February 26, 2014 United States Supreme Court opinions

Chadbourne & Parke LLP v Troice

Troice and other victims of a Ponzi scheme sued Chadbourne and other entities and individuals under state law. The district court concluded the suits were bared by 15 USC 78bb(f)(1) and dismissed. The 5th Circuit reversed holding the allegations were not about securities on a national exchange and thus the suits were not barred. The Court, 7-2 with a concurrence filed, affirmed. The majority held that 78bb(f)(1) only applied to state law claims about securities sold on national exchanges. Thus, the bank issued certificates of deposit here were not covered by the statute. The fact that the issuing bank lied about using the funds to purchase covered securities did not change the outcome as the lies were not about the sale of the covered securities. The majority looked to the statute’s purpose, natural meaning of the language, the regulatory scheme and precedent to support its holding. The majority rejected counterarguments that “in connection with” should be read broadly and that their decision would undermine federal authority to prevent and punish securities fraud noting the scope of federal regulatory authority is broader than the scope of 78bb(f)(1) and in any event the fraudsters in the underlying Ponzi scheme were criminally convicted. The concurrence argued the majority’s limiting principle applied to “in connection with” was consistent with regulatory scheme and precedent. The dissent argued that the majority’s construction of 78bb(f)(1) is inconsistent with broad reading of “in connection with” adopted in prior cases, exposes secondary actors to suit in contravention of the intent of Congress and undermines the power of the federal government to police fraud.

United States v Apel

Apel was convicted of being on a military base after being ordered to stay off in violation of 18 USC 1382. The 9th Circuit reversed on the ground that the military did not have exclusive ownership of the protest site in question. The court, with two coinsurances filed, unanimously reversed. It held that 1382 contained no exclusivity requirement and instead only required the property in question be inside the boundaries of the base and under the authority of the commanding officer. Both conditions were met here. The Court refused to address Apel’s first amendment argument and remanded for further proceedings. Justice Ginsburg added a concurrence arguing the access policies of the base commander may make it unconstitutional to keep Apel off the base. Justice Alito added a concurrence noting there was no need to discuss the first Amendment issue.

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