NU Online News Service, June 16, 10:33 a.m.EST

WASHINGTON—Lawyers, accountants and investment advisers cannotbe sued under securities laws by individuals for alleged false ormisleading statements by others, the Supreme Court has ruled.

The close 5-4 decision was lauded by business groups.

“It was a good day for mutual funds and similarly structuredbusinesses and a bad day for class plaintiffs,” says Sarah Gold, apartner and co-head of the Securities Litigation & EnforcementGroup at New York-based law firm Proskauer.

She says the Supreme Court majority “opted for a bright-linerule,” and in doing so the decision “diverges from the court'sprior pattern of flexible standards for fraud and appears toinsulate fund advisors and managers from section 10b-5liability.”

David Hirschmann, president and chief executive officer of theCenter for Capital Markets Competitiveness, a unit of the U.S.Chamber of Commerce, says the decision “will prevent yet anotherroadblock to our global competitiveness.”

“Expanding liability would have opened up the floodgates to evenmore costly and frivolous class action suits for businesses andgive additional reasons for companies to raise capital outside theU.S.,” he adds. “This decision is a significant step in bringinggreater certainty for these important market participants.”

Robin Conrad, executive vice president of the National ChamberLitigation Center, the public policy law firm of the U.S. Chamber,adds, “The Supreme Court correctly concluded, as the Chamber urged,that private liability under the securities laws must be construedquite narrowly.”

Conrad said that the “plaintiffs’ legal theory in this case wasvery aggressive, and would have exposed a whole new class ofcompanies to frivolous securities lawsuits, from accountants toinvestment advisers to law firms.”

The case is Janus Capital Group, Inc., v. First DerivativeTraders.

The Supreme Court decision on the case, first filed in 2003,reverses a 2009 decision by the 4th U.S. Circuit Court ofAppeals.

The decision was written by Justice Clarence Thomas. It heldthat Janus Capital Group, which managed a family of mutual funds,could not be sued for allegations it misled investors in theprospectuses of its mutual funds because it and a unit that advisedthe funds, Janus Capital Management, were separate legal entitiesfrom the mutual funds themselves.

It dealt with a policy uncovered by then New York attorneygeneral Eliot Spitzer that mutual funds were allowing favoriteinvestors to buy shares of mutual funds at the day’s closingprice—but after the market closed.

Justices Stephen Breyer, Ruth Bader Ginsburg, Sonia Sotomayorand Elena Kagan dissented.