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Supreme Court backs Merrill in class action test

Posted on: Tuesday, 21 March 2006, 11:03 CST

WASHINGTON (Reuters) - The U.S. Supreme Court on Tuesday ruled unanimously in favor of Wall Street investment bank Merrill Lynch in a decision to limit shareholders' rights to bring certain kinds of securities class actions.

Finding that 1998's Securities Litigation Uniform Standards Act (SLUSA) does cover certain kinds of lawsuits, the court ruled in Merrill's favor, said Skadden Arps Slate Meagher & Flom, attorneys for the investment bank, in a statement.

The ruling "is of great significance to all publicly traded companies and financial services firms as securities class action plaintiffs will no longer have the ability to bring so-called 'holders' class action suits," Skadden said.

"Holders" suits are brought by shareholders alleging that they were misled by being convinced not to sell stock they already owned, or not to buy shares they did not already own.

Merrill argued that these actions should be limited by SLUSA, a law that sought to stem a shift of securities class actions to state from federal courts. The court agreed.

Source: REUTERS

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