Supreme Court: defendants may seek contribution in securities rule 10b-5 cases.

The U.S. Supreme Court resolved a split among various federal circuit courts by ruling in an action brought under rule 10b-5, the antifraud provision of the Securities and Exchange Act of 1934, that codefendants can seek contributions from each other (that is, the right of the party required to compensate a victim to a contribution from a codefendant jointly responsible for the injury).

Employers Insurance of Wausau, which insured the directors and officers involved in this matter, paid $13 million to settle a case brought under rule 10b-5. Wausau, as subrogee to the settling parties' rights (that is, one who succeeds to the legal rights acquired by another), sued the attorneys and accountants involved in the stock offering that led to the 10-5 action, alleging the attorneys and accountants had joint responsibilities for the securities law violations.

The Supreme Court, is granting Wausau the right to sue the attorneys and accountants, said there was an implied right of contribution under rule 10b-5. The Court reasoned that if Congress had addressed this question when it enacted the 1934 act, it would have recognized a right to contribution. The Court further reasoned that allowing codefendants to seek contribution from other codefendants merely raised the issue of how to apportion damages, rather than recognizing any new duties under 10b-5. (Musick, Peeler & Garrett v. Employers Insurance of Wausau, U.S. Sup. Ct. no. 92-34)