WASHINGTON - The US Supreme Court put new limits on shareholder suits against a company's banks and business partners in a ruling that may thwart efforts to recoup billions of dollars lost in frauds at Enron Corp. and HealthSouth Corp.
The justices, voting 5 to 3, threw out a lawsuit by Charter Communications Inc. investors against two of its suppliers, Motorola Inc. and Scientific-Atlanta Inc. The court said the shareholders didn't show they relied on the alleged deception by the suppliers in making investment decisions.
The ruling is a triumph for business groups in what they called their highest priority in the court's 2007-08 term. Trade groups representing banks, accounting firms, and law firms took an especially keen interest, saying their members might present tempting targets for shareholder lawyers.
The ruling will bolster efforts by Merrill Lynch & Co. and other banks to block a lawsuit by Enron investors and also by UBS AG to defeat claims by HealthSouth shareholders and bondholders.
Justice Stephen Breyer didn't participate in the case. He owns stock in Cisco Systems Inc., which is now Scientific-Atlanta's parent company.
The decision reinforces a 1994 Supreme Court ruling that federal securities law bars suits for "aiding and abetting" another company's wrongdoing. Congress changed the law in 1995 to permit aiding-and-abetting suits by the Securities and Exchange Commission, but not by private shareholders.
