Elena Kagan, SCOTUS, Securities Law, Supreme Court

Elena Kagan: Solicitous of Shareholders

Elena Kagan 3 Harvard Law School Above the Law Elana Kagan Elena Kagen.jpgYou can’t go two clicks on the internet today without hearing something about the new term of the Supreme Court (or the NFL playoffs, or porn). I’ve got to agree with the WSJ Law Blog’s Ashby Jones that the most interesting SCOTUS related piece comes via Bloomberg and talks about Solicitor General Elena Kagan’s willingness to defend shareholder rights. The Law Blog summarizes Kagan’s pro-shareholder stances:

Exhibit A: In a case against Merck, Kagan’s office is asking the court to let shareholders wait longer to sue companies for securities fraud. The justices are considering whether to allow a lawsuit by investors who say the drugmaker deceived them about the risks posed by its Vioxx painkiller.
But Exhibit B is the case folks are buzzing about: Kagan and SEC lawyers are urging the court to ease the way for investors to sue mutual fund managers over their fees. The fund industry aims to avert more lawsuits by the 90 million investors who together hold $11 trillion in U.S. mutual funds.

Why worry about potentially messy government regulation of business when you can just sue the bastards?
More details from the Bloomberg article after the jump.


It’s not entirely surprising that Bloomberg slants Kagan’s shareholder defense as anti-business:

Rulings in Kagan’s favor might lead to additional costly lawsuits against companies. For example, Wyeth, now part of Pfizer Inc., has had to set aside more than $21 billion since 1999 to resolve 200,000 personal-injury claims over the diet- drug combination fen-phen.

Wait a minute, Wyeth has had to set aside $21 billion because fen-phen was a dangerous drug that never should have been brought to market in the first place. I’m not a huge proponent of product liability litigation (there are some obvious abuses) but it’s almost like fen-phen was designed to kill people and produce mass tort litigation.
Still, it’s not surprising that big business is wary of the Solicitor General’s strategy. But, on this one, capitalist jackboots can’t just blame the pinko liberals:

The court’s conservative wing, particularly Justices Clarence Thomas and Antonin Scalia, was partly responsible for the shift against companies during the 2008 to 2009 term. Thomas, for whom states’ rights often trump the pragmatic concerns of businesses, joined the court’s liberals in the 6 to 3 decision against drug companies. Thomas said the court should never read federal laws to preempt tougher state rules without an express directive from Congress.

The Bloomberg piece warns about the perils to business should shareholders and victims be allowed to utilize the courts to protect themselves:

As the Supreme Court issues scores of rulings in 2010, Kagan’s office will likely win most of its cases, if history is a guide. That means drugmakers, financial-services firms and other companies, already facing the prospect of more regulation from the Obama administration, may have to brace themselves for a flurry of new lawsuits in years to come.

Or drugmakers, financial-service firms, and other companies could just stop killing people and stealing money.
Obama 10th Justice Kagan Subverts Supreme Court Business Tilt [Bloomberg]
Will Elena Kagan Lead the Shareholder-Litigation Revival? [WSJ Law Blog]

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