Download this Paper Open PDF in Browser

Reading Stoneridge Carefully: A Duty-based Approach to Reliance and Third Party Liability Under Rule 10b-5

48 Pages Posted: 11 Sep 2009 Last revised: 10 Aug 2010

Donald C. Langevoort

Georgetown University Law Center

Date Written: July 29, 2010

Abstract

The Supreme Court's decision in the Stoneridge case has largely been interpreted as a imposing a strict, pro-defendant reliance requirement. This article offers an alternative reading that takes the Court's analysis more seriously than its overheated dicta, one that makes remoteness a serious and meaningful inquiry that can produce balanced and fair responses to the concern that seemed to motivate the search for restraint: fear of disproportionate liability. It explores the nature of the dispropotion, and suggests ways -- using the Court's own explanatory tools -- for deciding when third party involvement is close enough to the fraud so that fear of disproportion lessens. Among other things, this approach leads clearly to a rejection of the so-called attribution approach for liability. Recognizing that a statutory solution may be better than judicial patchwork, it also offers a coupling of expanded liability with a more rational and sensible proportionate liability regime than now exists.

Keywords: securities fraud; secondary liability; reliance

JEL Classification: K00, K22

Suggested Citation

Langevoort, Donald C., Reading Stoneridge Carefully: A Duty-based Approach to Reliance and Third Party Liability Under Rule 10b-5 (July 29, 2010). University of Pennsylvania Law Review, Vol. 158, 2010; Georgetown Law and Economics Research Paper No. 10-13; Georgetown Public Law Research Paper No. 10-47. Available at SSRN: https://ssrn.com/abstract=1470940 or http://dx.doi.org/10.2139/ssrn.1470940

Donald C. Langevoort (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States
202-662-9832 (Phone)
202-662-9412 (Fax)

Paper statistics

Downloads
193
Rank
132,711
Abstract Views
1,035