The Supreme Court/The Supreme Court.iso/pc/ascii/1990/90_727/90_727.zc2

Text File | 1992-03-31 | 7.5 KB | 139 lines

SUPREME COURT OF THE UNITED STATES
--------
No. 90-727
--------
ROBERT G. HOLMES, Jr., PETITIONER v. SECURI-
TIES INVESTOR PROTECTION CORPORATION et al.
on writ of certiorari to the united states court of
appeals for the ninth circuit
[March 24, 1992]

  Justice Scalia, concurring in the judgment.
  I agree with Justice O'Connor that in deciding this case
we ought to reach rather than avoid the question on which
we granted certiorari.  I also agree with her on the answer
to that question: that the purchaser-seller rule does not
apply in civil RICO cases alleging as predicate acts viola-
tions of Securities and Exchange Commission Rule 10b-5,
17 CFR 240.10b-5 (1991).  My reasons for that conclusion,
however, are somewhat different from hers.
  The ultimate question here is statutory standing: whether
the so-called nexus (mandatory legalese for ``connection'')
between the harm of which this plaintiff complains and the
defendant's so-called predicate acts is of the sort that will
support an action under civil RICO.  See Sedima S. P. R. L.
v. Imrex Co., Inc., 473 U.S. 479, 497 (1985).  One of the
usual elements of statutory standing is proximate causality.
It is required in RICO not so much because RICO has
language similar to that of the Clayton Act, which in turn
has language similar to that of the Sherman Act, which, by
the time the Clayton Act had been passed, had been
interpreted to include a proximate-cause requirement; but
rather, I think, because it has always been the practice of
common-law courts (and probably of all courts, under all
legal systems) to require as a condition of recovery, unless
the legislature specifically prescribes otherwise, that the
injury have been proximately caused by the offending
conduct.  Life is too short to pursue every human act to its
most remote consequences; ``for want of a nail, a kingdom
was lost'' is a commentary on fate, not the statement of a
major cause of action against a blacksmith.  See Associated
General Contractors of Cal., Inc. v. Carpenters, 459 U.S.
519, 536 (1983).
  Yet another element of statutory standing is compliance
with what I shall call the ``zone of interests'' test, which
seeks to determine whether, apart from the directness of
the injury, the plaintiff is within the class of persons sought
to be benefitted by the provision at issue.  Judicial infer-
ence of a zone-of-interests requirement, like judicial
inference of a proximate-cause requirement, is a back-
ground practice against which Congress legislates.  See
Block v. Community Nutrition Institute, 467 U.S. 340,
345-348 (1984).  Sometimes considerable limitations upon
the zone of interests are set forth explicitly in the statute
itself-but rarely, if ever, are those limitations so complete
that they are deemed to preclude the judicial inference of
others.  If, for example, a securities fraud statute specifical-
ly conferred a cause of action upon ``all purchasers, sellers,
or owners of stock injured by securities fraud,'' I doubt
whether a stockholder who suffered a heart attack upon
reading a false earnings report could recover his medical
expenses.  So also here.  The phrase ``any person injured in
his business or property by reason of'' the unlawful activi-
ties makes clear that the zone of interests does not extend
beyond those injured in that respect-but does not necessar-
ily mean that it includes all those injured in that respect.
Just as the phrase does not exclude normal judicial infer-
ence of proximate cause, so also it does not exclude normal
judicial inference of zone of interests.
  It seems to me obvious that the proximate-cause test and
the zone-of-interests test that will be applied to the various
causes of action created by 18 U. S. C. 1964 are not
uniform, but vary according to the nature of the criminal
offenses upon which those causes of action are based.  The
degree of proximate causality required to recover damages
caused by predicate acts of sports bribery, for example, see
18 U. S. C. 224, will be quite different from the degree
required for damages caused by predicate acts of transport-
ing stolen property, see 18 U. S. C. 2314-2315.  And so
also with the applicable zone-of-interests test: It will vary
with the underlying violation.  (Where the predicate acts
consist of different criminal offenses, presumably the
plaintiff would have to be within the degree of proximate
causality and within the zone of interests as to all of them.)
  It also seems to me obvious that unless some reason for
making a distinction exists, the background zone-of-inter-
ests test applied to one cause of action for harm caused by
violation of a particular criminal provision should be the
same as the test applied to another cause of action for harm
caused by violation of the same provision.  It is principally
in this respect that I differ from Justice O'Connor's
analysis, ante, at 4 (opinion concurring in part and concur-
ring in judgment).  If, for example, one statute gives
persons injured by a particular criminal violation a cause of
action for damages, and another statute gives them a cause
of action for equitable relief, the persons coming within the
zone of interests of those two statutes would be identical.
Hence the relevance to this case of our decision in Blue
Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975).
The predicate acts of securities fraud alleged here are
violations of Rule 10b-5; and we held in Blue Chip Stamps
that the zone of interests for civil damages attributable to
violation of that provision does not include persons who are
not purchasers or sellers.  As I have described above, just
as RICO's statutory phrase ``injured in his business or
property by reason of'' does not extend the rule of proximate
causation otherwise applied to congressionally created
causes of action, so also it should not extend the otherwise
applicable rule of zone of interests.
  What prevents that proposition from being determinative
here, however, is the fact that Blue Chip Stamps did not
involve application of the background zone-of-interests rule
to a congressionally created Rule 10b-5 action, but rather
specification of the contours of a Rule 10b-5 action ``im-
plied'' (i.e., created) by the Court itself-a practice we have
since happily abandoned, see, e.g., Touche Ross & Co. v.
Redington, 442 U.S. 560, 568-571, 575-576 (1979).  The
policies that we identified in Blue Chip Stamps, supra, as
supporting the purchaser-seller limitation (namely, the
difficulty of assessing the truth of others' claims, see id., at
743-747, and the high threat of ``strike'' or nuisance suits
in securities litigation, see id., at 740-741) are perhaps
among the factors properly taken into account in determin-
ing the zone of interests covered by a statute, but they are
surely not alone enough to restrict standing to purchasers
or sellers under a text that contains no hint of such a
limitation.  I think, in other words, that the limitation we
approved in Blue Chip Stamps was essentially a legislative
judgment rather than an interpretive one.  Cf. Franklin v.
Gwinnett County Public Schools, 503 U.S. ___, slip op., at
2 (1992) (Scalia, J., concurring in judgment).  It goes
beyond the customary leeway that the zone-of-interests test
leaves to courts in the construction of statutory texts.
  In my view, therefore, the Court of Appeals correctly
rejected the assertion that SIPC had no standing because
it was not a purchaser or seller of the securities in question.
A proximate-cause requirement also applied, however, and
I agree with the Court that that was not met.  For these
reasons, I concur in the judgment.