3rd Circ. Upholds Dismissal Of BDO Investor Action

Law360, New York (August 16, 2010, 7:42 PM EDT) -- A federal appeals court has rejected the “fraud-created-the-market” theory and upheld the dismissal of a class action against BDO Seidman LLP, which gave a clean audit to a subprime lender that went bankrupt and shorted its investors.

The adoption of the fraud-created-the-market theory would have allowed the plaintiffs to recover when they have refused to look out for themselves or even read a disclosure statement, the U.S. Court of Appeals for the Third Circuit said in an opinion issued Monday.

The legal theory — which holds...
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