The Supreme Court in a decision issued earlier this month may have blocked one route for stockholders to challenge corporate fraud, but in doing so, may have “inadvertently left open a far more dangerous path for the plaintiffs’ bar: claims under the Racketeer Influenced and Corrupt Organizations Act, or RICO,” writes Howard A. Fischer for Thomson Reuters Accelus.
Fischer, a senior trial counsel in the New York Regional Office of the Securities and Exchange Commission, analyzes the 5-4 decision in Janus Capital Group, Inc. v. First Derivative Traders, and concludes that the high court majority led by Justice Clarence Thomas may have unwittingly provided “the plaintiffs’ bar with a potential weapon far more powerful than the one it takes away. The Supreme Court appears to have ignored the warning of George Santayana that those who cannot learn from history are doomed to repeat it.”