Source: cases/15usc78j/us-552-148-stoneridge-v-scientific-atlanta.case
Case source: https://www.neochart.com/catalog/cases/us/volume_552/0148_01/index.html
Reliance by the plaintiff upon the defendant’s deceptive acts is an essential element of the § 10(b) private cause of act
Neither presumption applies here. Respondents had no duty to disclose; and their deceptive acts were not communicated to the public.
In all events we conclude respondents’ deceptive acts, which were not disclosed to the investing public, are too remote to satisfy the requirement of reliance.
If this conclusion were read to suggest there must be a specific oral or written statement before there could be liability under § 10(b) or Rule 10b-5, it would be erroneous. Conduct itself can be deceptive, as respondents concede.
casedsl 1 case /us/552/0148-01 name Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc. cite 552 U.S. 148 (2008) court Supreme Court of the United States date 2008-01-15 url catalog/cases/us/volume_552/0148_01/index.html source ir/caselaw/us_552.jsonl sha1=f7964649ec52053867b3b67da683f46a1f73eac3 chars=57107 law 15usc78j role applied posture private securities class action; supplier defendants dismissed under Rule 12(b)(6); majority opinion result claimant-lost element reliance : not-satisfied [pleaded] party Scientific-Atlanta and Motorola variant secondary-actor/undisclosed-roundtrip-transactions fact @2682..3457 [supports] | Respondents supplied Charter with the digital cable converter (set-top) boxes that Charter furnished to its customers. Charter arranged to overpay respondents $20 for each set-top box it purchased until the end of the year, with the understanding that respondents would return the overpayment by purchasing advertising from Charter. The transactions, it is alleged, had no economic substance; but, because Charter would then record the advertising purchases as revenue and capitalize its purchase of the set top boxes, in violation of generally accepted accounting principles, the transactions would enable Charter to fool its auditor into approving a financial statement showing it met projected revenue and operating cashflow numbers. Respondents agreed to the arrangement. fact @4245..4999 [supports] | To return the additional money from the set top box sales, Scientific-Atlanta and Motorola signed contracts with Charter to purchase advertising time for a price higher than fair value. The new set-top box agreements were backdated to make it appear that they were negotiated a month before the advertising agreements. The backdating was important to convey the impression that the negotiations were unconnected, a point Arthur Andersen considered necessary for separate treatment of the transactions. Charter recorded the advertising payments to inflate revenue and operating cash-flow by approximately $17 million. The inflated number was shown on financial statements filed with the Securities and Exchange Commission (SEC) and reported to the public. fact @5000..5454 [cuts-against] | Respondents had no role in preparing or disseminating Charter’s financial statements. And their own financial statements booked the transactions as a wash, under generally accepted accounting principles. It is alleged respondents knew or were in reckless disregard of Charter’s intention to use the transactions to inflate its revenues and knew the resulting financial statements issued by Charter would be relied upon by research analysts and investors. rule @12196..12317 | Reliance by the plaintiff upon the defendant’s deceptive acts is an essential element of the § 10(b) private cause of act held @13253..13385 | Neither presumption applies here. Respondents had no duty to disclose; and their deceptive acts were not communicated to the public. held @16214..16373 | In all events we conclude respondents’ deceptive acts, which were not disclosed to the investing public, are too remote to satisfy the requirement of reliance. gloss The sham transactions plausibly enabled Charter's misstatement, but investors relied on Charter's statements; supplier acts were neither public nor subject to a disclosure duty. Reliance cannot be inferred merely from foreseeable effects on the issuer's financial report. element scheme : not-reached role rule-announced variant deceptive-conduct/backdated-supply-contracts fact @3458..4244 [supports] | So that Arthur Andersen would not discover the link between Charter’s increased payments for the boxes and the advertising purchases, the companies drafted documents to make it appear the transactions were unrelated and conducted in the ordinary course of business. Following a request from Charter, Scientific-Atlanta sent documents to Charter stating — falsely—that it had increased production costs. It raised the price for set-top boxes for the rest of 2000 by $20 per box. As for Motorola, in a written contract Charter agreed to purchase from Motorola a specific number of set-top boxes and pay liquidated damages of $20 for each unit it did not take. The contract was made with the expectation Charter would fail to purchase all the units and pay Motorola the liquidated damages. rule @11329..11560 | If this conclusion were read to suggest there must be a specific oral or written statement before there could be liability under § 10(b) or Rule 10b-5, it would be erroneous. Conduct itself can be deceptive, as respondents concede. gloss The Court rejects a categorical statements-only restriction, then disposes of the private claim on reliance. It expressly declines to evaluate the transaction-connection requirement. misfit No aiding-and-abetting element is invented. The nonverbal-conduct rule does not eliminate reliance in private suits or resolve SEC liability on this record. misfit The short reliance rule excerpt ends inside the source word action at the chosen slice boundary. It remains exact and frozen; the complete held quotes supply the operative reliance conclusion.