Supreme Court Limits Class-action Suits

Physician's Money DigestNovember 2007
Volume 14
Issue 11

A June 21, 2007, Supreme Court ruling has made it more difficult for investors to bring civil lawsuits against companies for fraud, making securities underwriters almost immune from civil antitrust lawsuits. The specific case ruled on by the Justices involved a complaint against Tellabs, Inc; senior executives were accused by investors of presenting an overly optimistic projection of revenue and demand for products. The court ruled in favor of Tellabs.

According to the New York Times, the court said that claimants must show "cogent and compelling" evidence of intent to defraud. Senior Bush administration officials, according to the New York Times, have been advocating for tighter rules and regulations against fraud lawsuits, while critics claim the regulations are unnecessary due to a current drop in civil lawsuits and the potential deterrent to inventors who have legitimate fraud claims. While this ruling may limit unnecessary lawsuits, it may leave investors without an avenue for retribution if they feel they have been misled.

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