Scotus: Good News on Stoneridge

Stoneridge v Scientific-Atlanta is one of those battles where both sides really deserve to lose. But I am very glad that it's the plaintiffs who are actually losing this one. For all the lobbying surrounding the case, the central fact are pretty clear: Congress has repeatedly refused to hold companies like Scientific-Atlanta responsible for others' frauds in cases like this. The only reason to find in favor of the plaintiffs, then, is, as Ruth Bader Ginsburn suggested in court, that "such a rigid rule would leave many victims of stock fraud with no recovery".

But I'm far from convinced that someone who loses money in the stock market should, as a matter of principle, always be able to sue someone in an attempt to recover that money – at least if there was some kind of fraud involved. Fraud is a criminal act, and has criminal remedies. Unleashing a tidal wave of class-action suits from people with mutual funds is highly unlikely to benefit anybody except for class-action lawyers. There are risks to any activity, and one of the risks to investing in the stock market is that there will be stock fraud. If there is, you can sue the company which defrauded you – but let's please not start allowing people to sue third parties as well. That is truly a recipe for chaos.