Corporate Governance

Justice Stevens and the Federal Securities Laws

By J. Robert Brown

Articles have begun to speculate that Justice Stevens is ready to announce his resignation from the Supreme Court.  The speculation is based his hiring of a single clerk, rather than the usual four.  Retired Justices apparently get one clerk.

Justice Stevens has been on the Court for 33 years.  As such, he has been involved in all of the critical securities cases decided in recent years.  Justice Stevens has been a steady, often impassioned, supporter of shareholder and investor rights.  He wrote the majority opinion in Zandford, overturning a Fourth Circuit decision attempting to restrict fraud actions through a narrow definition of the "in connection with" requirement.  But his strongest voice was often in dissent in some of the worst investor protection decisions during the period.  

He dissented in Central Bank, disagreeing with the elimination of aiding and abetting liability and again in Stoneridge, the case that arbitrarily restricted the reach of Rule 10b-5 to vendors and other third parties.  He dissented in Lampf, the case that imposed a federal limitations period on private actions under Rule 10b-5 and chose an abismally short one year, three year period. 

While in dissent, he may have the last laugh.  He was largely vindicated in Lampf with the decision by Congress in SOX to adopt a longer period of limitations.  He may also be vindicated in Central Bank, with legislative proposals recently introduced to reinstate secondary liability.  

In any event, if he steps down, investors and shareholders will lose a true advocate.  Hopefully the Administration will find someone of comparable views. 

Full post as published by The Race to the Bottom on September 07, 2009 (boomark / email).