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Second Circuit Review: Alleging Scheme Liability In the Wake of ‘Lorenzo’
July 27, 2022
Litigation of counsel Martin Flumenbaum and firm Chairman Brad Karp’s latest Second Circuit Review column, “Alleging Scheme Liability In the Wake of ‘Lorenzo,’” appeared in the July 27 issue of the New York Law Journal. The authors discuss the court’s recent decision in SEC v. Rio Tinto plc, in which the panel unanimously held that scheme liability claims in securities litigation may not be based on allegations of misstatements and omissions alone, rejecting the SEC’s view that the Supreme Court’s decision in Lorenzo v. SEC expanded the scope of scheme liability. The decision also preserved two main arguments for companies facing securities lawsuits under §10(b): that plaintiffs must identify the individuals with ultimate authority over the statement to prevail on Rule 10b-5(b) claims, and that private litigants cannot simply plead around the PSLRA’s heightened requirements for Rule 10b-5(b). Litigation associates Sarah Prostko and Taeler Lanser assisted in the preparation of this column.