The 5th U.S. Circuit Court of Appeals in New Orleans reversed on Monday a 2011 lower-court ruling and cleared the way for state court cases against brokerages, lawyers and others accused of helping Stanford.
U.S. District Judge David Godbey in Dallas had ruled that the federal Securities Litigation Uniform Standards Act, or SLUSA, barred the state cases in Louisiana and Texas because they were related to securities fraud.
But the three-judge appeals court panel said that law was only "tangentially related" to the fraud alleged by the plaintiffs, the sale of bogus certificates of deposit issued by Stanford's Antigua-based Stanford International Bank Ltd.
Among the defendants was SEI Investments Co, which was accused of inducing investors to move retirement funds into the CDs, and the insurance brokerage Willis Group Holdings .
Both were accused of misrepresenting the CDs as good investments and of misrepresenting the soundness and competency of Stanford International Bank. Lawyers for the bank were also accused of aiding and abetting the fraud.
"The heart, crux, and gravamen of their allegedly fraudulent scheme was representing to the (plaintiffs) that the CDs were a 'safe and secure' investment that was preferable to other investments for many reasons," Judge Edward Prado wrote for the 5th Circuit panel.
"That the CDs were marketed with some vague references to Stanford International Bank's portfolio containing instruments that might be SLUSA-covered securities seems tangential," Prado continued.
Gordon Cooney, a lawyer for SEI; and Jonathan Polkes, a lawyer for Willis, did not immediately respond to requests for comment.
Phillip Preis, a lawyer for some of the investors, said the ruling was perhaps the most significant for investors since Stanford's fraud was uncovered in February 2009.
"It will allow us to assert negligence claims," Preis said in an interview. "It's a big deal."
A Houston federal jury found Stanford guilty on March 6 on 13 criminal counts, including fraud, conspiracy and obstructing a U.S. Securities and Exchange Commission investigation.
Stanford, 61, could face more than 200 years in prison at his scheduled June 14 sentencing, or a maximum of about 20 years if he is sentenced to concurrent terms.
The jury also said federal authorities should try to seize$330 million that Stanford stashed in 29 foreign bank accounts. A court-appointed receiver recently had only about $113 million of cash on hand.