The Supreme Court/The Supreme Court.iso/pc/ascii/1992/92_34/92_34.zd

Text File | 1993-05-31 | 14.5 KB | 283 lines

SUPREME COURT OF THE UNITED STATES
--------
No. 92-34
--------
MUSICK, PEELER & GARRETT, et al., PETI-
TIONERS v. EMPLOYERS INSURANCE OF
WAUSAU et al.
on writ of certiorari to the united states court
of appeals for the ninth circuit
[June 1, 1993]

  Justice Thomas, with whom Justice Blackmun and
Justice O'Connor join, dissenting.
  In recognizing a private right to contribution under
10(b) of the Securities Exchange Act of 1934 and
Securities and Exchange Commission Rule 10b-5, the
Court unfortunately nourishes -a judicial oak which has
grown from little more than a legislative acorn.-  Blue
Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 737
(1975).  I respectfully dissent from the Court's decision to
cultivate this new branch of Rule 10b-5 law.

                            I
  I agree with the Court's description of its mission as an
-attempt to infer how the 1934 Congress would have
addressed the issue had the 10b-5 action been included
as an express provision in the 1934 Act.-  Ante, at 7-8.
However, I do disagree with the Court's chosen method
for pursuing this difficult quest.  The words of 10(b) and
Rule 10b-5 scarcely -suggest that either Congress in 1934
or the Securities and Exchange Commission in 1942
foreordained- the existence of a private 10b-5 action.
Blue Chip Stamps, 421 U. S., at 737.  Despite our con-
ceded inability -to divine from the language of 10(b) the
express `intent of Congress,'- ibid., we acquiesced in the
lower courts' consensus that an implied right of action
existed under 10(b) and Rule 10b-5.  Superintendent of
Ins. of New York v. Bankers Life & Casualty Co., 404
U. S. 6, 13, n. 9 (1971); Affiliated Ute Citizens of Utah v.
United States, 406 U. S. 128, 150-154 (1972).  See Kardon
v. National Gypsum Co., 69 F. Supp. 512 (ED Pa. 1946).
Such acquiescence was -entirely consistent- with J. I. Case
Co. v. Borak, 377 U. S. 426 (1964), which may have
suggested a relatively permissive approach to the recogni-
tion of implied rights of action.  Blue Chip Stamps,
supra, at 730.  Although we later -decline[d] to read
[Borak] so broadly that virtually every provision of the
securities Acts gives rise to an implied private cause of
action,- Touche Ross & Co. v. Redington, 442 U. S. 560,
577 (1979), we never repudiated the 10b-5 action.
  We again have no cause to reconsider whether the
10b-5 action should have been recognized at all.  In
summarizing its rationale, the Court states that: -Having
made no attempt to define the precise contours of the
private cause of action under 10(b), Congress had no
occasion to address how to limit, compute, or allocate
liability arising from it.-  Ante, at 8-9.  Though this
statement is an adequate description of how we came to
infer the private right of action, it is not an adequate
defense of the Court's reasoning.  Unlike the majority, I
do not assume that courts should accord different treat-
ment to implied rights of action whose recognition may
have been influenced by Borak.  How a particular private
cause of action may have emerged should not weaken our
vigilance in the subsequent interpretation and application
of that action.  Our inquiries into statutory text, congres-
sional intent, and legislative purpose remain intact.  We
have consistently declined to recognize an implied private
cause of action -under the antifraud provisions of the
Securities Exchange Act . . . where it is `unnecessary to
ensure the fulfillment of Congress' purposes' in adopting
the Act.-  Santa Fe Industries, Inc. v. Green, 430 U. S.
462, 477 (1977) (quoting Piper v. Chris-Craft Industries,
Inc., 430 U. S. 1, 41 (1977)).  Accordingly, the 10b-5
action must be -judicially delimited one way or another
unless and until Congress addresses the question.-  Blue
Chip Stamps, supra, at 749.  In the absence of any
compelling reason to allow contribution in private 10b-5
suits, we should seek to keep -the breadth- of the 10b-5
action from -grow[ing] beyond the scope congressionally
intended.-  Virginia Bankshares, Inc. v. Sandberg, 501
U. S. ___, ___ (1991) (slip op., at 17).
  The Court's abandonment of this restrained approach
to implied remedies stems from its mistaken assumption
that a right to contribution is a mere -elemen[t] or
aspec[t]- of Rule 10b-5's private liability apparatus.  Ante,
at 8.  Unlike a statute of limitations, a reliance require-
ment, or a defense to liability, however, contribution
requires a wholly separate cause of action.  This case does
not require us to define the elements of a 10b-5 claim or
to clarify some other essential aspect of this liability
scheme.  Rather, we are asked to determine whether a
10b-5 defendant enjoys a distinct right to recover from a
joint tortfeasor.
  The recent decision in which we established a limita-
tions period for 10b-5 actions, Lampf, Pleva, Lipkind,
Prupis & Petigrow v. Gilbertson, 501 U. S. ___ (1991),
illustrates the difference that I find decisive.  A limita-
tions period is almost indispensable to a scheme of civil
liability; even when federal law prescribes no express
statute of limitations, we will not ordinarily assume that
Congress intended no time limit.  DelCostello v. Teamsters,
462 U. S. 151, 158 (1983).  Rather, -we `borrow' the most
suitable statute or other rule of timeliness from some
other source.-  Ibid.  Contribution, by contrast, was
generally unavailable at common law.  See Union Stock
Yards Co. of Omaha v. Chicago, B. & Q. R. Co., 196 U. S.
217, 224 (1905).  Those jurisdictions that have seen fit to
provide contribution have usually done so by resort to
legislation.  Northwest Airlines, Inc. v. Transport Workers,
451 U. S. 77, 87-88, and n. 17 (1981); Texas Industries,
Inc. v. Radcliff Materials, Inc., 451 U. S. 630, 634 (1981).
A court that recognizes an implied right to contribution
must endorse a remedy contrary to the common law and
perhaps even the legislative policy of the relevant jurisdic-
tion.
  Lampf, Pleva and like cases thus offer scant guidance
when the question is not whether a right to contribution
is an appropriate incident of the 10b-5 action, but
whether congressional intent or federal common law
justifies an expansion of the class entitled to enforce
10(b) and Rule 10b-5 through private lawsuits.  In
conducting this inquiry, we cannot safely rely on Congress'
design of distinct statutory provisions.  Indeed, inappropri-
ate extension of 10b-5 liability would -nullify the effective-
ness of the carefully drawn . . . express actions- that
Congress has provided through other sections of the 1934
Act.  Ernst & Ernst v. Hochfelder, 425 U. S. 185, 210
(1976).  However proper it may be to examine related
portions of the Act when fleshing out details of the core
10b-5 action, see Lampf, Pleva, supra, at ___ (slip op., at
8); id., at ___ (slip op., at 2) (Scalia, J., concurring in
part and concurring in judgment), the Court errs in
placing dispositive weight on the existence of contribution
rights under 9 and 18 of the Act.  See ante, at 9-11.
  The proper analysis flows from our well-established
approach to implied causes of action in general and to
implied rights of contribution in particular.  When decid-
ing whether a statute confers a private right of action, we
ask whether Congress-either expressly or by implication-intended to create such a remedy.  Touche Ross, 442
U. S., at 575; Transamerica Mortgage Advisors, Inc. v.
Lewis, 444 U. S. 11, 15-16, 24 (1979).  Where Congress
did not expressly create a contribution remedy, we may
infer that Congress nevertheless intended by clear implica-
tion to confer a right to contribution.  Texas Industries,
supra, at 638; Northwest Airlines, supra, at 90.  Through
the exercise of their power to craft federal common law,
federal courts may also fashion a right to contribution.
Texas Industries, supra, at 638; Northwest Airlines, supra,
at 90.
  Application of this familiar analytical framework com-
pels me to conclude that there is no right to contribution
under 10(b) and Rule 10b-5.  With respect to fashioning
a common-law right to contribution, the Court readily and
correctly concludes that the right to contribution recog-
nized in Cooper Stevedoring Co. v. Fritz Kopke, Inc., 417
U. S. 106 (1974), has no bearing on the availability of
contribution under the elaborate federal statutory scheme
governing purchases and sales of securities.  Ante, at 3-4.
See also Texas Industries, supra, at 640-646; Northwest
Airlines, supra, at 95-98.  This case therefore depends
exclusively on the interpretation of 10(b) and Rule 10b-5.

                           II
  -`The starting point in every case involving construction
of a statute is the language itself.'-  Ernst & Ernst,
supra, at 197 (quoting Blue Chip Stamps, 421 U. S., at
756 (Powell, J., concurring)).  Nothing in the words of
10(b) and Rule 10b-5 suggests that joint tortfeasors
should enjoy a right to contribution.  Section 10(b) makes
it
-unlawful for any person . . . . .
      -To use or employ, in connection with the purchase
or sale of any security registered on a national securi-
ties exchange or any security not so registered, any
manipulative or deceptive device or contrivance in
contravention of such rules and regulations as the
Commission may prescribe as necessary or appropriate
in the public interest for the protection of investors.-
15 U. S. C. 78j(b).
Rule 10b-5 recasts this proscription in similar terms:
      -It shall be unlawful for any person . . .
      -(a) To employ any device, scheme, or artifice to
defraud,
      -(b) To make any untrue statement of a material
fact or to omit to state a material fact necessary in
order to make the statements made, in the light of
the circumstances under which they were made, not
misleading, or
      -(c) To engage in any act, practice, or course of
business which operates or would operate as a fraud
or deceit upon any person,
      -in connection with the purchase or sale of any
security.-  17 CFR 240.10b-5 (1992).
  The sweeping words of 10(b) and Rule 10b-5 ban
manipulation, deception, or fraud in the purchase or sale
of securities.  -[A]ny person- who engages in such activity
merits condemnation under the statute and the rule.  Far
from being entitled to seek the protection of 10(b) and
Rule 10b-5, joint tortfeasors must confess that these
provisions were -expressly directed . . . to regulate their
conduct for the benefit- of others.  Northwest Airlines,
supra, at 92.  Neither enactment suggests that Congress
or the SEC intended to -softe[n] the blow on joint wrong-
doers- by permitting contribution.  Texas Industries, supra,
at 639.  Quite the contrary: As private actors -whose
activities Congress [and the SEC] intended to regulate for
the protection and benefit of an entirely distinct class,-
joint tortfeasors -can scarcely lay claim to the status of
`beneficiary'- under 10(b) and Rule 10b-5.  Piper v.
Chris-Craft Industries, 430 U. S., at 37.
  The -underlying . . . structure of the [1934 Act's]
statutory scheme- also negates the existence of a 10b-5
contribution action.  Northwest Airlines, 451 U. S., at 91.
The Court notes the presence of express contribution
rights under 9 and 18 of the Act, but it misconstrues
the significance of these provisions.  See ante, at 9-11.
The ability to legislate express contribution remedies
under the 1934 Act applies with no less force to 10(b)
than to 9 and 18.  -When Congress wished to provide
a [contribution] remedy . . . it had little trouble in doing
so expressly.-  Blue Chip Stamps, supra, at 734.  Nor has
Congress lacked opportunities to modify the 10b-5 action.
Within the last five years, Congress has both preserved
and altered the 10b-5 action through amendments to the
1934 Act.  Compare Insider Trading and Securities Fraud
Enforcement Act of 1988, Pub. L. 100-704, 5, 102 Stat.
4681 (stating that nothing in a new provision prohibiting
insider trading -shall be construed to limit or condition
. . . the availability of any cause of action implied from
a provision of this title-), with 15 U. S. C. 78aa-1 (Supp.
III) (altering the retroactive effect of the 10b-5 limitations
period that we adopted in Lampf, Pleva, Lipkind, Prupis
& Petigrow v. Gilbertson, 501 U. S. ___ (1991)).  See
generally ante, at 6-7.  Had Congress intended 10b-5
defendants to sue joint tortfeasors, a single enactment
could have given effect to this policy.  Congress' failure
to act does not justify further judicial elaboration of the
10b-5 action.
  Moreover, contribution is inconsistent with our estab-
lished views of the 10b-5 action.  In Blue Chip Stamps
v. Manor Drug Stores, supra, we held that only actual
purchasers and sellers of securities are entitled to press
private 10b-5 suits.  We based this conclusion largely on
the language of 10(b) and Rule 10b-5, which by their
terms govern only -the purchase or sale of any security.-
See 421 U. S., at 731-732; id., at 756-757 (Powell, J.,
concurring).  The merits of a contribution action in this
case would turn on whether -the attorneys and accoun-
tants involved in [a] public offering- bore -joint responsi-
bility for . . . securities violations.-  Ante, at 2.  Even if
a court were to acknowledge respondents' status as the
subrogees of securities sellers, the contribution action
would be at least one level removed from the underlying
exchange of securities.  Blue Chip Stamps' requirement of
actual purchase or sale would virtually evaporate in a
contribution dispute embroiling only separate groups of
professionals who had merely advised or facilitated a
tainted securities transaction.  The rule adopted today
thus undermines not only the discernable intent of Con-
gress and the SEC, but also our own elaboration of this
regulatory scheme.  Such are the risks that inhere in the
-hazardous enterprise- of recognizing a private right of
action despite congressional silence.  Touche Ross, 442
U. S., at 571.
                           III
  Once again we have been invited to join a -vigorous
debate over the advantages and disadvantages of contribu-
tion and various contribution schemes.-  Texas Industries,
451 U. S., at 638.  Consistent with our prior practice, I
would adhere to the task of resolving the -dispositive
threshold question: whether courts have the power to
create . . . a cause of action absent legislation.-  Ibid.
Whether the answer to that question is -most unfair- to
those who litigate private 10b-5 actions, ante, at 6, is
irrelevant.  Courts should not treat legislative and admin-
istrative silence as a tacit license to accomplish what
Congress and the SEC are unable or unwilling to do.  In
their current condition, 10(b) and Rule 10b-5 afford no
right to contribution.  Congress has been and remains free
to alter this state of affairs.  Accordingly, I respectfully
dissent.