Private Right Of Action Research Articles

Revisiting the Government as Plaintiff

This is a symposium essay dedicated to the late Richard Nagareda and written in response to Adam S. Zimmerman's piece, The Corrective Justice State.As Professor Zimmerman recognizes, the debate over governments acting as plaintiffs and “regulating by deal” has shifted from initial questions over whether litigation produces the best public policy and whether executive officials are acting within the scope of their authority to how government actors should pursue and allocate settlements. Yet, as this first wave of controversy suggests, the slate upon which executive officials currently write is neither clean nor uncontroversial. Instead, this new debate is playing out in an unsettled landscape where those first-order questions about legitimacy remain unresolved.When layered atop the existing controversy over the intermingling of government functions, executive officials’ relatively new allocative role may put their actions even further at odds with their traditional regulatory and proprietary functions, particularly when the action yielding the compensation is a public substitute for a private right of action. What principles should guide officials in this new role: traditional tort law, social welfare, or political equality principles such as one person one vote? More specifically, should executive officials look to tort law precepts to govern the allocation and retain concepts such as economic loss and the collateral source rule, or employ a governmental aid aspect, which would suggest a principal of equality that would not vary based on one’s income but would consider collateral sources of compensation?Zimmerman suggests that officials have attempted to justify both their regulatory and allocative decisions with ill-suited corrective justice principles that translate poorly from the private to the public sphere. Despite reservations about whether regulation through litigation results in the best policies or offers democratic checks, he seems more willing to accept executive officials’ increased litigation role in the wake of Congressional failings and the difficulty of certifying a private class action. He thus tailors his reform proposals to target the government’s allocative function, suggesting ways to improve legitimacy and transparency in distributing recoveries, whatever the guiding principle might be. Still, certain concerns and questions linger. First, Zimmerman narrows his focus to the second generation question of allocation, even though he raises and dismisses first-generation concerns over whether executive officials are properly acting within the scope of their authority and whether the regulatory solutions they generate through litigation are legitimate and optimal. Shoring up back-end allocation procedures, however, does not alleviate first-generation legitimacy questions or regulatory concerns. Second, Zimmerman opts not to iron out overarching systemic problems like legislative stalemates or mounting difficulty in certifying class actions, preferring instead (or perhaps more realistically) to work within the circumstances that prompt executive action. Yet, truly legitimizing process and adhering to corrective justice principles would require resolving systemic concerns about who should litigate and who should regulate. Finally, given concerns that judges already “rubber stamp” class-action settlements and that parties tend to find innovative ways to gerrymander votes and stakeholder input in areas like bankruptcy, one might question the effectiveness of Zimmerman’s proposals for enhancing due process when allocating state recovery to affected citizens.

Supreme Court Hears Whether Medicaid Recipients and Physician Providers May Invoke the Supremacy Clause to Sue California for Reducing Reimbursement Rates Without Adhering to Medicaid's Statutory Procedures – Douglas v. Independent Living Center of Southern California

Supreme Court Hears Whether Medicaid Recipients and Physician Providers May Invoke Supremacy Clause Sue California for Reducing Reimbursement Rates Without Adhering Medicaid's Statutory Procedures - Douglas v. Independent Living Center of Southern California1 - On October 3, 2011, Supreme Court heard consolidated appeal by current Director of California's Department of Health Care Services (Director), defendantappellant in three Ninth Circuit cases.2 The appeal focuses on whether individuals have cause of action under Supremacy Clause enjoin California from implementing Medicaid rate reduction, which does not comply with Federal Medicaid Act's procedures. The named plaintiff, Independent Living Center of Southern California (Independent Living), is joined by a group of pharmacies, health care providers, senior citizen's groups, and beneficiaries of California's Medicaid program, Medicai.3 The plaintiffs in two other consolidated cases are Santa Rosa Memorial Hospital and California Pharmacists Association, which are joined by number of other professional associations.4 Independent Living and its co-plaintiffs seek enjoin state from implementing legislation that would reduce Medicaid reimbursement rate.5 The legislation at issue in Douglas is California's Assembly Bill Five (AB 5), which California Assembly passed on February 16, 2008.6 AB 5 reduced fee-forservice payments physicians, dentists, pharmacies, adult health care centers, clinics, health systems, and [non-contract acute care hospitals] ... by ten per cent.7 Independent Living argued that ten percent rate reduction violates section 1396a(a)(30)(A) of Medicaid Act and is thus invalid under Supremacy Clause.8 Section (3O)(A) requires that state Medicaid plan such methods and procedures ... assure that payments are consistent with efficiency, economy, and quality of care ... so that care and services are available under plan at least extent that [they] are available general population in geographic area.9 The Director contended that only Congress can create private right of action enforce section 30(A) and that Supremacy Clause does not create one by itself.10 The Ninth Circuit applied standard it established in Orthopaedic Hospital v. Belshe, which requires Director rely on responsible cost studies, its own or others', that provide reliable data as basis for its rate setting in order comply with section 30(A). The Ninth Circuit held in Independent Living, case being appealed as Douglas, that Director violated section 30(A) by failing to provide any evidence that Department or legislature studied impact of ten percent rate reduction . . . prior enacting AB 5, and by failing demonstrate that Department considered reliable cost studies.12 Setting substantive violation of section 30(A) aside, Supreme Court will decide on whether private actors have right of action under Supremacy Clause enforce section 30(A).13 In Orthopaedic Hospital, Ninth Circuit ruled that section 30(A) allowed for private right of action under 42 U.S.C. § 1983. 14 This ruling followed Wilder v. Virginia Hospital Association, in which Supreme Court held that Congress did not intend for an administrative procedure replace private right of action under section 1983 for similar section of Medicaid Act known as Boren Amendment.15 In response that decision, Congress repealed Boren Amendment in 1997.16 In Independent Living, however, Ninth Circuit clarified that the repeal of Boren Amendment, 'like its enactment, modified § 13(A) alone; it effected no change § 30(A),' and therefore did not affect Ninth Circuit's prior ruling on section 30(A) in Orthopaedic Hospital.17 The Ninth Circuit also held that purpose underlying section 30(A), as described in Orthopaedic Hospital, remains same regardless of how plaintiff chooses enforce it. …

Improving the Culture of Ethical Behavior in the Financial Sector: Time to Expressly Provide for Private Enforcement Against Aiders and Abettors of Securities Fraud

Financial markets do not function well when fraud is pervasive. It has been well documented that financial fraud has increased following changes in securities law that occurred in the 1990’s. Also around September of 2009, the investigations into the SEC examinations of Bernard Madoff Investment Securities, LLC were completed and released to the public. The simple facts reveal an alarming level of incompetence and lack of financial literacy on the part of the guardians of the integrity of our financial markets. I suggest two important tools for addressing these problems. One is to supplement enforcement of anti-fraud rules with more private attorney generals by expressly creating a private right of action for aiding and abetting violations of securities laws. This will foster a stronger culture of integrity and ethical conduct in the auditing profession. An additional tool is to increase financial literacy in our law schools which supply the regulators of our markets.

The Aftermath of Morrison v. National Australia Bank and Elliott Associates v. Porsche

This article evaluates the ambiguities and shortcomings of the U.S. Supreme Court decision in Morrison with a particular emphasis on the implications of the recent Porsche decision in the Southern District of New York. We conclude that the ambiguities in Morrison and the implications of interpreting Morrison for persons and companies in European jurisdictions and elsewhere in the world make it necessary for the U.S. Congress to further clarify the extraterritorial reach of the implied right of action under the Securities Exchange Act of 1934.We also conclude that the U.S. Congress should clarify its intent in Section 929P(b) of the Dodd-Frank Act of 2010 to give extraterritorial enforcement authority to the U.S. Securities and Exchange Commission (SEC) and U.S. Department of Justice. An SEC study of private rights of action is also required by the Dodd-Frank Act, but regardless of the outcome of this study, Congress should decline to reinstate private rights of action in “foreign-cubed” cases. Restraining and clarifying the U.S. approach to extraterritoriality could help provide certainty to international securities markets and avoid a downturn in international economic cooperation.

Potential Liability for Mortgage Lenders and Servicers Under HAMP and State Consumer Protection Laws During the Mortgage Modification Process

During the most recent financial crisis, the Obama Administration took what appeared to be a promising initiative to slow down the increasing number of foreclosures occurring throughout the country. The Home Affordable Modification Program (HAMP), which was intended to be a win-win for creditors and debtors, would allow creditors to prevent greater losses associated with a foreclosed loan and allow debtors to keep their home. However, after several years of mediocre success, federal courts have begun to place liability on creditors for their perceived failure to save more homes from foreclosure. Although HAMP itself does not contain a private right of action, federal judges have been quick to use other legal doctrines, such as state consumer-protection and contract law, to hold creditors liable for issues arising during the mortgagemodification process. This Essay attempts to outline the various ways in which courts impose this liability, and offers some suggestions for creditors who wish to avoid liability for their perceived shortcomings.

Remarks by Lucinda Low

I would like to speak about the public international law claims and remedies that have been invoked in this case, in particular the second claim filed by Chevron and Texaco under the U.S.-Ecuador Bilateral Investment Treaty (BIT), and the now withdrawn request for precautionary measures filed by the Lago Agrio plaintiffs against Ecuador before the Inter-American Commission on Human Rights (IACHR), and their interaction with the domestic law claims in the case. I am not personally involved in the case. My law firm represents Chevron in other contexts, but I am not speaking on Chevron's behalf or on my firm's behalf, but in my personal capacity, based on extensive legal experience with the extractive industries. Before doing so, however, I want to focus on some of the factual aspects of the case that previous speakers have not highlighted. The theme of this Annual Meeting is complexity, and one of the dimensions of this case that is important to the issue of legal responsibility is factual complexity. In reviewing the voluminous history of this dispute, three aspects struck me as having received insufficient attention: (1) The empty chair at the table. The concession at issue in this case dates back to 1964. It is thus a very old concession, likely differing in significant respects from contracts or concessions for resource extraction that would be given today. During the entire time that Texaco, through its Ecuadorian subsidiary Texaco Petroleum Corporation (referred to herein for convenience as Texaco), was involved in Ecuador, it held a minority interest in a consortium that held the concession. From 1976, the concession was majority-owned by the state of Ecuador through its state-owned enterprise (SOE) PetroEcuador. Although Texaco was operator of the concession from 1974 to the time of its departure from Ecuador in 1990, decisions regarding the activities of the consortium would have been taken or approved by the consortium as a whole. Moreover, after Texaco left Ecuador in 1990, PetroEcuador took over as operator of the project and has since held 100% ownership. PetroEcuador has operated the project for more than two decades now. PetroEcuador is reported to have caused hundreds of spills during its tenure as operator. Yet the plaintiffs have targeted only the foreign investor, not the SOE. The judgment of the Ecuadorian courts makes no effort to determine or allocate responsibility, either among consortium members during the period Texaco was involved, or during the period after Texaco departed Ecuador and PetroEcuador was the sole owner and operator. (2) Remediation. After Texaco exited Ecuador in 1990, while Aguinda was still pending in the United States, agreements were reached between Texaco, the Ecuadorian government, and PetroEcuador allocating responsibilities for remedial work in the project area among them. It appears Texaco performed the work it contractually undertook to do, and was formally released by the state and PetroEcuador in 1998 (although Ecuador in 2008 sought to criminally impeach the lawyers for the company who signed certifications regarding the completion of remedial work which triggered the release). Texaco also sought and obtained releases from several municipalities in the project area. I have looked at these releases; they do not appear to cover anything but claims of the parties thereto; nor is there any right of indemnity. With 20/20 hindsight regarding what has since transpired (including the adoption of the legislation described below), Texaco might today draft the release somewhat differently than it did in 1995, but it probably thought at the time it had protected itself fairly well. (3) Environmental standards. It also appears that the basis of the Lago Agrio claim is legislation that was adopted in 1999, years after Texaco exited the country, and after it was released from liability by the state, creating for the first time a private right of action for environmental damage. …

The challenges of private antitrust enforcement in transition economies

PurposeThe purpose of this paper is to examine the practical and legal challenges and barriers to the development of a private action in antitrust controls and to project those onto a consideration of the development of such rights of action through a case study of Brazil.Design/methodology/approachThe paper provides a critical review of both the theoretical and practical barriers to the development of private rights of action, drawing upon the history of development in both the USA and in Europe and the regular considerations of policy and law making, through debate at the Organisation for Economic Co‐operation and Development. This comparative and historical analysis is projected into models of design and delivery for consideration by law makers.FindingsDespite the different legal traditions and policy considerations of the different jurisdictions, the fundamental design of a common action pan‐jurisdictions and outwith conflict of law principles might be possible. The paper proposes a design framework to facilitate and achieve this. The case‐study of Brazil presents an interesting and recent context, and illustration, of this process.Practical implicationsThe paper provides an historical and comparative account of the development of private rights actions in this area and provides, to the law maker, a framework and set of legal principles and practical enforcement and design guidelines. This framework and its guidelines should assist those countries seeking to introduce such rights of action in the policy area of antitrust control.Originality/valueThe historical and comparative approach draws together in one paper a contemporary global position in this area of law development.

The Fiduciary Study: A Triumph of Substance Over Form?

In the months preceding the enactment of the Dodd‐Frank Wall Street Reform and Consumer Protection Act of 2010, public interest groups and financial planners lobbied Congress to impose a fiduciary duty on broker-dealers that provide investment advice. Congress deflected this issue to the Securities and Exchange Commission, however. The Act requires the Commission to conduct a six-month study of the regulation of investment advisers and broker-dealers and grants it rulemaking authority to act on the study’s findings. Although the issue of broker-dealers’ fiduciary duties has long been framed as a problem of different standards of conduct applying to advisers and broker-dealers with respect to their investment advisory activities, this essay argues that this should not be the guiding principle for the SEC’s study. Rather, the focus of the study should be the efficacy of principles‐based regulation as to broker-dealers’ investment advisory activities. Furthermore, the Commission should consider the broker-dealer fiduciary duty in the context of other traditional models of legal analysis, including: public versus private rights of action, allocation of regulatory oversight authority, comparative dispute resolution mechanisms, federalism, procedural rules, and separation of powers.

Strengthening the Foreign Corrupt Practices Act Through a Private Right of Action

By prohibiting corrupt payments in business transactions, the Foreign Corrupt Practices Act recognizes the need to curb corruption and aims to promote global transparency and to maintain fair markets. The FCPA was weakly enforced for much of its history, but recently enforcement by the Department of Justice and the Securities Exchange Committee has accelerated exponentially. Nonetheless, justice has been slow and unfair to those damaged by violations. This paper conveys the need for a private right of action (PRA), where plaintiffs would themselves seek compensation for FCPA related damages. Ultimately, the paper argues that an effectively established PRA would dramatically increase international global compliance, aligning global sentiments and efforts against corruption.

Resolution of NTBs in Bilateral Trade Agreements – Lessons from the U.S.-Korea Free Trade Agreement and a Model for Market Access in the Twenty-First Century

The incredible success of the World Trade Organization (WTO) and bilateral Free Trade Agreements in reducing tariffs has shifted the battle for market access in the twenty-first century. Countries that seek to protect their markets now must resort to non-tariff barriers (NTBs). Unfortunately for exporters, NTBs are elusive and it is difficult to prove the illegality of a measure within the confines of the standard dispute settlement system. This article draws upon lessons from the U.S.-Korea FTA (KORUS) and the current political climate and concludes that the United States must develop a new framework to address NTBs to trade within bilateral trade agreements. It is proposed that an NTB Resolution Mechanism be included within U.S. bilateral trade agreements. The NTB Resolution Mechanism should build on proposals at the WTO that require that NTBs be examined within 60 days and focus on the trade restrictiveness—and not the legality—of the measure. However, the Congressional Proposal to Open Korea’s Automotive Market makes it clear that the NTB Resolution Mechanism must have teeth to assure exporters that trade barriers will be addressed. One option is to include the Korea trade agreement’s “snap-back” provision within the NTB Resolution Mechanism. Next, the NTB Resolution Mechanism should allow for a private right of action. Exporters are concerned that the U.S. government may not take up their cause over discrete NTBs in otherwise complicated bilateral relationships. A private right of action would guarantee that all companies with market access problems are heard. Finally, a continuous monitoring platform should be created that documents NTBs. The platform would exist within U.S. bilateral trade agreements and would be built upon the principles of current structures that document trading difficulties. The platform would provide a formal channel to raise NTBs and ratchet up pressure to remove the barriers. The platform would also provide a channel to build evidence prior to engaging the NTB Resolution Mechanism. Market access is the issue that drives corporate support for liberalization of international trade. The United States must build structures within its trade agreements that can adequately address market access inhibitors like NTBs. Without these structures, agreements like KORUS will not be ratified by a Congress that is increasingly skeptical of liberalized trade, and the United States will fall further behind in global trade agreements.

Resolution of Non-Tariff Barriers in Bilateral Trade Agreements: Lessons from the U.S. - Korea Free Trade Agreement and a Model for Market Access in the Twenty-First Century

The incredible success of the World Trade Organization and bilateral Free Trade Agreements in reducing tariffs has shifted the battle for market access in the twenty-first century. Countries that seek to protect their markets now must resort to non-tariff barriers. Unfortunately for exporters, non-tariff barriers are elusive and it is difficult to prove the illegality of a measure within the confines of the standard dispute settlement system. Additionally, the current dispute settlement system is litigious and lengthy. This article draws upon lessons from the U.S. - Korea Free Trade Agreement and the current political climate and concludes that the United States must develop a new framework to address non-tariff barriers to trade within bilateral trade agreements. It is proposed that an NTB Resolution Mechanism be included within U.S. bilateral trade agreements. The NTB Resolution Mechanism should build on proposals at the World Trade Organization that require that NTBs be examined within 60 days and focus on the trade restrictiveness - and not the legality - of the measure. But the Congressional Proposal to Open Korea’s Automotive Market makes it clear that the NTB Resolution Mechanism must have teeth to assure exporters that trade barriers will be addressed. One option is to include the Korea trade agreement’s “snap-back” provision within the NTB Resolution Mechanism. Next, the NTB Resolution Mechanism should allow for a private right of action. Exporters are concerned that the United States government may not take up their cause over discrete non-tariff barriers in otherwise complicated bilateral relationships. A private right of action would guarantee that all companies with market access problems are heard.Finally, a continuous monitoring platform should be created that documents non-tariff barriers. The platform would exist within U.S. bilateral trade agreements and would be built upon the principles of three structures: the National Trade Estimate Report on Foreign Trade Barriers of the Office of the U.S. Trade Representative; the Automotive Working Group of the U.S. - Korea Free Trade Agreement; and the Codes of Liberalisation of Capital Movements of the Organisation for Economic Co-Operation and Development. The platform would provide a formal channel to raise non-tariff barriers and ratchet-up pressure to remove the barriers. The platform would also provide a channel to build evidence prior to engaging the NTB Resolution Mechanism.Market access is the issue that drives corporate support for liberalization of international trade. The United States must build structures within its trade agreements that can adequately address market access inhibitors like non-tariff barriers. Without these structures, agreements like the U.S. - Korea Free Trade Agreement will not be ratified by a Congress that is increasingly skeptical of liberalized trade, and the United States will fall further behind in global trade agreements.

Public Rights and Private Rights of Action: The Enforcement of Federal Election Laws

In what circumstances should there be a private right of action to sue for violations of federal election statutes. Lying at the intersection of federal courts and election law, this question has arisen in several recent cases, as private litigants have increasingly called upon federal courts to resolve election disputes. The question was before the U.S. Supreme Court in Brunner v. Ohio Republican Party (“Brunner”) which alleged that a state chief election official had failed to follow the requirements of the Help America Vote Act of 2002 (“HAVA”) pertaining to statewide voter registration lists. In a one-paragraph, unanimous per curiam opinion, the Court held that a political party could not sue, reversing the lower courts’ conclusion that there was a private right of action. The brevity of the Brunner decision masks the significance and complexity of the larger question. To be sure, the issue in Brunner was a straightforward one under existing private-right-of-action doctrine, which requires an “unambiguously conferred” individual right. The problem is this doctrine fails to account for the vital role that federal courts play in overseeing elections in the United States, especially in pre-election litigation. The availability of a private right of action is especially critical in election cases – and the existing doctrine especially ill-fitting – for both conceptual and practical reasons. On a conceptual level, election cases typically involve non-individuated or collective interests. It follows that the Court’s insistence on an unambiguously conferred individual right makes little sense in election cases. Existing doctrine is also problematic from a practical perspective, given the absence of any institution besides the federal courts with the ability to ensure consistency in the interpretation of federal law. The ultimate consequence is to leave the interpretation of federal election law in the hands of state and local officials, except in those rare instances when the U.S. Attorney General decides to sue. This is particularly troubling given the partisan affiliation of most state and many local election officials, which creates an inherent conflict of interest and makes federal judicial oversight especially important. The Court’s stringent approach to private rights of action is therefore ill-suited to federal election law disputes, because they involve quintessentially public rights for which a federal judicial forum is essential. In Brunner, the Court failed to consider the distinctive character of election controverises. In fact, both the lower courts and the Supreme Court got it wrong in this case – even though they arrived at diametrically opposite conclusions. The lower courts incorrectly applied existing precedent, which foreclosed private enforcement of HAVA’s matching requirement. But the Supreme Court was also incorrect, in failing to reconsider this precedent to account for the especially important role the federal courts play in electoral disputes. Though faithfully applying existing doctrine, the Court missed an opportunity to correct – or at least limit – a line of precedent that has unfortunate consequences in the realm of election law. The Article concludes that, in the appropriate case, the Court should revisit Brunner and relax the standard for private enforcement of federal election statutes under Section 1983.

The Regulation of Non-Judicial Debt Collection and the Consumer's Choice Among Repayment, Bankruptcy and Informal Bankruptcy

This article measures the impact of state laws on defaulting borrowers. Prior literature has assessed the impact of laws that limit the enforcement of judgments on bankruptcy filings. However, (1) the majority of defaulting consumers do not file for bankruptcy, and (2) most debt collection takes place outside of the courtroom. Federal law prohibits collection techniques that are designed to harass or that are deemed abusive, but it exempts creditors who originated the loan or purchased the loan before default. About half of the states have enacted statutes that grant consumers a private right of action against these creditors. This article finds that states with anti-harassment statutes have lower bankruptcy filing rates, but borrowers living in these states are more likely to default without filing for bankruptcy. Our results suggest that these (or related) laws may reduce creditors’ ability to pressure debtors to repay.

Strategic Considerations in the Emergence of Private Action Rights

The design of mechanisms for the enforcement of rules regarding anticompetitive practices has been the subject of considerable controversy in both developed and developing countries. Public competition authorities have advantages in terms of scale economies and coordination of competing policy objectives. Private rights of action enhance the capacity of legal regimes to generate information and deter collusive agreements and exclusionary practices. Private enforcement also increases the transaction costs of regulatory capture. Given these differences, mixed regimes are likely to be superior to purely public or private arrangements. However, most national jurisdictions grant exclusive authority to public agencies and prosecutors. This article explores the puzzling resistance to the development of mixed competition enforcement regimes by studying recent attempts in the European Union (EU) to enhance private rights of access. The analysis suggests that decentralization of enforcement rights limits the capacity of a government to employ competition rules as an instrument of strategic trade policy. Evidence from EU illustrates that tensions between domestic and international policy considerations can generate distinctive paths of procedural development.

National Survey of Patients’ Bill of Rights Statutes

BACKGROUNDDespite vigorous national debate between 1999–2001 the federal patients’ bill of rights (PBOR) was not enacted. However, states have enacted legislation and the Joint Commission defined an accreditation standard to present patients with their rights. Because such initiatives can be undermined by overly complex language, we surveyed the readability of hospital PBOR documents as well as texts mandated by state law.METHODSState Web sites and codes were searched to identify PBOR statutes for general patient populations. The rights addressed were compared with the 12 themes presented in the American Hospital Association’s (AHA) PBOR text of 2002. In addition, we obtained PBOR texts from a sample of hospitals in each state. Readability was evaluated using Prose, a software program which reports an average of eight readability formulas.RESULTSOf 23 states with a PBOR statute for the general public, all establish a grievance policy, four protect a private right of action, and one stipulates fines for violations. These laws address an average of 7.4 of the 12 AHA themes. Nine states’ statutes specify PBOR text for distribution to patients. These documents have an average readability of 15th grade (range, 11.6, New York, to 17.0, Minnesota). PBOR documents from 240 US hospitals have an average readability of 14th grade (range, 8.2 to 17.0).CONCLUSIONSWhile the average U.S. adult reads at an 8th grade reading level, an advanced college reading level is routinely required to read PBOR documents. Patients are not likely to learn about their rights from documents they cannot read.

Private Rights of Action Under § 1983 to Enforce the Equal Access Provision of the Medicaid Act - Equal Access for El Paso v. Hawkins

An abstract is not available for this content so a preview has been provided. Please use the Get access link above for information on how to access this content.

Is There an Express Section 10(b) Private Right of Action? A Response to Professor Prentice

In Scheme Liability: A Reply to Grundfest, Professor Robert A. Prentice asserts that the United States Supreme Court was simply and abysmally wrong in Central Bank v. First Interstate Bank. He also claims that the majority of lower courts have been dead wrong in interpreting Central Bank. He further states that the Section 10(b) private right of action is express and not implied, that Congress in 1934 intended to create that private right of action, and that the Securities and Exchange Commission also intended to create a private right when it adopted Rule 10b-5 in 1942. From these premises, Professor Prentice urges that Section 10(b) and Rule 10b-5 be interpreted to sustain a private right of action for scheme liability. Professor Prentice's analysis rests on revisionist history. The record is clear that the private right of action under Section 10(b) is implied: it is not and has never been express. Congress in 1934 did not intend to create a private right of action under Section 10(b), much less one that would encompass scheme liability. Nor did the Commission intend to create a private right of action in 1942 when it adopted Rule 10b-5. Professor Prentice's conclusions based on these false premises fail of their own weight. Professor Prentice's analysis is also strategically selective. He ignores 1934-era common law rejecting scheme liability. He nowhere discusses the Court's admonitions that implied rights be narrowly construed. He also fails to appreciate the implications of his historically revisionist analysis. If Professor Prentice is correct that the Section 10(b) private right is express, and intended by Congress and the Commission, then the entire corpus of federal securities law must be rewritten. Central Bank is then far from the only decision in which the Supreme Court is simply and abysmally wrong.

SEC adopts new anti‐fraud rule for private funds

PurposeThe purpose of this paper is to analyze new SEC Rule 206(4)‐8 under the Investment Advisers Act of 1940 and discuss its practical implications.Design/methodology/approachThe paper describes the new rule, the types of advisers and funds to which the rule applies, examples of topics on which advisers might make statements that run afoul of the new rule, the application of the rule to both existing and potential investors, the application of the rule beyond statements made in the context of a securities transaction, and the application of the rule to any conduct that is fraudulent, deceptive, or manipulative, including negligent conduct. The paper explains that the scope of the new rule extends beyond Section 34(b) under the Investment Company Act of 1940, that the rule creates no new fiduciary duty, and that it creates no new private right of action against fund advisers.FindingsThe new rule signals that the SEC continues to focus intently on the fund activities of both registered and unregistered investment advisers, in particular with respect to their unregistered funds.Practical implicationsThe new rule is an indicator of the SEC's enforcement intentions. Advisers should review their compliance programs, particularly as they relate to communication and other interaction with current and prospective fund investors, in light of the new rule.Originality/valueThe paper provides an helpful rule description and practical guidance from experienced securities lawyers.

The Protected Interests in the Private Right of Action for Insider Trading: A Comparative Perspective

This article argues that in creating a private right of action for insider trading, the legislature needs to communicate clearly the nature of the protected interests by addressing first, the causation issue, and secondly, how loss should be measured. To the extent that the wrong of insider trading is characterised as trading on or communicating sensitive non-public information, it is not obvious how private interests are substantially affected. In legislating for a private right of action, therefore, it is inadequate merely to provide that damages may be sought by any private party who has suffered losses. Through an examination of the insider trading laws of the US, Australia and Singapore, the author analyses the doctrinal problems that arise when the protected interest is not clearly identified. At the same time, the author explores the feasibility of characterising the protected interest as one against unfair use of information, and considers its use as the theoretical construct by which to frame the questions of causation and loss in the context of Australia and Singapore.

Scheme Liability: A Question for Congress, Not for the Court

Any person who knowingly provides substantial assistance, whether through participation a or by any other means, to another who violates the federal securities laws also violates the federal securities laws. The Securities and Exchange Commission can sue these aiders and abettors and force them to make payments for the benefit of shareholders harmed by the fraud. They can also be criminally prosecuted by the Department of Justice. But are they additionally liable private civil actions filed under Section 10(b) of the Exchange Act? The United States Supreme Court will, Stoneridge, decide whether the implied private right of action under Section 10(b) supports claims of scheme liability against counterparties who properly account for transactions, make no public statements regarding those transactions, and do not transact any securities affected by the fraud. Established Supreme Court doctrine and clear statutory text preclude the imposition of such scheme liability a private action. Whether the scope of the implied private right should be expanded to encompass scheme liability is a question properly put to Congress not to the Courts. Stoneridge is therefore important for reasons that transcend the narrow question of scheme liability. Petitioners can prevail only if the Supreme Court repudiates its own precedent, jettisons its well-established technique for interpreting Section 10(b), ignores clearly relevant statutory text, and disregards two Congressional decisions not to expand the private right under Section 10(b) to encompass scheme liability. The court will, other words, have to establish an entirely new jurisprudence of statutory construction. This new jurisprudence will inevitably re-open a plethora of doctrinal issues regarding the interpretation of the federal securities laws that are today clearly resolved. Where this new and unanticipated jurisprudence would lead - other than to more litigation over the contours of the implied private right of action - is impossible to predict. Stoneridge is truly one of the most important securities cases to come before the court in many years because, if Petitioners prevail, far more than scheme liability is at stake for the future evolution of our nation's securities markets.