Citation
Publication Date:
Format:
Bibliography:
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.
Other publications by this author
- What's Needed is Uncommon Wisdom
- Affidavit of Joseph A. Grundfest
- Reinventing the Securities Disclosure Regime: Online Questionnaires as Substitutes for Form-Based Filings
- Walking the Walk on Corporate Governance
- Scheme Liability: A Question for Congress, Not for the Court
- Fixing 404
- The Class-Action Market
- Securities Class Action Case Filings, 2006: A Year in Review
- Out of Bounds
- The Unexpected Value of Litigation
Author
- Joseph A. Grundfest
- Stanford Law School
- grundfest@stanford.edu
- 650 723.0458