.
On Friday, the Supreme Court accepted appeals from Chadbourne & Parke and Proskauer Rose, two law firms that once represented R. Allen Stanford, a convicted Ponzi schemer who a judge last year sentenced to 110 years behind bars. Stanford swindled investors out of more than $7 billion over 20 years. Chadbourne and Proskauer are seeking to avoid state-law suits that Stanford’s investors, seeking to recoup their losses, brought against them.
The lawsuits seek to hold the two law firms responsible for the actions of Thomas Sjoblom, a lawyer who worked at both firms and who the investors claim obstructed a Securities and Exchange Commission probe into Stanford.
The firms, however, claim that the Securities Litigation Uniform Standards Act (SLUSA)—which prevents plaintiffs from filing state-law class actions alleging fraud in connection with the purchase or sale of nationally traded securities—preclude the plaintiffs’ suits.
A district court judge ruled in October 2011 that SLUSA preempted the plaintiffs’ suits. But in March 2012, the 5th Circuit reversed the decision, finding that the fraud was only tangentially related to the investors’ securities purchases.
After the 5th Circuit’s decision, which created a significant split among the circuits, experts predicted the case would head to the Supreme Court. “The Supreme Court in the past few terms has been much more active in getting involved in securities cases and class actions,” Neal Marder, a partner at Winston & Strawn, told InsideCounsel in June 2012. “This may very well provide the opportunity for the Supreme Court to intervene and decide in a more uniform way what ‘in connection with’ is intended to mean under SLUSA.”
The Supreme Court could hear the appeal in April and will likely deliver a decision by the end of June.
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