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Yesterday, the US Supreme Court ruled unanimously in favor of Merrill Lynch in a decision that limits the ability of shareholders to bring so-called “holders” class action lawsuits in state court – even if the claim is only that shareholders were induced to hold on to their stocks, not to buy or sell – because such lawsuits were found to be preempted by the Securities Litigation Uniform Standards Act of 1998.

In vacating the decision from the US Court of Appeals for the Second Circuit (and overruling the majority of courts that have addressed this issue), Justice John Paul Stevens’ opinion rejected the argument that SLUSA only preempts lawsuits involving a purchaser or seller by narrowly constructing SLUSA and finding it would give rise to wasteful and duplicative litigation – thus, the phrase “in connection with the purchase or sale” of securities was given a broad reading.

As you might recall, after the enactment of the PSLRA, plaintiffs began to bring more state law securities class actions in state courts – and after SLUSA was passed, plaintiffs commenced the filing of “holders” class actions in state court. These practices should be over now; wonder what will be the next angle sought by the plaintiff’s bar? Lots of blogs will undoubtedly analyze this decision as they love the Supreme Court stuff, like Ideoblog and The 10b-5 Daily.

Here is the court opinion in Merrill Lynch v. Dabit (04-1371) – and we have begun posting law firm memos on this development in our “Securities Litigation” Practice Area.

Nifty Chart: Initial and Continuous Listing Standards of US Trading Markets

They say it couldn’t be done! Many thanks to Neil Kaufman and Chris Seamster of Davidoff Malito & Hutcher for this handy one-page chart that compares initial and continuous listing standards of the US trading markets, including the NYSE, Nasdaq, Amex, OTC Bulletin Board and pink sheets.

It’s amazing that so much information can be boiled down onto one page! I tend to get excited about simple things like this, but I know more than one of you are reading this saying, “What. Ever.” I have posted this chart in a number of our Practice Areas, including “NYSE Guidance,” “Nasdaq Guidance,” “Small Business” and “IPOs.”

PCAOB’s Two Releases on Auditor Process to Address Quality Control Criticisms

Yesterday, the PCAOB issued two releases concerning the implementation of the Sarbanes-Oxley provision that gives registered accounting firms incentive to address quality control criticisms included in PCAOB inspections reports within 12 months after the reports have been issued. Specifically, Section 104(g)(2) of Sarbanes-Oxley provides that “no portions of the inspection report that deal with criticisms of or potential defects in the quality control systems of the firm under inspection shall be made public if those criticisms or defects are addressed by the firm, to the satisfaction of the Board, not later than 12 months after the date of the inspection report.”

The first release details the PCAOB’s process for determining whether a registered accounting firm has addressed quality control criticisms included in an inspection report to the Board’s satisfaction.

The second release describes the efforts undertaken by the Big Four audit firms to address quality control concerns included in the August 2004 reports regarding limited PCAOB inspections. This release includes a general summary of some of the steps taken by the firms to address the PCAOB’s quality control concerns.