One message from two of Thursday’s decisions is that the Supreme Court doesn’t seem to care what the lower courts have done with an issue. In both Skilling v. United States and Morrison v. National Australia Bank, the court has shown a willingness to go to first principles and reject approaches that the courts of appeal have followed for decades. When a law has been on the books for a good while and generated numerous cases, the courts of appeal elaborate increasingly complex tests that often gravitate further and further from the statutory text. The courts of appeal follow one another, and everyone comes to accept the line of cases as set in stone.
The Supreme Court, however, is wholly prepared to ignore what the courts of appeal have done and take a fresh look based on first principles. The lesson for Supreme Court litigators is: Don’t be afraid to make arguments to the Supreme Court that no previous courts have accepted.
Morrison and Skilling are striking in that regard. In Morrison, the court held that investors who purchase securities on foreign stock exchanges couldn’t sue in U.S. courts for violations of U.S. securities fraud laws even where some of the acts that contributed to the fraud occurred in the United States. In an opinion by Justice Antonin Scalia, the court said flatly that it would not assume that Congress wanted U.S. securities law to govern such purchases, even though the investors claimed that the books were cooked in Florida and the fraud had “effects” in the United States. The U.S. securities fraud law, the court held, only protects investors who make securities purchases in the United States.
The majority did not disagree with Justice John Paul Stevens’ statement in his concurring opinion that “federal courts have been construing [the relevant securities fraud provision] in a different manner for a long time.” Stevens argued the court should adhere to the established approach “that has been the law in the Second Circuit, and most of the rest of the country, for nearly four decades.” The court’s majority, however, simply brushed aside the long-standing, complex “conduct-and-effects” test that had been elaborated in numerous decisions in the lower courts and replaced it with a simple test: Did the purchase itself actually occur in the United States? This test was based on text of the statute—a text that the courts of appeal seem to have lost sight of long ago. So much for decades of lower court law.
In Skilling (ably explained by Paul’s posting), my law firm colleagues pressed the argument that the statutory crime of denying anyone of the “intangible right of honest services” was unconstitutionally vague unless it was sharply limited to bribery and kickbacks. Given that the honest-services statute had been the basis of hundreds of prosecutions that had been upheld in every federal court of appeals, it may have seemed an unlikely gambit to challenge its constitutionality at this late date. The fact that all nine justices agreed that this long-standing and frequently invoked law was unconstitutionally vague suggests once again that litigants should not take law “settled” by court of appeals as a given. The fact that the Supreme Court swept aside the law in virtually every federal appellate circuit in both of Thursday’s cases without breaking a sweat is a reminder that this court is called “Supreme” for a reason.
Come Monday, when the court decides whether to accept Paul’s argument that the Second Amendment now applies to every state and local government, will we have further evidence (for better or worse) of the court’s supremacy?
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