The Supreme Court Helps Out the Economy

Today the Supreme Court, in one of the most important securities law rulings in years, Stoneridge Investment Partners v. Scientific-Atlanta, decided that fraud claims are not allowed against third parties who did not directly mislead investors but were business partners with those who did. Investors, the Court said in a narrow 5-3 ruling (Justice Breyer took no part in the case), may only sue those who issued statements or otherwise took direct action that the investors had relied upon in buying or selling stock – whether that involved public statements, omissions of key facts, manipulative trading, or other deceptive conduct. One impact of the decision is likely to be the end of a $40 billion lawsuit against financial institutions growing out of the Enron scandal.

Although this was the result expected by Court-watches, the split decision – along the usual “liberal/conservative” lines, with Justice Kennedy writing the opinion as he has tended to in such situations – was a bit of a surprise. The opposite result would have been disastrous for Wall Street, with massive ramifications on the economy as a whole. It would also have greatly expanded the court-created private right of action that is not expressly spelled out in the relevant securities laws. Ultimately, the Court’s ruling in Stoneridge wisely prevents an implied cause of action against the whole marketplace in which those who do directly mislead investors do business.

Happy to be an Urbane Libertarian

I’m surprised none of my colleagues have commented on this, but one of the interesting throw-away lines in Jamie Kirchik’s Ron Paul expose in The New Republic is his calling certain Ron Paul supporters as being “nothing like the urbane libertarians who staff the Cato Institute or the libertines at Reason magazine.” I can’t speak for my fellow Cato-ites — and will let my friends at Reason comment on their moniker — but I for one will take “urbane” any day of the week and thrice on Sunday.

A Capital Waste of Time

Yesterday the Supreme Court heard argument in Baze v. Rees, otherwise known as the “lethal injection case.” Contrary to popular perception—and the wishes of certain activist groups—Baze considers neither the constitutionality of lethal injection as a method of execution nor the validity of the death penalty itself. Instead, the issue is whether the particular three-chemical formula used by most states that employ lethal injection causes undue pain and suffering such that the method violates the Eighth Amendment’s proscription of “cruel and unusual punishment.” The Court’s decision—likely to be 5-4 with Justice Kennedy the swing vote as always—may turn on what weight the justices place on the availability of other “ drug cocktails” that purportedly accomplish the same result with less chance for “undue pain and suffering.” But that critical point raises two further (non-legal) questions: 1) Whether the case is about little more than delaying executions that will take place regardless of this particular ruling; and 2) Why haven’t all the relevant states simply adopted the “better” chemical protocols and rendered this case moot? Ultimately, this high profile case is a waste of judicial resources.

(Cross-posted at the Cato blog.)