Brace Yourselves, Investors

The business-friendly U.S. Supreme Court will shortly decide two cases that could impact investors’ recovery rights for decades.

The key question is whether the Court will roll back existing law that currently protects investors. The stakes for Mom and Pop investors are huge; if the business lobby wins either of these cases, it would severely limit investors’ ability to have their grievances stemming from securities fraud and abuses heard as a class action.

First, today, the Court will hear oral argument in “Halliburton.” This is the big enchilada because the Court will review the continuing validity of the “fraud-on-the-market” standard. Eliminating this standard “would mean the demise of private securities [class] actions and the deterrent and compensatory role they serve” according to the plaintiff’s lawyer in a report by Greg Stohr of Bloomberg.

Under that standard, the law presumes that false information (think phony quarterly financial results) issued by a public company influenced the price of the stock. That presumption is in danger of being extinguished for a group of investors suing in a class action.

The defendants argue in their court submission that plaintiffs should at least be required to prove that the alleged misrepresentations actually distorted the market price. That requirement in turn “would preclude class actions because it would require judges to conduct a case-by-case inquiry into the circumstances of each shareholder” according to Bloomberg’s Stohr.

That means no class actions and no company liability for massive frauds like Enron or WorldCom. The business lobby is licking its chops on this one.

The second case is “Fifth Third.” Here the Court will address a split in the circuit courts concerning the applicable pleading requirements for claims that ERISA fiduciaries imprudently invested the assets of employee stock ownership plans in employer-company stock.

Remember, ERISA is a federal law that sets minimum standards for pension plans in private industry. ERISA does not require any employer to establish a pension plan. It only requires that those who establish plans must meet certain minimum standards and requires accountability of plan fiduciaries.

In “Fifth Third,” the Court may decide to make it more difficult for company employees to recover under the ERISA law if employers commit stock fraud. In other words, the Court could gut ERISA, which is designed to protect millions of employees who own company stock in an employer stock plan.

Decisions favoring business in these cases could set investors rights back to the Stone Age. Brace yourselves, investors.

With a conservative 5-4 majority on the Court, Chief Justice Roberts will be the Kingmaker as he was in his surprise decision last year to vote to uphold the Obamacare law.

The question is, will Chief Justice Roberts decide for big business or for the investing public? Mom and Pop investors should be ready for a punch to the gut.

Zamansky LLC are investment and stock fraud attorneys representing investors in federal and state litigation and arbitration against financial institutions.

About Jacob H. Zamansky 57 Articles

Jacob (”Jake”) H. Zamansky is one of the country’s foremost authorities on securities arbitration law, the legal recourse for investors claiming broker wrongdoing, or for brokers claiming wrongful termination or other misconduct by their employer. Zamansky & Associates, the New York-based law firm he founded, represents both individuals and institutions in complex securities, hedge fund, and employment arbitrations.

Mr. Zamansky was at the forefront of recent efforts to “clean up” Wall Street. In 2001, he successfully sued former Merrill Lynch analyst Henry Blodget on behalf of a New York pediatrician misled by Blodget’s stock research. The case’s successful resolution was the catalyst for New York Attorney General Elliot Spitzer to investigate the conflicts of interest on Wall Street and resulted in the well-reported $1.4 billion Global Settlement, which included many of the biggest names on Wall Street.

More recently, Mr. Zamansky is one of the leading litigators and opinion leaders of the subprime mortgage crisis and the related hedge fund collapses, representing both investors and mortgage borrowers who were defrauded by Wall Street firms and mortgage lenders. Among Mr. Zamansky’s early actions is filing the first arbitration case on behalf of institutional and high net worth investors against Bear Stearns Asset Management with regard to the two hedge funds which collapsed as a result of exposure to subprime mortgage backed securities. He also has filed claims on behalf of individual investors victimized by brokers that steered their portfolios into unsuitable subprime stocks and mortgage borrowers who were fraudulently coerced into inappropriate mortgage and investment transactions.

Earlier in his career, Mr. Zamansky worked for more than 30 years as a litigator, including positions at Skadden Arps, Slate, Meagher and Flom LLP. His tenure also included serving as a federal prosecutor with the Federal Trade Commission.

A native of Philadelphia, Mr. Zamansky has been a frequent expert commentator on CNBC, CNN, and FOX News and has published opinion pieces in The Wall Street Journal, Financial Times and USA Today. He is regularly quoted and his cases have been chronicled in major financial and news publications including The New York Times, USA Today, The Washington Post, BusinessWeek, Fortune and Forbes. He is a frequent lecturer for industry and legal groups around the country. He also writes a blog that can be viewed here.

Visit: Zamansky & Associates

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