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Statutory Interpretation and the Securities Laws

One common thread running through these cases is the predominance of theories of statutory interpretation over the impact of those interpretations on actual practice, at least when that practice is securities class actions. The Roberts Court’s approach in these cases suggests a somewhat confined vision of the judicial role; only certain sources matter. In Kircher and Merck, the approach to statutory interpretation focused on judicial precedent. Congress was presumed to have incorporated those judicial interpretations into its legislation. Whether any member of Congress was actually aware of that precedent, we do not know. In Dabit, the Court confronted two potentially relevant interpretive strands, with the Court asserting that Congress was legislating against the backdrop of one strand rather than the other. The Court adopted the interpretive choice that it did because the purpose of the statute—to prevent evasion of the PSLRA—was clear from the statute’s face. The judicial precedent mattered little to the decision, but the Court nonetheless invoked it, despite its lack of persuasive force. In Gabelli, the SEC lost because it could not identify prior judicial precedent for its position.

The common thread here is that the Court is managing the relationship between itself and Congress. In none of the three cases does the Court demonstrate any awareness—or interest—in the actual practice of securities litigation. It is primarily interested in applying its precedents in a predictable fashion. Whether it succeeds in this task is open to question, but the enterprise is a general one, not specific to the securities law. Only when the Court was faced with questions of government practice in Gabelli did the relevant inquiry open up to consider broader policy concerns with the fairness and efficiency of government enforcement.

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