Mayer Brown's Stephen Shapiro will appear before the U.S. Supreme Court on Oct. 9 in a closely watched case that has taken on added significance for his law firm.
He will make arguments on behalf of Motorola Inc. and Scientific-Atlanta Inc., which were sued by Charter Communications Inc. shareholders who allege they helped the cable-television company commit fraud. The plaintiff is Stoneridge Investment Partners, an investment management firm.
At stake is whether third parties, such as bankers, lawyers, vendors and others with deep pockets, can be sued by private investors for contributing to a company's wrongdoing under federal securities laws.
The case has attracted much public interest. More than 30 third parties have filed briefs with the Supreme Court. It also has exposed a rift between the Securities and Exchange Commission, which has sided with investors, and the Bush administration, which will argue for the corporate defendants.
The outcome has consequences for Mayer Brown, after the law firm was named Monday as a defendant in a shareholder suit against Refco Inc., one of the world's biggest commodities brokerage firms, which collapsed in an accounting scandal two years ago.
Mayer Brown was Refco's primary outside law firm, providing a variety of legal services, including regulatory and transactional work. The partner in charge was Joseph Collins, who also was named a defendant.
The complaint alleges that Collins and his fellow attorneys at Mayer Brown allowed Refco to issue false and misleading statements in its initial public offering and about its financial condition. In particular, the suit says Mayer Brown drafted a series of "round-trip loans" that had no apparent business purpose other than disguising Refco's true financial condition.
The scheme, the suit claims, happened between 2000 and 2005 and involved 17 different sets of loans.
In a statement, Mayer Brown said it plans to contest the charges and that it is "confident of a positive resolution."
"We believe that the securities laws do not permit shareholders to bring a claim, in the circumstances alleged here, against an outside adviser where the company allegedly misrepresented its financial position," said the firm.
The suit reprises many of the findings first raised by Refco's court-appointed bankruptcy examiner in a report issued in July. Drawing on more than a million pages of billing records, correspondence and other documents, examiner Joshua Hochberg concluded that Collins and his fellow attorneys at Mayer Brown "knew or should have known" about the "fraudulent" financial manipulation that preceded Refco's abrupt failure, challenging their claims of ignorance.
By adding Mayer Brown and Collins, the shareholder suit has about 30 defendants, including a number of Refco companies, its former executives, underwriters of its stock and its former auditors, Grant Thornton.
The suit, filed in April 2006, seeks class-action status. Bernstein Litowitz Berger & Grossmann and Grant & Eisenhofer are co-lead counsel for the plaintiffs.