The justices, voting 5-3, threw out a lawsuit by Charter Communications Inc. investors against two of its suppliers, Motorola Inc. and Scientific-Atlanta Inc. The court said the shareholders didn't show they relied on the alleged deception by the suppliers in making investment decisions.
Allowing additional shareholder lawsuits ``may raise the cost of being a publicly traded company under our law and shift securities offerings away from domestic capital markets,'' Justice Anthony Kennedy wrote for the court.
Business groups called the case their highest priority in the court's 2007-08 term. Trade groups representing banks, accounting firms and law firms took an especially keen interest, saying their members might present tempting targets for shareholder lawyers. The ruling will bolster efforts by Merrill Lynch & Co. to block a lawsuit by Enron investors and by UBS AG to defeat claims by HealthSouth shareholders.
The case split the court along ideological lines, with Chief Justice John Roberts and Justices Samuel Alito, Antonin Scalia and Clarence Thomas joining Kennedy's opinion.
Seeking a Remedy
Justices John Paul Stevens, Ruth Bader Ginsburg and David Souter dissented. Stevens wrote that Congress enacted the federal securities laws ``with the understanding that the federal courts respected the principle that every wrong would have a remedy.''
Justice Stephen Breyer didn't participate in the case. He owns stock in Cisco Systems Inc., which is now Scientific- Atlanta's parent company.
The Supreme Court in 1994 ruled 5-4 that federal securities law bars suits for ``aiding and abetting'' another company's wrongdoing. Congress changed the law in 1995 to permit aiding- and-abetting suits by the Securities and Exchange Commission, but not by private shareholders.
