Posted Mar 22, 2012 04:04 pm CDT
Two law firms accused of negligently employing a lawyer who advised convicted financier R. Allen Stanford suffered a setback in an appellate ruling on Monday.
The New Orleans-based 5th U.S. Circuit Court of Appeals ruled (PDF) that state investor class actions weren’t barred by a federal law designed to curb nuisance litigation in state courts over federal securities, report Reuters and the Daily Business Review.
The suits claim Proskauer Rose and Chadbourne & Parke were negligent for employing Thomas Sjoblom, who advised Stanford, and were responsible for his conduct. Stanford was convicted earlier this month in a $7 billion fraud case alleging he bilked investors who bought certificates of deposit at his offshore bank. Sjoblom is accused in the investor suits of helping delay an inquiry into Stanford’s conduct by the Securities and Exchange Commission.
The 5th Circuit said the CDs issued offshore were not covered by the federal law, the Securities Litigation Uniform Standards Act of 1998, and they weren’t sold “in connection with” covered securities within the meaning of the law.
Proskauer and Chadbourne said in statements that they have several other defenses that will be pressed at the district court level, Reuters said.