Two recent Southern District of New York summary judgment decisions in the In re Parmalat Securities Litigation1 are of potential concern to large global accounting firms that may have found comfort in the Supreme Court’s Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc. decision last year. Where a foreign affiliate’s conduct creates potential liability, courts have rarely allowed claims to extend to the organization’s global umbrella entity or its U.S. operating entity.2 The new Parmalat decisions, however, allowed securities claims to proceed to trial against both Deloitte & Touche’s and Grant Thornton’s international and U.S. entities under §20(a) of the Securities Exchange Act of 1934. Both decisions also upheld claims against these entities under §10(b) of the act by invoking common law agency principles, notwithstanding the Supreme Court’s Stoneridge decision, which set forth no such exception to the rules for establishing primary liability.
In 1994, the Supreme Court held in Central Bank, N.A. v. First Interstate Bank, N.A.3 that aider/abettor liability did not lie for §10(b) securities law claims brought by private individuals, and that such claims could only be brought against primary violators who had made a material misrepresentation or omission. Over the last several years, an increasing number of securities class actions plaintiffs had attempted to circumvent Central Bank by alleging that secondary actors who had not made actionable statements were nonetheless liable where they had participated in a scheme with primary actors. Stoneridge, however, held that “scheme liability” did not exist under §10(b), reiterated Central Bank’s holding, and emphasized that the “conduct of a secondary actor must satisfy each of the elements or preconditions for liability.”4
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