Court Opinion

ID: 6920600
Source: CourtListenerOpinion
Date Created: 2022-07-23 23:00:04.218626+00
Date Added: 2024-06-11T16:06:47.364807
License: Public Domain

CLARK, Circuit Judge
(dissenting).
The court’s refusal by majority vote to take any steps to abate the confusion resulting from the decision by our senior panel has striking connotations beyond those affecting the central issue on the merits, important as that is. Chief among these added consequences is the precedent — the first time in our history— of refusing the assistance of the Securities and Exchange Commission, here proffered as a result of the need therefor expressed by the writer as a member of the court. This re-enforces the harsh refusal of the original panel majority. Under the peculiar circumstances here present making S.E.C. advice more relevant even than usual, I should have thought that we would have accepted the offer with alacrity, whatever our eventual views as to the merits; and I am chagrined that an individual judge’s “right to know” is thus so severely circumscribed. Some instances where such help has been gladly received, as well as others where its absence is deplored, are noted in Greene v. Dietz, 2 Cir., 247 F.2d 689, 696. Even in the case which is being treated as controlling here, Rattner v. Lehman, 2 Cir., 193 F.2d 564, the court, although rejecting the Commission’s advice in part, nevertheless paid it the compliment of devoting a major part of its discussion to the Commission’s presentation. I submit with deference that the correct approach here was that followed in Greene v. Dietz, supra, 2 Cir., 247 F.2d 689, 697:
“Although neither appellant nor appellee sought a rehearing in this case, the Securities and Exchange Commission timely filed an application with us seeking our permission to file a petition, amicus curiae, for a rehearing. We readily granted such permission. [Emphasis added.] The Commission represents to us that our opinion of June 7, 1957 should be clarified * * *. We are grateful to the Commission for the interest it has shown, and we order that the brief offered by it in support of its petition be filed and made a part of the records in the case.”
In my original dissent I pointed out why S.E.C. advice seemed particularly desirable here. In addition to the expertise which the Commission and its staff must necessarily have acquired over the years in an area particularly committed to its care, there were the special considerations that the Commission has long required reporting by trading partnerships of all .insider short-*798swing profits acquired by them and hence must know the dimensions of the problem and further that the Commission had made changes in its regulations signifying lack of confidence in the Rattner rule, the rationale for which changes surely would be enlightening. Now the reasons presently stated by the Commission for its appearance intensify this need for enlightenment. For it requests granting of its petition for rehearing “so as to permit the Commission to urge that this Court in its decision should overrule its earlier interpretation of Section 16(b) of the Securities Exchange Act of 1934 as enunciated in Rattner v. Lehman, 2 Cir., 193 F.2d 564.” An explanation of its reasons for coming to its present conclusion could hardly fail to be instructive.
My brothers offer no explanation of their decision, and the grounds therefor can only be inferred. But since a decision on the merits is avoided in a situation where the need therefor is great, it is probably a fair inference that procedural barriers were thought to exist. It is believed, however, that actually none such are discoverable. As concerns the S.E.C. it has followed the exact procedure found acceptable in Greene v. Dietz, supra, 2 Cir., 247 F.2d 689. The Commission states that it refrained from seeking to enter earlier because of its conclusion that the case here would turn on issues of fact — a very reasonable deduction, since Rattner had assumed to settle the law. Undoubtedly, too, rejection of its views in the Rattner case obviously suggested caution until it received something approaching an invitation from members of the court. And if we are at all realistic we must recognize that changes in Commission personnel may well have resulted in a new and different policy.
The S.E.C. application is now supported by the plaintiff. Here, too, there seems to be some implication that he has been dilatory. But I do not see how this can be sustained. Notwithstanding the two long holiday week ends immediately after our decision he moved with due promptness, and within the 15 days stated in our Local Rule 25(a), for certification of the case to the Supreme Court. While this may not have been good tactics in view of our customary unwillingness to certify, yet it does show his desire and speedy attempt to secure some form of review. Upon denial of his motion by a divided court and the intervening application by the S.E.C., he promptly filed his motion and affidavit supporting the request of the S.E.C. to be heard in banc. Thus at no time has our decision become final, and it will not become so until the filing of the present order. Obviously there has been no prejudice to anyone by any supposed delay. Moreover, it has been our uniform practice to grant additional time for presentation of petitions for rehearing, since we have preferred to terminate the process of adjudication by decisions on the merits rather than by application of some newly fashioned time barriers. Indeed I can recall no case where we have ever rejected a meritorious petition for rehearing on the ground that it was untimely. The fashioning of procedural rules ad hoc to avoid decision on the merits is always to be deplored. Clark, Code Pleading 71 (2d Ed. 1947).
I am bound to add that I consider all these implications of procedural barriers irrelevant; for even if these suitors could have been considered in default as private claimants, yet we must not overlook the fiduciary character in which they here appear. Both the Commission and the plaintiff are trustees of the public interest; their private interest is either nominal or, in the case of the Commission, nonexistent. At best they do but remind us of our own public responsibility. In such case I doubt if a few days’ delay in the holiday season can properly be seized upon by us as justifying our inaction in the public regard. Consideration on the merits, far from according succor to the laggard, would be but a proper response to a judicial obligation to do justice to all, however incompletely represented.
*799But, whatever the reasons to be assigned for the result, it leaves this important area of the law almost ludicrously uncertain., What now is the present force to be assigned to Rattner? Although it is assumed to compel the present decision, yet quite significantly not a single word in its defense has been uttered by any of the eight judges here engaged. My own criticisms uttered in my dissent have remained unanswered and have now, as is apparent, the support of the S.E.C. But even further, Judge Medina, in writing the main opinion and though he held himself bound by the decision, uttered as strong a criticism of its results as has appeared, in supporting the fundamentally inconsistent ruling that the partner-director must give up something representing his share of insider profits to the corporation. And in this Judge Swan concurred, although agreeing neither on the principle nor on the actual amount of the recovery. It is indeed ironical that so disfavored a precedent1 nevertheless has apparent power to control even to the extent of ruling out proper restrictions or exceptions there at least implied with respect to a director who gives actual investment advice.
The most serious vice of the Rattner decision is the unfair discrimination it builds into an important remedial statute — a discrimination substantially eliminating the great Wall Street trading firms from the statute’s operation. So great is the unfairness of the result that, notwithstanding its remedial nature, the statute, it would appear, should not stand unless its judicially discovered defects can be corrected. But before that conclusion is finally reached let us hope that the S.E.C. may discover some tribunal prepared and willing to listen to its arguments.
SMITH, Circuit Judge, joins in the dissent of CLARK, Circuit Judge.

. It has remained nncited elsewhere except for one purely incidental reference in Lehman v. Civil Aeronautics Board, 93 U.S.App.D.C. 81, 209 F.2d 289, 294, note 9, certiorari denied 347 U.S. 916, 74 S.Ct. 513, 98 L.Ed. 1072.