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Dabit and federalism

Larry Ribstein suggests here and here that pro-business conservatives praising the opinion (is he talking about me?) may not be so happy with the opinion, and some of Stevens's language, down the road. I disagree.

1) I think it's an error to equate "federalism" with states' rights on steroids. Federalism doesn't mean that there's no role for the federal government, merely that there are appropriate venues for federal concerns and for local concerns. And it stands federalism on its head to say that an elected Madison County judge (or even Attorney General Spitzer) gets to dictate a nationwide regulation of securities law. SLUSA, and the Court's interpretation of SLUSA, is not inconsistent with federalism.

2) Ribstein suggests that language in Justice Stevens's opinion could be used to rationalize Sarbanes-Oxley in a few years. It wouldn't surprise me to see Dabit's language quoted that way, but such use would be a tool of convenience, rather than something that binds a judge. Not even the Free Enterprise Fund is suggesting that the Supreme Court should be striking down Sarbanes-Oxley because it violates the federalist structure of the Constitution. The Appointments Clause argument behind their lawsuit isn't going to stand or fall because of Dabit dicta. That I would argue that it's unwise for Sarbanes-Oxley to displace state and market regulation of internal corporate governance doesn't mean that I would argue that it's unconstitutional for it to do so. The policy argument to be made against Sarbanes-Oxley needs to be made to the legislative and executive branches (as Ribstein has done magnificently with Henry Butler in their future monograph for the AEI Liability Project), not in the judicial branch.

Separately, Richard Booth has interesting observations on why a post-Dabit SLUSA doesn't preclude meaningful relief for the Kirchers of the world—assuming, perhaps incorrectly, that the plaintiffs' lawyers involved actually cared about the class members rather than the opportunity for a quick Madison County payday.

Update: Ribstein responds. In a post with many links to others' analysis, Professor Bainbridge weighs in, and takes my side.

Separately, Dave Hoffman argues that Dabit could be laying the groundwork to reverse Blue Chip Stamps, 421 U.S. 723 (1975). This argument strikes me as implausible at best; as I note in the comments there:

Perhaps Stevens would reverse Blue Chip Stamps, but his opinion in Dabit explicitly endorses the Rehnquist rationale behind that decision (one that Thurgood Marshall joined). I don't see any desire among Roberts/Scalia/Thomas/Alito/Breyer/Kennedy to create a brand new federal cause of action that wasn't explicitly endorsed by Congress by reversing a thirty-year-old Supreme Court opinion that says it doesn't exist. (It's not like the prudential considerations that motivated Blue Chip Stamps have even been mildly ameliorated: litigation is more expensive than ever, and the plaintiffs' bar is more sophisticated about filing multi-billion-dollar strike suits.) And Ginsburg and Stevens and Souter would have to recognize that reversing Blue Chip Stamps--a case where Congress has the power to act to change a statutory interpretation--undermines the rationale for stare decisis for Roe, a case where Congress doesn't have the power to act.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.