"During the first two centuries of this Nation's history much of our law was developed by judges in the common-law tradition. A basic principle animating our jurisprudence was enshrined in state constitution provisions guaranteeing, in substance, that 'every wrong shall have a remedy.' Fashioning appropriate remedies for the violation of rules of law designed to protect a class of citizens was the routine business of judges."
The above quotation is from Supreme Court Justice Stevens in his dissenting opinion in this past Tuesday's Supreme Court ruling on third party liability in securities fraud. The quote sets up the historic premise of the American court system: to ensure compensation for those harmed by another's injustice. That the court is moving away from valuing our ability to seek a remedy is the essence of the 'rollback' of our rights.
At face value, a securities fraud case may not seem to have much to do with civil rights -- but in reality this is just another piece of the puzzle of our slowly-dissolving freedoms. First we were told we couldn't sue for discrimination unless we could prove it was intentional, or only if a complaint had been filed within an impossible period of time. Then women's reproductive rights took a big hit in Gonzales v. Carhart. Now, investors who relied on false information when making financial decisions have been denied the capacity to seek damages from those who helped inflate the price of stock they purchased, which then plummeted. In a gradual and very subtle way, Americans are coming to understand that big business is the only big winner, and that our individual rights are being rendered meaningless by the day.
You know things have reached a critical point when reporting by Fox Business News has you cheering and waving your fists. In their coverage of the StoneRidge decision, they illustrate the changing face of the courts and its affect upon the average American:
In dissent, Justice John Paul Stevens said the court is conducting a continuing campaign to render investors' rights to sue "toothless."
A liberal Supreme Court in 1971 endorsed investor lawsuits under antifraud provisions of securities law at issue in the current lawsuit.
Fourteen years ago, a more conservative Supreme Court imposed limits on such lawsuits, prohibiting cases against third parties for aiding and abetting a company's misstatements.
Amen. So, back to facts. What happened here, exactly? And why does this case matter?
For those of us who don't traffic in financial legalese, a cable company named Charter Communications found that their finances were less-than-robust, so they struck a deal with two of their suppliers, Motorola and Scientific-Atlanta, which made it appear that they had earned $17 million more in revenue then in actuality. When their scam was revealed and their stock crashed, angry investors went after Charter and followed up with a suit against Motorola and Scientific-Atlanta. Before its appeal to the Supreme Court, the latter suit was dismissed by a lower court, as a 1994 decision had protected third parties from such litigation -- but that decision rested on the assumption that the third party as issue was innocent of wrongdoing.
Supreme Court Justice Breyer recused himself from consideration of the case because he owns stock in Cisco, which currently owns Scientific-Atlanta. In the resulting 5-3 ruling, according to Reuters:
The Supreme Court upheld a lower court's dismissal of the lawsuit. Justice Anthony Kennedy concluded for the court majority that federal securities law does not reach the companies because Charter investors did not rely on their statements or representations.
Kennedy said Scientific Atlanta and Motorola "had no duty to disclose; and their deceptive acts were not communicated to the public."
The shareholders cannot show reliance on any of the third parties' actions "except in an indirect chain that we find too remote for liability," he wrote.
He went further to say that allowing shareholders to pursue third parties "would expose a new class of defendants to these risks." "Overseas firms with no other exposure to our securities laws could be deterred from doing business here," he said.
While Justice Kennedy appears to have our best interests in mind, he fails to acknowledge that a new class of defendants exists because a new class of multinational corporations is employing a new class of deceptive tactics to expand their bottom line at the expense of everything and everyone else. Tuesday's ruling has not only been cause for numerous champagne toasts in corporate America, it has provoked much speculation over whether or not this decision will doom those waiting for fair compensation in the massive Enron debacle from a few years ago. Their case is still pending Supreme Court consideration.
I hear my baffled twenty-something self asking what has happened to our integrity as a nation. When exactly did the notion of democracy as government by and for the people become lip service? While these are certainly questions worth considering, our energy is much better spent figuring out how we can reclaim the rights we've lost and re-envision the just society that our founders sought to establish.