The Supreme Court’s decision this term relieving an investment firm of liability for fraud has received some attention on ACSblog and within the legal community.
But among the public at large, Janus Capital Group, Inc. v. First Derivative Traders is likely the blockbuster ruling “everyone missed,” writes College of Saint Rose political science professor Scott Lemieux in The American Prospect.
The decision, in which a five-justice majority held that Janus Capital Group was not legally responsible for false statements made in the literature of a mutual fund it managed, is “as stark an example as one can imagine of the Court’s pro-corporate bias” and reveals “the extent to which conservatives are happy to give the financial interests that destroyed the economy free rein,” Lemieux writes.
One possible reason why the decision didn’t get more attention is that Justice Clarence Thomas’s “tortured” explanation of why Janus Capital executives didn’t “make” the false statements in a legal sense is so difficult to comprehend.
“If you don’t understand this reasoning, the fault lies with the Supreme Court, not you,” Lemieux writes. “As one securities litigator told me, the Court’s newly minted definition of what it means to ‘make’ a statement is ‘literally unheard of in the history of law.’ … By Thomas’s logic, since Press Secretary Jay Carney works at the pleasure of the president, the press is wrong to say that he is ‘making’ statements at a press conference. This argument is so silly as to be self-refuting.”
That the majority’s reasoning is weak won’t stop Janus Capital from having potentially disastrous consequences, however. The Court’s opinion provides a blueprint for executives of financial firms who want to profit from defrauding their customers: Just form a subsidiary your company runs, and you can’t be held responsible for lying to the customers who choose to do business with you.
… In theory, Congress can fix the problem the Court created by clarifying the language of the statute. But here is where the tendency of the Roberts Court to side with the most powerful comes full circle. Because arguments in favor of the constitutionality of campaign-finance regulations have gone zero for five against the Roberts Court, financial interests exert increasingly massive influence in Congress, no matter which party is in charge.
To learn more about how corporations are faring in the courts, visit ACS’s new web page, Corporations and the Courts.