ACC Amicus Brief in Refco Appeal Opposes Liability Theory’s Threat to Transactional/Securities Lawyers

ACC filed an amicus brief on September 16th in the Second Circuit urging the court to reject the Securities and Exchange Commission’s (SEC) arguments in Pacific Management Co. v. Mayer Brown LLP, No. 09-1619-cv (2d Cir.). ACC argues the SEC’s amicus, filed August 6, 2009, espouses a theory of lawyer liability inconsistent with legal precedent and interpretation of lawyer liability for the provision of legal advice to clients subject to SEC regulation.

The SEC is seeking to prosecute an attorney and his firm on a heightened standard of “creator liability” – distinct from the current bright line rule espoused by the U.S. Supreme Court. Adopting the SEC’s proposed standard would drastically expand liability for lawyers who provide legal services to issuers.

A ruling in favor of the SEC’s new standard could impact ACC members in several ways. Expanded liability for transactional and securities lawyers will interfere with the ability of issuers to receive advice on difficult issues involving securities disclosures: the specter of immense liability on inside and outside lawyers for merely giving advice to others who use it to their own ends may chill lawyers’ willingness or ability to provide counsel on the client’s most troubling issues – exactly when we most want them to receive expert and candid counsel. It will also increase unnecessarily the cost of required legal services for issuers by draining the market of many lawyers who will be unwilling to bear the financial risk of giving disclosure advice, further burdening the shareholders the securities laws are supposed to protect.

In light of the Second Circuit’s pivotal role in defining securities litigation standards, it is crucial that they support clearly articulated Supreme Court rulings regarding the accepted and appropriate standard of lawyer liability.

Lucian T. Pera and Brian S. Faughnan of Adams and Reese LLP worked with ACC to prepare the brief. For more information, see below:

ACC Amicus Brief in Pacific v. Mayer, 9/16/09
SEC Amicus Brief in Pacific v. Mayer, 8/6/09
Amici Curiae Law Firms’ Brief, filed 9/11/09
Court Opinion and Order, In re REFCO, Inc. Securities Litigation, 3-17-09