Klein v. Boyd
United States Court of Appeals for the Third Circuit
Fed. Sec. L. Rep. 90,136 (1998)
William Coleman, William Boyd, and others (defendants) hired the law firm Drinker Biddle & Reath (Drinker) (defendant) to assist their acquisition of a securities broker business through Mercer, LP, a limited partnership owned by Coleman; Drinker partner Robert Strouse prepared a disclosure package for prospective investors, including Klein and others (plaintiffs), that omitted Coleman's extensive history of fraud, misrepresentation, and securities violations. After Mercer LP fell into financial distress, the investors sued under section 10(b) and Rule 10b-5 of the Securities Exchange Act and under RICO; the district court granted Drinker summary judgment, and the plaintiffs appealed.
Whether a lawyer who authors a client's fraudulent document may be held primarily liable to a third-party investor under federal securities laws for the material misstatements or omissions contained in the document.