The Supreme Court said on Monday that it would hear an appeal by Janus Capital Group of a ruling that reinstated a class-action securities fraud lawsuit against the mutual fund company.
The lawsuit, brought on behalf of those who bought Janus stock from mid-2000 through early September 2003, alleged that the prospectuses of several of Janus funds created the misleading impression that the company would adopt measures to curb market timing, when in fact secret arrangements with several hedge funds permitted such transactions, to the detriment of long-term investors.
The lawsuit alleged shares of the stock were purchased at inflated prices during the time period, until the public disclosure of the market timing arrangements.
A federal judge initially dismissed the lawsuit, but a U.S. appeals court ruled it could proceed, holding the plaintiffs had adequately pleaded a claim of liability against the company.
Janus appealed to the Supreme Court, arguing the appeals court had erred. The Obama administration opposed the appeal.
Administration lawyers said the allegations in the complaint were sufficient to withstand a motion to dismiss, that the lawsuit adequately alleged Janus made misrepresentations in the prospectuses and that class members relied on the alleged false statements to their detriment.
The Supreme Court will hear arguments in the case during its upcoming term that begins in October.
(Reporting by James Vicini, Editing by Lisa Von Ahn)