The Supreme Court as museum curator: securities regulation and the Roberts Court.

AuthorChaffee, Eric C.
PositionSymposium: Business in the Roberts Court

CONTENTS INTRODUCTION I. SURVEY OF THE EXISTING CASE LAW A. Unrealized Landmark Opinions B. Tinkering with Core Substantive Issues of Securities Law C. Securities Litigation Procedure D. The Outer Limits of Securities Regulation II. THE ROBERTS COURT AS MUSEUM CURATOR AND ITS IMPACT ON SECURITIES REGULATION A. The Death of the Mother Court and the Lower Court Laboratories Approach B. The Entrenchment of Well-Constructed and III-Constructed Case Law C. The Lack of a Pro-Business Bias CONCLUSION: THE FUTURE OF THE ROBERTS COURT INTRODUCTION

Mosaic theory is a research methodology used in various different contexts based upon piecing together bits of available information to draw conclusions about an entity or a phenomenon. (1) Although the term "mosaic theory" is a relatively recent entrant into the intelligence gathering lexicon, it describes the process that has been used by scholars studying the Supreme Court of the United States throughout the existence of that body. In regard to the Supreme Court, however, analogizing understanding the Court to viewing a mosaic is not a perfect description. While a mosaic is a picture or pattern created by an arrangement of smaller pieces, understanding the Court involves analyzing a rich tapestry of interwoven precedent, judicial theory, history, and individual personalities. One must look at the strands that compose the tapestry, how those strands are interconnected, and the patterns that have emerged to understand the role of the Court in American democracy and American history.

Although the portion of the tapestry known as the "Roberts Court" is not yet complete, important patterns have begun to emerge. This is especially true in the area of securities regulation. As a result, analysis can and should be done.

The number of opinions that have been handed down so far relating to securities law is substantial. Since Chief Justice Roberts began his tenure on September 29, 2005, (2) the Court has authored roughly twenty-one opinions relating to securities regulation. (3) Notably, deciding which cases to include on this list is controversial because one of the cases had certiorari granted before Chief Justice Roberts joined the Court," (4) which creates a question as to which version of the Court to assign it, and two cases focus on issues that are outside the traditional realm of securities regulation. (5) Moreover, two additional cases were dismissed prior to judgment, which requires a decision as to what granting certiorari in those cases means. (6) This Article takes an all-inclusive approach.

Importantly, regardless of how narrow an approach is employed, the number of cases seems to erroneously reflect a deep and pervasive interest by the Court in securities regulation issues. The Roberts Court has taken approximately two securities regulation cases per term, which is twice the number that the Rehnquist Court took. (7) Moreover, the number of cases granted certiorari continues to shrink, which means that securities regulation cases represent an even larger portion of the Court's docket. (8) But the opinions themselves tell a different story with the Court serving in the role of a museum curator maintaining historical relics from bygone eras, doing minor restoration work as needed, limiting access to these relics through statutory interpretation, and occasionally offering an exhibition involving issues at the periphery of securities law. (9) This approach deviates substantially from a judicial body deeply invested in securities law.

A small number of excellent articles have already been authored regarding the Roberts Court and securities regulation. (10) This Article adds to the existing scholarship in three main ways. First, this Article supplements the previous analyses of the Roberts Court because more opinions now exist to be analyzed. (11) Currently, the Roberts Court has authored twenty-one opinions in securities regulation cases, and it granted certiorari in two other cases that were dismissed prior to a decision by the Court. (12) As a result, a new examination is possible and warranted. Second, since the last article on this topic, the Court has handed down Salman v. United States, (13) which represents the Court's first major examination of insider trading regulation in two decades, (14) and the Court's first major examination of tipper-tippee liability in more than three decades. (15) This Article places that opinion in context with the rest of the Roberts Court's securities law opinions. Third, this Article provides new analysis of the Roberts Court's approach to securities regulation, including offering a new analogy for understanding the Court's approach to securities regulation, i.e., as a museum curator. It also examines the death of the lower court laboratories approach in creating and developing securities law and discusses the impact of the Court's current methodology of unflinchingly entrenching existing Supreme Court precedent. (16) Beyond that, this Article also puts to rest any claims that the Roberts Court is pro-business in regard to securities law. (17)

Obviously, this Article can offer only part of the story. At the time of the writing of this Article, Chief Justice John Roberts was sixty-two years old. (18) This means that Chief Justice Roberts tenure is likely to be at least twice the time he has already been on the Court. During that time, because of the ages of the other Justices, a number of Justices are likely to depart and join the Court. This means that the Roberts Court's approach to securities regulation could shift dramatically, especially if a Justice with a background and interest in securities regulation similar to William O. Douglas or Lewis F. Powell is appointed. (19) Chief Justice Roberts, however, has been sitting on the Court for over a decade, and at least some of the story of the Roberts Court and securities regulation can be written.

The remainder of this Article is structured as follows. Part I provides a survey of existing securities regulation case law from the Roberts Court, including the Court's issuing of unrealized landmark opinions, tinkering with core substantive issues of securities regulation, addressing issues relating to securities litigation procedure, and dealing with issues at the outer limits of securities regulation. Based upon this survey, Part II offers a description of the Roberts Court as a museum curator in the area of securities regulation by preserving Supreme Court precedent, doing minor restoration work when necessary, controlling issues of access, and having the occasional special exhibit with issues at the outer limits of securities regulation. This Part will also explore the implications of this analogy, including the death of the lower court laboratories approach in creating and developing securities law, the impact of the Court's current methodology of entrenching existing Supreme Court precedent, and the fact that the Roberts Court should not be referred to as a pro-business court in the area of securities regulation, which is a foundational aspect of business law. Finally, the Conclusion will discuss the future of the Roberts Court and offer brief concluding remarks.

  1. SURVEY OF THE EXISTING CASE LAW

    The question of how to slice and dice the existing opinions from the Roberts Court regarding securities regulation into categories is a difficult one. First, a decision must be made whether to include Dabit, in which certiorari was granted prior to Chief Justice Roberts taking his seat on the Court, because although members of the Roberts Court authored the opinion, members of the Rehnquist Court were the ones who thought the issues involved in that case was worth hearing in the first place. (20) Second, a decision must be made whether to include two cases in which certiorari was granted that were dismissed prior to a decision by the Roberts Court, i.e., IndyMac (21) and UBS. (22) In IndyMac, the Court dismissed the case because a settlement was reached prior to oral arguments, (23) and in UBS, the Court dismissed an appeal pursuant to agreement between the parties under Rule 46.1 of the Rules of the Supreme Court. (24)

    In both instances, the cases have been included in the pool of cases for analysis for this Article. In regard to the case in which certiorari was granted prior to Chief Justice Roberts taking his seat on the Court, although the granting of certiorari occurred by the Rehnquist Court, the opinion is the product of the Roberts Court and reflects the jurisprudence of that Court. In regard to the cases that were dismissed prior to a decision by the Roberts Court, those cases are included in the pool for analysis as well because despite the lack of an opinion in those cases, they evidence the types of issues that are important enough for the Court to grant certiorari, which is becoming an even rarer occurrence. (25)

    The next question is how to divide the pool for purposes of analysis. Numerous ways exist to do this. For example, one could divide the cases into narrow discrete issues to provide a nuanced overview of the securities regulation issues that the Roberts Court has addressed; one could divide the opinions between procedural and substantive issues to understand how the Court deals with such categories of issues; or one could pick a discrete issue, such as securities litigation, to focus the scope of analysis to a limited topic. Notably, all of these articles have already been written. (26) Of course, at some point, each of these articles will almost certainly need to be updated, especially if the Supreme Court continues at its current pace of deciding approximately two new securities law opinions per term. (27) However, that updating is left for another day.

    This Article takes a different approach than previous scholarship by grouping the opinions of the Roberts Court into four broad categories: (1) Unrealized Landmark Opinions, (2) Tinkering with Core...

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