Just how thrilled are corporate lawyers over the Supreme Court's decision yesterday to rein in shareholder class actions, declaring that investors cannot sue third-party businesses for their participation in a "scheme" with a public company to inflate its stock price?

Well, consider this: Skadden, Arps, Slate, Meagher & Flom sent out a memo to clients yesterday morning--at lightning speed in lawyer time--trumpeting the high court's 5-3 decision in Stoneridge Investment Partners v. Scientific-Atlanta.

"Today's ruling is a significant victory for the business community," says Skadden's client alert. "Had the Court sanctioned "scheme" liability, it would have opened the door to lawsuits targeted at secondary corporate actors merely because they engaged in business transactions with issues who allegedly accounted for transactions fraudulently on their books. As a result of the Court's decision, however, such scenarios will not be allowed to develop."

Skadden partners Joseph H. Flom, a legendary deal lawyer of the 1980s whose mergers and acquisitions practice resulted in the law firm's juggernaut growth, and Kenneth J. Bialkin, who is one of Sandy Weill's most trusted legal advisors, filed one of the many amicus briefs that flooded into the Supreme Court. The brief was co-signed by Richard J. Beattie of New York's Simpson Thacher & Bartlett, counsel to buyout king Henry Kravis.

Not to be outdone, Flom's rival in the 1980s dealmaking craze, Martin A. Lipton and his firm, Wachtell Lipton Rosen & Katz, also weighed in on the Stoneridge case late yesterday afternoon. Wachtell Lipton's missives to its clients are known as an art form in the corporate world. The firm calls the decision "important but not surprising," and but adds an ominous prediction, at least for the investors, for these cases going forward: "Stoneridge reflects an emerging jurisprudence that emphasizes public enforcement of the securities laws and limits opportunities for 'private attorney general' suits designed to obtain settlements disproportionate to the merits and potentially inimical to broader public interests."

In other words: Hurrah!!!

Word from lawyers who are studying the opinion, considered the most important business case on the Supreme Court's docket this term, is that Justice Anthony M. Kennedy, author of the majority opinion in Stoneridge, took a page, quite literally, from an amicus brief filed by a number of law professors and former commissioners of the Securities and Exchange Commission.

Among the sea of amici, this brief is one that relies heavily on the scholarship of Joseph A. Grundfest, a professor at Stanford Law School, former S.E.C. commissioner and consultant to corporate America. In August, Grundfest published a paper called "Scheme Liability: A Question for Congress, not the Court."

And in fact, that is just what Kennedy wrote: "The decision to extend the cause of action is for Congress, not for us," according to the majority opinion. And, at least in Kennedy's view, Congress has already asked and answered the question of whether third parties should be liable.

And he ought to know. When Congress passed a 1995 law called the Private Securities Litigation Reform Act, it was just a year after the Supremes had issued a ruling in a case known as Central Bank, declaring there was no "aiding and abetting" liability in class actions for third parties such as accountants and lawyers --- a 1994 case that turned back the clocks on more than a decade of judicial rulings holding these third parties liable.

To many, among them Kennedy (also the author of the Central Bank ruling), "scheme" liability is just aiding and abetting under another name. This time around, Kennedy listed a litany of changes made by the P.S.L.R.A., and then noted that "it appropriate to assume" that Congress had its chance, but chose to leave Central Bank as it was.

Robert Giuffra Jr. a partner at Sullivan & Cromwell who was a primary negotiator of the P.S.L.R.A. as counsel to the Senate Banking Committee, agrees: "During the debate over the P.S.L.R.A., Congress expressly considered and refused to grant the plaintiffs' bar the weapon to sue banks and other third parties as aiders and abettors of their clients' misconduct. The Supreme Court's decision in Stoneridge properly recognizes that Congress did not want to give the plaintiffs' bar the enormous leverage of an open ended theory of liability to extract huge settlements from the 'deep pockets' of those who deal with public companies."

But not everyone agrees. Sen. Chrisopher Dodd (D-Conn.) and erstwhile candidate for president, a co-sponsor of the P.S.L.R.A., issued this statement about the Stoneridge decision: "Today's decision goes past that common-sense law. Instead of protecting innocent businesses, it would protect wrongdoers from the consequences of their actions."

Precisely what Justice John Paul Stevens, who dissented from Central Bank in 1994, says in and authored today's dissent in Stoneridge, lamenting the high court's "continuing campaign" to render these class actions "toothless."

But there's a presidential election under way, and a trial lawyer among the contenders. Anyone want to venture a guess as to whether this issue comes to Congress yet again?

by Karen Donovan