In my previous post on Stoneridge I complained about the Court’s sidetrack into policymaking. Steve Bainbridge, in a thoughtful comment on my post, rejoins:
The court was driven by public policy considerations in creating the implied private rights of action - most notably those associated with the larger private attorneys general project of the 1960s - so it should not be surprising or disquieting that such considerations continue to inform the court’s jurisprudence under Rule 10b-5 and its ilk.
So Steve seems to be ok with the Court's making policy as long as it is making the right policy. I would rather tame the monster than simply turn it around. The problem is that you never know when the monster will tack off in the wrong direction again.
The amicus brief Steve and I signed onto got it right (p. 7):
Whether to create a new private right of action—or to extend an existing one—is a question appropriately directed to Congress, not this Court.* * *If Congress were to consider expanding the private right, it would have to take into account a number of competing policy considerations, including the impact of such an expansion on efficiency, competition and capital formation. It would also have to consider the proper parameters of scheme liability, including whether to provide safe harbors for derivative or other transactions. At the end of the legislative process, Congress might decide—as it has twice before—that the marginal costs of extending the private right to cover secondary actors would exceed the marginal benefits of such an extension, or it might decide that such an extension is warranted. But the very fact that a legislature could reasonably reach either conclusion demonstrates that the decision is not one for the Judiciary in the first instance.
In its Stoneridge opinion the Court echoed the above language when it said: “The decision to extend the cause of action is for Congress, not for us.” But then the Court made its own policy judgment about the dangers of excessive securities liability. I would have preferred that the Court had merely cited such arguments to show why extending the remedy in the Stoneridge case was sufficiently consequential to warrant a legislative judgment. And, as I observed in my prior post, the Court should have done a better job of clarifying precisely why permitting a remedy under the Stoneridge facts would have involved an extension.
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