The blawgosphere’s analysis has been extensive and insightful in regard to the Supreme Court’s important decision Tuesday in Stoneridge Investment Partners v. Scientific-Atlanta (previous posts here), which upheld the Central Bank rule against holding third parties secondarily liable for damages for providing financing to a company that is found to have defrauded its investors. The Point of Law.com blog, which has been a leader in providing a forum for discussion of the issues in the case, provides links to many excellent commentators, including Professors Bainbridge and Ribstein, the latter of whom has this follow-up post to his initial one that is well worth reading.
Although the issues and policy implications involved in Stoneridge are easy to understand for those of us involved in business, it’s interesting how many people who are not involved in business on a day-to-day basis have asked me about the case and why I think it’s so important that the Central Bank rule be upheld. Why shouldn’t the banks that facilitated a company defrauding its investors not have to contribute something into the compensation pot for the investors, they inquire?
I have found that directing the folks asking that question to the practical example presented in this earlier post usually does the trick in explaining why erosion of the Central Bank rule is a manifestly bad idea.