On Feb. 26, 2014, the U.S. Supreme Court decided Chadbourne & Parke v. Troice,1 holding by a 7-2 vote that the Securities Litigation Uniform Standards Act of 1998 (SLUSA) does not preclude state law class actions where the plaintiffs allege that they purchased uncovered securities that the defendants misrepresented were backed by securities listed on a national exchange. The court found that the victims of Allen Stanford’s multibillion dollar Ponzi scheme could pursue state law class action claims against numerous individuals and companies—including attorneys, accountants, brokers and investment advisers—for allegedly aiding and abetting a Ponzi scheme. On April 14, 2014, in one of the first applications of Troice, Judge Thomas P. Griesa ruled that a group of Madoff securities investors who suffered losses in Madoff’s Ponzi scheme were permitted to add state law claims to the previously filed class action complaint in In re: Tremont Securities Law, State Law and Insurance Litigation.2
Griesa’s reversal in Tremont demonstrates the significance of Troice to lawyers and other third-party advisors (who may have increased exposure to secondary liability in securities-related litigation under state law causes of action) and to class action litigants (who now may have more opportunities to pursue state law claims alongside federal securities law claims). This article discusses (i) the implications of Troice for third-party advisors with respect to aiding and abetting claims in class actions and (ii) how law firms can limit increased exposure to third-party liability.
