Page:Amicus brief - Stoneridge v Scientific-Atlanta - Chamber of Commerce of the United States of America.pdf/15

6 B. Scheme Liability Is Unworkable And Uncertain. Central Bank held that liability under § 10(b) is “‘an area that demands certainty and predictability.’” 511 U.S. at 188 (quoting Pinter v. Dahl, 486 U.S. 622, 652 (1988)). “Scheme” liability, however, would create a vague and unprincipled standard of private civil liability easily manipulated by plaintiffs’ counsel with the benefit of hindsight. Every case of “scheme” liability would turn on post-hoc allegations of scienter, here called “purpose.” As Central Bank held, the uncertainty created when a claim can be based entirely on alleged scienter drives up the costs of numerous legitimate transactions, and eliminates some altogether. See 511 U.S. at 188-89. Courts that have embraced “scheme” liability have inevitably allowed claims based on transactions that may well be legitimate. See, e.g., Parmalat, 376 F. Supp. 2d at 504 n.160 (deceptive act allegation sustained even though bank merely may have accepted “valid receivables”); In re Parmalat Secs. Litig., 414 F. Supp. 2d 428, 435 n.31 (S.D.N.Y. 2006) (deceptive act allegation sustained even though bank legitimately may have been exposed to “significant risk”). “Scheme” liability thus fosters judicial “decisions ‘made on an ad hoc basis, offering little predictive value.’” Central Bank, 511 U.S. at 188 (quoting Pinter, 486 U.S. at 652). The goals of the securities laws are ill served when large settlements are paid because of uncertainty. Rather, businesses need clear and understandable rules to follow. See Pinter, 486 U.S. at 654 n.29 (rejecting liability for “those who are only tangentially involved with” a securities transaction, because if “the test produces unpredictable results, it risks over-deterring” lawful activities). “Scheme” liability is the antithesis of certainty. Among other things, a counterparty has no ability to audit or dictate accounting decisions made by the issuer’s management and auditors. Moreover, business transactions are often subject to complex, changing, or