Since the downfall of Stanford's financial services empire in 2009, virtually all lawsuits by Stanford victims were dismissed or frozen by a Dallas, Texas, federal judge as a receiver sought to round up assets for a victims' pool.
U.S. District Judge David Godbey also threw out class action lawsuits, saying they were not allowed under the Securities Liltigation Uniform Stanfords Act, which says class-action lawsuits related to securities fraud can't be filed under state law.
Monday, the three Fifth Circuit judges disagreed, saying 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.
But delight with the decision wasn't entirely felt in north Mississippi, where Stanford had an office and scores of victims live.
"I think this is a good decision for the people who invested their money in SIB CDs," said Tupelo attorney Claude Clayton, who represents Stanford victim Walt Walton.
Clayton noted, though, that Walton is not part of a class action lawsuit, which brings multiple people together with similar issues, but seeks legal recourse against his local financial adviser, who recommended he put his money in the CDs.
"This doesn't directly address the issues of the Mississippi cases I'm involved with," Clayton said about the appeals court decision.
He added that he hopes the investors' clamor "is loud and clear" for Godbey to lift his freeze on other lawsuits by individual investors.
Last month, Stanford was convicted on 13 of 14 fraud-related charges for misusing money from investors who bought the CDs from his Caribbean bank.
The appeals court found that while Stanford claimed his bank's investment portfolio was backed by securities like stocks, this claim only had a minor connection to the financier's fraud.
Angela Shaw, who founded the Stanford Victims Coalition, which represents investors, said the class action lawsuits under state law will allow investors to pursue certain civil damages they could not do under federal law.
"The primary source of recovery for the victims is litigation," said Shaw, who along with her husband lost $2 million in Stanford's scheme.
So far, only about $115 million has been recovered for investors by a court-appointed receiver.
Stanford, 61, is set to be sentenced on June 14 and could spend the rest of his life behind bars.
The jury that convicted Stanford also cleared the way for U.S. authorities to go after $330 million in investor funds sitting in his frozen foreign bank accounts.