United States Ninth Circuit

The scope of primary violation liability under section 10(b) of the Securities Exchange Act includes deceptive conduct in furtherance of a "scheme to defraud." To be liable as a primary violator of section 10(b) for participation in a "scheme to defraud," a defendant must have engaged in conduct that had the principal purpose and effect of creating a false appearance of fact in furtherance of the scheme. It is not enough that a transaction in which a defendant was involved had a deceptive purpose and effect; the defendant's own conduct contributing to the transaction or overall scheme must have had a deceptive purpose and effect.

Appellate Information

• Argued 02/06/2006
• Decided 06/30/2006
• Published 06/30/2006

Judges

• GOULD, Circuit Judge., Before BEEZER, T.G. NELSON, and GOULD, Circuit Judges.

Court

• United States Ninth Circuit

Counsel

• For Appellant:
  
• Joseph W. Cotchett (argued), Bruce L. Simon and Nancy L. Fineman, Cotchett, Pitre, Simon & McCarthy, Burlingame, CA, for plaintiff-appellant California State Teachers' Retirement System.


• For Appellees:
  
• Peter T. Barbur (argued), Cravath, Swaine & Moore LLP, New York, NY;  John B. Quinn, Quinn Emanuel Urquhart Oliver & Hedges LLP, Los Angeles, CA, for defendant-appellee Time Warner Inc. Samuel Kadet, Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY;  Jeffrey Speiser, Stern & Kilcullen, Roseland, NJ, for defendants-appellees Cendant Corporation and Richard A. Smith.  Carl S. Kravitz, Zuckerman Spaeder LLP, Washington, DC, for defendant-appellee David Colburn.  J. Christian Word, Latham & Watkins LLP, Washington, DC, for defendant-appellee Eric Keller.   Daniel J. Tyukody, Orrick, Herrington & Sutcliffe LLP, Los Angeles, CA, for defendant-appellee L90, Inc. d/b/a MaxWorldwide, Inc., Michael L. Post, Senior Counsel, Washington, DC, on behalf of the Securities and Exchange Commission as amicus curiae in support of appellant.   Peter H. Mixon, General Counsel, Sacramento, CA;  Keith Johnson, Chief Legal Counsel, Madison, Wisconsin, on behalf of the California Public Employees' Retirement System and the State of Wisconsin Investment Board as amici curiae in support of appellant.  Eric Alan Isaacson, Lerach Coughlin Stoia & Robbins LLP, San Diego, CA, on behalf of the Regents of the University of California as amicus curiae in support of appellant.  Lawrence S. Robbins, Robbins, Russell, Englert, Orseck & Untereiner LLP, Washington, DC, on behalf of the American Institute of Certified Public Accountants as amicus curiae in support of appellees.  David H. Braff, Sullivan & Cromwell LLP, New York, NY, on behalf of the Bond Market Association, et al., as amici curiae in support of appellees.