Source: https://www.law.cornell.edu/supct/html/06-43.ZD.html
Timestamp: 2019-02-16 11:21:38
Document Index: 575489429

Matched Legal Cases: ['§10', '§10', '§10', '§10', '§10', '§ 10', '§ 6', '§2', '§10', '§104']

The Court’s conclusion that no violation of §10(b) giving rise to a private right of action has been alleged in this case rests on two faulty premises: (1) the Court’s overly broad reading of Central Bank, and (2) the view that reliance requires a kind of super-causation—a view contrary to both the Securities and Exchange Commission’s (SEC) position in a recent Ninth Circuit case2 and our holding in Basic Inc. v. Levinson, 485 U. S. 224 (1988) . These two points merit separate discussion.
Finally, the Court relies on the course of action Congress adopted after our decision in Central Bank to argue that siding with petitioner on reliance would run contrary to congressional intent. Senate hearings on Central Bank were held within one month of our decision.5 Less than one year later, Senators Dodd and Domenici introduced S. 240, which became the Private Securities Litigation Reform Act of 1995 (PSLRA), 109 Stat. 737.6 Congress stopped short of undoing Central Bank entirely, instead adopting a compromise which restored the authority of the SEC to enforce aiding and abetting liability.7 A private right of action based on aiding and abetting violations of §10(b) was not, however, included in the PSLRA,8 despite support from Senator Dodd and members of the Senate Subcommittee on Securities.9 This compromise surely provides no support for extending Central Bank in order to immunize an undefined class of actual violators of §10(b) from liability in private litigation. Indeed, as Members of Congress—including those who rejected restoring a private cause of action against aiders and abettors—made clear, private litigation under §10(b) continues to play a vital role in protecting the integrity of our securities markets.10 That Congress chose not to restore the aiding and abetting liability removed by Central Bank does not mean that Congress wanted to exempt from liability the broader range of conduct that today’s opinion excludes.
While I would reverse for the reasons stated above, I must also comment on the importance of the private cause of action that Congress implicitly authorized when it enacted the Securities Exchange Act of 1934. A theme that underlies the Court’s analysis is its mistaken hostility towards the §10(b) private cause of action.11 Ante, at 13. The Court’s current view of implied causes of action is that they are merely a “relic” of our prior “heady days.” Correctional Services Corp. v. Malesko, 534 U. S. 61, 75 (2001) (Scalia, J., concurring). Those “heady days” persisted for two hundred years.
In a law-changing opinion written by Justice Brennan in 1975, the Court decided to modify its approach to private causes of action. Cort v. Ash, 422 U. S. 66 (constraining courts to use a strict four-factor test to determine whether Congress intended a private cause of action). A few years later, in Cannon v. University of Chicago, 441 U. S. 677 (1979) , we adhered to the strict approach mandated by Cort v. Ash in 1975, but made it clear that “our evaluation of congressional action in 1972 must take into account its contemporary legal context.” 441 U. S., at 698–699. That context persuaded the majority that Congress had intended the courts to authorize a private remedy for members of the protected class.
“During the late 1940’s, the 1950’s, the 1960’s and the early 1970’s there was widespread, indeed almost general, recognition of implied causes of action for damages under many provisions of the Securities Exchange Act, including not only the antifraud provisions, §§ 10 and 15(c)(1), see Kardon v. National Gypsum Co., 69 F.Supp. 512, 513–14 (E.D.Pa.1946); Fischman v. Raytheon Mfg. Co., 188 F.2d 783, 787 (2 Cir. 1951) (Frank, J.); Fratt v. Robinson, 203 F.2d 627, 631–33 (9 Cir. 1953), but many others. These included the provision, § 6(a)(1), requiring securities exchanges to enforce compliance with the Act and any rule or regulation made thereunder, see Baird v. Franklin, 141 F.2d 238, 239, 240, 244–45 (2 Cir.), cert. denied, 323 U.S. 737 … (1944), and provisions governing the solicitation of proxies, see J. I. Case Co. v. Borak, 377 U.S. 426 … (1964)… . Writing in 1961, Professor Loss remarked with respect to violations of the antifraud provisions that with one exception ‘not a single judge has expressed himself to the contrary.’ 3 Securities Regulation 1763–64. See also Bromberg & Lowenfels, supra, §2.2 (462) (describing 1946–1974 as the ‘expansion era’ in implied causes of action under the securities laws). When damage actions for violation of §10(b) and Rule 10b–5 reached the Supreme Court, the existence of an implied cause of action was not deemed worthy of extended discussion. Superintendent of Insurance v. Bankers Life & Casualty Co., 404 U.S. 6 … (1971).” Leist, 638 F. 2d, at 296–297 (footnote omitted).
8 PSLRA, §104, 109 Stat. 757; see also S. Rep., at 19 (“The Committee believes that amending the 1934 Act to provide explicitly for private aiding and abetting liability actions under Section 10(b) would be contrary to S. 240’s goal of reducing meritless securities litigation”).