Supreme Court Makes It Harder for Investors to Sue

The high court has unanimously decided to made it harder for investors to join forces and file lawsuits against companies.

In essence, the decision “blocks state class-action lawsuits by stockholders who contend they were tricked into holding onto declining shares.” Specifically, the court is saying that

the 1998 Securities Litigation Uniform Standards Act permits suits on behalf of 50 or more investors only by purchasers and sellers of securities, not by people who simply hold investments.

The decision in Merrill Lynch v. Dabit was a big win for Merrill Lynch, which “faced a spate of lawsuits prompted in part by New York Attorney General Eliot Spitzer’s 2002 probe into the investment banking firm’s practices.”

I don’t usually side with Big Business, but I like that it’s now more difficult for disgruntled investors to file frivolous securities class action lawsuits.

Sources: This Bloomberg article and “Court Makes It Harder for Investors to Sue,” by AP writer Gina Holland (3/21/06)