|  | | 2005 News and Press Releases | | |
HEADLINE NEWS:
Supreme Court To Decide Firms' Liability In Investor Suits
Curtis Zimmermann
Compliance Reporter. December 5, 2005
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EXCERPT: The U.S. Supreme Court will hear a case next month that could potentially make it easier for existing shareholders to sue broker/dealers and public companies. The court will resolve a dispute between Merrill Lynch and a former registered representative over whether such investors can sue under state law firms and companies whose frauds caused a price drop. If the court decides they can, the number of suits could spike because it is easier to sue at the state level, said Michael Unger, a former president of the North American Securities Administrators Association. The question in the case, Merrill Lynch v Dabit, is whether the Securities Litigation Uniform Standards Act (SLUSA) applies to shareholders. SLUSA bars state class action suits for cases alleging a misrepresentation or omission of facts in the buying or selling of securities. But the plaintiff in the case is contending that because tie already owned the shares SLUSA does not apply, which gives him the right to sue under state law. In the case, Shadi Dabit, the former rep, filed a class action claim in an Oklahoma U.S. District Court alleging on behalf of current and former Merrill Lynch employees that he held onto stocks because of false Merrill Lynch research. The suit alleged that Merrill Lynch breached its fiduciary duty to its employees by encouraging them to hold the stocks. The case was shifted to New York, which dismissed it. It is connected to New York Attorney General Eliot Spitzer's investigation of the firm's research of Internet stocks, which were the types of stocks Dabit owned. The U.S. Court of Appeals for the 2nd Circuit ruled iii January against Merrill Lynch and the firm appealed. But in an unrelated ruling in May, the U.S. Court of Appeals for the 7th Circuit concluded the opposite in Kicher v. Putnam. Merrill Lynch's attorney, Jay Kasner, a partner at Skadden, Arps, Slate, Meagher & Flom in New York, would not comment beyond his brief. Oral arguments are scheduled for Jan. 18. |
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