Defence lawyers have a new reason to feel nervous after a
court ruling last month threatened to expose underwriters to
In a case that has received little media attention but could
have far-reaching effects on the way initial public offerings
(IPOs) are conducted, a New York court ruled that underwriters
could be held to be fiduciaries when carrying out their normal
work. The ruling could lead to new securities suits against
banks already facing a broad and increasing threat of
In early June the New York Court of Appeals denied attempts
to dismiss a case brought against Goldman Sachs concerning its
work as lead underwriter on the 1999 flotation of internet
retailer eToys. The case was brought by a committee of
unsecured creditors on behalf of eToys, which filed for Chapter
11 protection in 2001 and is now known as EBC I.
The committee alleged in...