Washington Law Review


Bruce E. Dick


This note will first examine whether in fact accountants can be held primarily liable for proxy violations. Concluding that they can, the note will scrutinize the court's opinion to determine whether it requires scienter for all primary violators or only for accountants. The court's rationale suggests that the court intended to apply a uniform standard of culpability. This note will then compare the court's reasoning with the reasoning that led courts in two other circuits to choose, at least in some cases, negligence as the standard for primary violators. The comparison will show negligence to be the more appropriate minimum standard under the policies of section 14(a) of the Securities Exchange Act of 1934 and SEC rule 14a-9. Finally, this note concludes that a uniform standard of culpability cannot equitably be applied to the wide range of potential defendants and that perhaps the Adams court reached its holding by implicitly applying a flexible-duty standard. This would justify requiring scienter for accountants, but negligence for other, more central participants in proxy violations. Alternatively, the court's result could be justified on an aiding and abetting theory without finding an accountant primarily liable under the statute.

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