The Supreme Court confronted the facts in Dirks with a clear goal. The majority intended to make certain that the law of insider trading did not unnecessarily impede communications between the company and market participants. In doing so, the Court opted for an overbroad test that unquestionably sanctioned behavior that, in any common sense world, would constitute insider trading. Better to let off some individuals who engaged in insider trading than to leave in place a test that chilled legitimate communications with market participants.
The Court did so by using a vocabulary familiar to any corporate lawyer. Insider trading was keyed to fiduciary duties and a breach of those duties. Yet the Court then departed from conventional law by interpreting those terms in a manner largely unrecognizable to those practicing in the area. In part as a result, the Court had to invent an approach and lexicon that filled gaps created by its own analysis. We will explore this in a bit more detail in the next post.
With respect to Newman, the decision and the request for rehearing en banc is posted, along with the SEC’s amicus brief, at the DU Corporate Governance web site. The amicus filed by a small group of law professors that supports the decision is here.