[ by Melanie Gretchen ]

The Supreme Court will hear appeals by law firms that represented Allen Stanford.  New York-based firms Chadbourne & Parke and Proskauer Rose, and Thomas Sjoblom, a lawyer who worked at both, face lawsuits by victims of Stanford's $7 billion Ponzi scheme trying to recoup losses.

The Lawsuits. Victims allege that:

• Sjoblom along with the two firms he worked for, Chadbourne and Proskauer, obstructed a SEC probe into Stanford.

• insurance brokerage Willis Group Holdings Plc played an alleged role in Stanford's fraud.

In their defense, the firms argue that the federal Securities Litigation Uniform Standards Act, or SLUSA, precluded state-law class actions involving alleged misrepresentations made "in connection with" the purchase or sale of covered securities.  Stanford's conviction centered on the sale of certificates of deposit by his Antigua-based Stanford International Bank, and a lot of litigation focused on whether these qualified as securities under the applicable laws.  In October 2011, Dallas federal judge David Godbey ruled that SLUSA preempted the state law class-action litigation, noting that many investors sold securities to invest in the CDs, which the 5th U.S. Circuit Court of Appeals overturned.

In April, when the Supreme Justices may hear the appeal, the court will likely hear the arguments from the defendants that lower courts are split on the issue, and that similar lawsuits over Bernard Madoff's Ponzi scheme have also been barred by SLUSA..  A decision may be reached by the end of June.  In the meantime, Stanford continues to serve a 110-year prison sentence following his sentence last June.

The cases: Chadbourne & Parke LLP v. Troice et al, U.S. Supreme Court. No. 12-79; Willis of Colorado Inc et al v. Troice et al, U.S. Supreme Court, No. 12-86; and Proskauer Rose LLP v. Troice et al, U.S. Supreme Court, No. 12-88.

For further details, go to [Reuters, 1/18/13].