2nd Circuit Rules Mayer Brown and Ex-Partner Not Liable in Refco Investor Suit
A federal appeals court has ruled that Mayer Brown and one of its former partners are not liable in a shareholder suit filed over the bankruptcy of brokerage firm Refco Inc.
The New York City-based 2nd U.S. Circuit Court of Appeals ruled Tuesday, the New York Law Journal reports. The opinion (PDF) held that lawyers who were secondary actors in an alleged securities fraud scheme can’t be liable to shareholders for false statements they helped create unless the statements were attributed to them at that time.
The court cited the 2008 Supreme Court decision Stoneridge Investment Partners v. Scientific-Atlanta, which held that third parties are not liable for participating in corporate wrongdoing if they did not directly mislead investors.
Plaintiffs had alleged Mayer Brown helped Refco create sham transactions to hide debts of customers who suffered massive losses while trading on margin. They also claimed the law firm was responsible for false statements in Refco documents.
Former Mayer Brown partner Joseph Collins was convicted for his role in the transactions and sentenced to seven years in prison.
The case is Pacific Investment Management Co. v. Mayer Brown.
Updated at 4:58 p.m. to include Collins’ first name and firm affiliation.
