Corporate Governance

Stoneridge v. Tellabs and Blog Prognostication

By J. Robert Brown

It's been a bad week for shareholders but a good week for predictions by the Race to the Bottom.  First, we predicted a 5-3 vote affirming the 8th Circuit in Stoneridge. 

Now we go back to Tellabs v. Makor, the case interpreting the strong inference language and written by Justice Ginsburg.  We took the position that she wrote the least harmful opinion that could come out of this Court and that it would do little to change the law (merely providing those already prepared to dismiss additional excuse).  As proof of our position, we predicted that the 7th Circuit on remand, would affirm its decision despite the analysis in Tellabs. According to the post:

• So Tellabs is more remarkable for what it did not do rather than for what it did.  As a practical matter, it will not result in any significant change from what courts are already doing.  The evidence?  The Court sent the case back to the Seventh Circuit to apply the new standard.  On remand, the case will be reassigned to the same panel of judges that decided it the first time.  My prediction?  The new test notwithstanding, the outcome will be the same.

The 7th Circuit came out with its opinion on Thursday.  And the result?  Judge Posner writes:  "We therefore adhere to our decision to reverse the judgment of the district court dismissing the suit."  In other words, what ever impact the gloss given to "strong inference" by Justice Ginsburg, it had no actual impact in the facts of the case that resulted in the test.  Apparently for judicial prognostication, at least in the securities area, this is the Blog to read. 

Full post as published by The Race to the Bottom on January 21, 2008 (boomark / email).