Pfeiffer Thigpen
FitzGibbon & Ziontz LLP

Sep 2 2011

On June 13, 2011, the United States Supreme Court issued its opinion in the case entitled Janus Capital Group, Inc., et al., v. First Derivative Traders, 564 U.S. _____ (2011), 2011 WL 2297762 (U.S.) which held that only the party with “ultimate authority” over an alleged fraudulent statement is able to “make” a statement so as to be held primarily liable under Section 10(b) and Rule 10b-5 for securities fraud: “For purposes of Rule 10b-5, the maker of a statement is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it. . . . One who prepares or publishes a statement on behalf of another is not its maker.” In overturning the Fourth Circuit, the Supreme Court held that Janus Capital Group, Inc. - a mutual fund investment advisor that had issued prospectuses to investors containing alleged fraudulent statements – had not “made” the statements for purposes of 10b-5 liability merely because it participated in the writing and dissemination of the statements in the prospectus.

This case created a bright-line test and will be particularly important in the Ninth Circuit where the prior "substantial participation" test allowed a broader net of liability than in other circuits that had adopted other standards such as the "creator" or required "attribution."

Firm lawyers led by Tom FitzGibbon have already successfully used the Janus Capital opinion to obtain a summary judgment on federal securities fraud claims in a multi-million dollar case pending in the the United States District Court in Nevada.