Opinion ID: 776749
Heading Depth: 2
Heading Rank: 5

Heading: Choice of Law Redux

Text: 48 We return, then, to the question with which we began: Which law, state or federal, should provide the rule of decision in this case? We concluded in Part IV, above, that three of the plaintiff's alleged injuries, the set of harms arising from the alleged coercion of the rights offering, supports direct claims under Maryland law. The plaintiff is therefore able to bring direct claims under the ICA for such injury unless we determine that application of Maryland's law of shareholder standing would frustrate the specific federal policy objectives underlying the ICA. 49 Our investigation of policy objectives is hampered by the fact that §§ 36(a), 36(b), and 48 of the ICA do not explicitly provide for direct causes of action by private individuals. This makes the presumption that rules will be borrowed from state law to determine questions raised by the plaintiff's ICA claims all the more difficult to overcome. The expectations of private parties that state law will govern their corporate disputes is even higher when the federal statute invoked does not on its face provide notice to the parties of a possibility of a federal private suit and thereby suggest that federal law may be applied. 50 Lacking meaningful indications of congressional policy regarding the plaintiff's specific causes of action, we turn to the general policy statement of the ICA set out in ICA § 1(b), 15 U.S.C. § 80a-1(b). Relevant objectives of the statute listed there include protecting all classes of investment company security holders from the special interests of directors, officers, and particular classes of security holders, and preventing investment companies from failing to protect the preferences and privileges of the holders of their outstanding securities. Id. § 80a-1(b)(3). We conclude as a general matter that Maryland's law of shareholder standing, with its emphasis on honoring the expectations and protecting the interests of both shareholders and corporate creditors, appears to support the policy goal of protecting all classes of security holders. And the potential availability of direct action to redress coercive practices by directors and officers (assuming that these practices breach the directors' and officers' fiduciary duties — a question we do not decide here) appears to protect the preferences of shareholders who do not wish to increase their investments in a closed-end fund. We thus see nothing in the general policies of the ICA that would militate against importing Maryland's rules of shareholder standing for claims brought for alleged violations of the ICA sections cited by the plaintiff. 51 We hold that the plaintiff's alleged injuries associated with coercion support direct claims under both Maryland law and, in this case, §§ 36(a), 36(b), and 48 of the ICA.