Pacific Management Company LLC, et al. v. Mayer Brown LLP, et al.

Case Updates

The Second Circuit ruled that a corporation’s outside counsel can’t be held liable for false statements in a private damages action unless the statements are directly attributed to the outside counsel.

NCLC urged the Second Circuit to reject the SEC’s latest attempt to expand ‘primary liability’ for fraudulent financial statements to secondary actors who neither make fraudulent statements, nor have fraudulent statements attributed to them. In this case, a class of plaintiffs alleged that the defendant’s lawyers were liable for the company’s allegedly fraudulent financial statements because, among other things, the law firm had drafted portions of the documents, and because some of the documents identified the firm as counsel to the defendant. In its amicus brief, NCLC argued that the SEC’s so-called “creator liability” is a radical departure from existing precedent, which limits primary liability for secondary actors to very narrow, bright line circumstances. NCLC warned that the fear of litigation under the SEC’s new, vague standard will discourage attorneys, accountants, investment bankers and others from doing business with publicly-held companies.