Mayer Brown Escapes a Refco Case; No Private Right of Action, Judge Rules
Posted Mar 18, 2009 3:35 PM CDT
By Martha Neil
Plaintiffs in a securities fraud case filed over the collapse of Refco Inc. can't hold an international law firm defendant liable for alleged aiding and abetting, a federal judge in New York City has ruled.
Because there is no private right of action under the applicable federal statutory law, Mayer Brown, which served as Refco's outside counsel, must be dismissed from the putative class action, U.S. District Judge Gerard Lynch held yesterday. A copy of his 25-page opinion (PDF) is provided by the Am Law Daily.
"Although the complaint alleges facts that, if true, would make the Mayer Brown cefendants guilty of aiding and abetting the securities fraud that harmed the plaintiffs, the Supreme Court and Congress have declined to provide a private right of action for victims of securities fraud against those who merely—if otherwise substantially and culpably—aid a fraud that is executed by others," Lynch writes. "Accordingly, the motions to dismiss must be granted."
In addition to the law firm, former partner Joseph Collins was also dismissed by Lynch as a defendant in the case, which was brought under sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
In a written statement, Mayer Brown says the firm "acted in a professional, competent, and ethical manner in its work on behalf of Refco" and is pleased with yesterday's decision, the Am Law Daily reports.
However, the law firm hasn't completely escaped all litigation over its representation of Refco in a 2005 initial public offering, the post notes. Two more lawsuits are still pending. Meanwhile, Collins has been criminally charged with securities and bank fraud, and is scheduled to go to trial next month in federal court in Manhattan.