Court Opinion

ID: 8963590
Source: CourtListenerOpinion
Date Created: 2022-11-27 09:53:55.451987+00
Date Added: 2024-06-11T17:10:15.290822
License: Public Domain

On Rehearing
ARNOLD, Circuit Judge,
with whom LAY, Chief Judge, HEANEY and JOHN R. GIBSON, Circuit Judges, join, dissenting.
*56I vote to grant the petition for rehearing en banc.
It seems to me that the notes involved in this case meet all the traditional tests of a security. The statute, of course, expressly includes “notes” in its definition, so one begins at least with a presumption that notes are covered. It remains true that some notes are not “notes” as the statute uses the term — for example, a note I sign to evidence a loan from a friend or a bank. But the notes at issue here are poles apart from such a case of personal or commercial credit. They were sold to large numbers of relatively unsophisticated investors; their purpose is to raise capital which will be put at risk in the insurer’s business; and those who buy them expect to reap a benefit in the form of interest payments. So even if these notes have to meet the traditional test for “investment contracts,” they clearly qualify. Our panel’s conclusion to the contrary appears to commit the Eighth Circuit to a definition of security unique among the federal courts.
The panel’s almost casual rejection of the District Court’s view of Arkansas law also disturbs me. We normally defer to district judges’ interpretations of the law of their own states. My own attitude when hearing appeals on such questions is roughly akin to the posture of appellate judges when reviewing questions of fact. That is, I am inclined to reverse on state-law questions only when the decision below is clearly erroneous. Such a use of a question-of-fact standard is not so strange as it may first appear. Questions of foreign law are traditionally treated as questions of fact. And, while the law of a state is obviously not “foreign” to us in the same way as, say, the law of Afghanistan, a judge of a federal appellate court whose legal upbringing was in Arkansas cannot be expected to have the same instinctive feel for the law of North Dakota as a judge of that State. One can look at all the law books in print and still not have the same degree of reliable judgment on legal questions as a lawyer who has lived and practiced for years in the jurisdiction. There is such a thing as what Dean Pound called “law in action,” as opposed to “law in the books.” Each State has its own distinct legal ethos which informs and qualifies how lawyers and judges understand what is written in the law books. So when we defer to the opinions of district courts on the law of their states, we are not shirking our responsibilities. We are simply using common sense.
Here, the District Court s opinion on the meaning of the Arkansas securities statute seems to me more carefully analyzed than the opinion of our panel. But even if it did not, I would still be inclined to affirm. There is no reported Arkansas state-court opinion that contradicts the District Court’s view, nor is there anything logically deficient about its analysis. The regulatory attitude of the Arkansas Securities Department, and the history of the Arkansas General Assembly’s treatment of the exemption for notes issued by agricultural cooperatives point strongly in the same direction. See Robertson v. White, 635 F.Supp. 851, 856-58 (W.D.Ark.1986) (the opinion of Chief Judge Waters in this case).
One other observation about the panel’s holding on Arkansas law: it binds no one except the parties to this case (by res judi-cata) and the federal courts in this Circuit (by stare decisis). It does not the Arkansas state courts or the Arkansas Securities Department. Our decisions on state law can be accepted by the state courts if they find them persuasive, but they need not be. Stare decisis, as a doctrine of binding precedent, applies only to courts at the same or a lower level in a single hierarchical system. We have no supervisory or appellate jurisdiction over the state courts. So when this question comes before the Arkansas state courts (if it does), they are free to differ from our panel’s conclusion. I hope that they will differ. And if the Arkansas Supreme Court decides the question differently from our panel, this Court will thereafter be bound by that decision. The Supreme Court of Arkansas has the last word on the law of Arkansas.