Securities Law in the Sixties: The Supreme Court, the Second Circuit, and the Triumph of Purpose Over Text

70 Pages Posted: 13 Feb 2018 Last revised: 13 Apr 2018

See all articles by Adam C. Pritchard

Adam C. Pritchard

University of Michigan Law School

Robert B. Thompson

Georgetown University Law Center

Date Written: April 9, 2018

Abstract

This articles analyzes the Supreme Court’s leading securities cases from 1962 to 1972—Capital Gains, J.I. Case v. Borak, Mills v. Electric Auto-Lite Co., Bankers Life, and Affiliated Ute—relying not just on the published opinions, but also the justices’ internal letters, memos, and conference notes. The Sixties Court did not simply apply the text as enacted by Congress, but instead invoked the securities laws’ purposes as a guide to interpretation. The Court became a partner of Congress in shaping the securities laws, rather than a mere agent. The interpretive space opened by the Court’s invocation of purpose allowed a dramatic expansion in the law of securities fraud. Encouraged by the high court’s dynamic statutory interpretation doctrine, the Second Circuit—the “Mother Court” for securities law—developed new causes of action that transformed both public and private enforcement of the securities laws. The insider trading prohibition found a new home in the flexible confines of Rule 10b-5. Implied private rights of action encouraged class actions to flourish. The growth of fiduciary duty in the 1960s created a blueprint for “federal corporation law.” The Supreme Court’s “counter-revolutionary” turn in the 1970s cut back on purposivism and the doctrinal innovations of the Sixties, but the approaches to insider trading and private rights of action survived, remaining pillars of securities regulation today.

Keywords: Insider Trading, Securities Fraud Class Actions, Federal Corporate Law

Suggested Citation

Pritchard, Adam C. and Thompson, Robert B., Securities Law in the Sixties: The Supreme Court, the Second Circuit, and the Triumph of Purpose Over Text (April 9, 2018). Notre Dame Law Review, Forthcoming; U of Michigan Law & Econ Research Paper No. 18-004. Available at SSRN: https://ssrn.com/abstract=3119969 or http://dx.doi.org/10.2139/ssrn.3119969

Adam C. Pritchard (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4048 (Phone)
734-647-7349 (Fax)

Robert B. Thompson

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States
(202) 661-6591 (Phone)

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