We earlier discussed the significance of Stoneridge (Mar. 27; see also the related discussion over the Enron-related Regents v. CSFB case, where the Supreme Court is considering a petition for certiorari Apr. 5, Mar. 19, and May 17), which could lead to a tremendous unlegislated expansion in secondary liability in securities-fraud cases. Lyle Denniston reports that Justices Roberts and Breyer have recused themselves from the case, leaving a seven-justice panel. Six of those justices previously participated in Central Bank v. First Interstate Bank, a 5-4 decision that spoke of the importance of firmly circumscribed liability rules in the securities context. Justice Kennedy wrote the majority opinion, joined by Rehnquist, O'Connor, Scalia, and Thomas; the dissent was authored by Stevens, with Blackmun, Souter and Ginsburg joining. That leaves the current makeup of the court 3-3, with only Alito's vote unknown—assuming that the senior six justices honor their earlier stated positions, and that none of the dissenters recognize the importance of stare decisis. The petitioners will also presumably seek to ask Justice Kennedy to distinguish Central Bank and claim that the secondary liability they seek to impose here is really primary liability.
If the SEC decides to support Stoneridge, its brief is due June 11; if it decides to support Lerach's certiorari petition, its brief is due June 1. The SEC's position will not be dispositive by any stretch of the imagination; after all, it was on the losing side in Central Bank.