When the Justices start talking policy in Stoneridge its a bad sign. The language of Section 10(b) is clear enough in its application to this case (the Section prohibits deceptive acts) and the facts are awful for the defendants (allegations of falsified documentation and backdated contracts). So, when the Justices move to policy, its their only refuge. Here is what the unrecused Justice Roberts asked counsel for shareholders (the oral argument transcript is here):
- CHIEF JUSTICE ROBERTS: I'm not -- my suggestion is not that we should go back and say that there is no private right of action. My suggestion is that we should get out of the business of expanding it, because Congress has taken over and is legislating in the area in the way they weren't back when we implied the right of action under 10(b).
Finally, the loudest thing at the oral argument may have been the deafening silence of the Justices when it came to the argument by Respondents. Roberts, Alito, Kennedy and Scalia were active on questioning counsel for shareholders but had almost nothing to say during the argument of counsel for the vendors (only Justice Kennedy asked a few questions). In other words, the reasoning was so convincing, they had nothing to say. At least with respect to Roberts, Alito, and Scalia, the silence is indicative.
As for the government's argument, the Chief Justice in particular seemed to have little patience with the government's position that conduct could result in primary liability but that there had to be actual reliance. Roberts pointed out that the argument had not been raised below. Counsel asserted otherwise.
- MR. HUNGAR: Your Honor, on page 10a, the second line, the first full sentence, speaking of Motorola and Scientific-Atlantic, "they did not issue any misstatement relied upon by the investing public," and then it goes on the next sentence: "None of the alleged financial misrepresentations by Charter was made by or even with the approval of the vendors," that is the Respondents. Again as I say, it's not as complete a discussion of the reliance issue as we would have thought appropriate if we had been writing the opinion, but it certainly does touch on the question and we think it's wholly presented.
In other words, it wasn't raised in any meaningful way, as the Petitioners point out in their reply brief. Unfortunately, this makes it harder for the Court to rely on the analysis. The alternative is simply to eliminate liability for vendors, with or without actual reliance.