OCTOBER TERM, 1993
Syllabus
CENTRAL BANK OF DENVER, N. A. v. FIRST INTERSTATE BANK OF
DENVER, N. A.,
ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH
CIRCUIT
No. 92-854. Argued November 30, 1993-Decided April 19, 1994
As this Court has interpreted it, § 10(b) of the Securities
Exchange Act of 1934 imposes private civil liability on those who
commit a manipulative or deceptive act in connection with the
purchase or sale of securities. Following a public building
authority's default on certain bonds secured by landowner
assessment liens, respondents, as purchasers of the bonds, filed
suit against the authority, the bonds' underwriters, the developer
of the land in question, and petitioner bank, as the indenture
trustee for the bond issues. Respondents alleged that the first
three defendants had violated § 10(b) in connection with the sale
of the bonds, and that petitioner was "secondarily liable under §
10(b) for its conduct in aiding and abetting the [other
defendants'] fraud." The District Court granted summary judgment to
petitioner, but the Court of Appeals reversed in light of Circuit
precedent allowing private aiding and abetting actions under §
lO(b).
Held: A private plaintiff may not maintain an aiding and
abetting suit under § lO(b). Pp.170-192.
(a) This case is resolved by the statutory text, which governs
what conduct is covered by § 10(b). See, e.
g., Ernst &
Ernst v. Hochfelder,
425 U. S. 185, 197, 199.
That text-which makes it "unlawful for any person, directly or
indirectly, ... [t]o use or employ, in connection with the purchase
or sale of any security ... , any manipulative or deceptive device
or contrivance" -prohibits only the making of a material
misstatement (or omission) or the commission of a manipulative act,
and does not reach those who aid and abet a violation. The
"directly or indirectly" phrase does not cover aiding and abetting,
since liability for aiding and abetting would extend beyond persons
who engage, even indirectly, in a proscribed activity to include
those who merely give some degree of aid to violators, and since
the "directly or indirectly" language is used in numerous 1934 Act
provisions in a way that does not impose aiding and abetting
liability. Pp. 170-178.
(b) Even if the § lO(b) text did not answer the question at
issue, the same result would be reached by inferring how the 1934
Congress would have addressed the question had it expressly
included a § 10(b) private
165
right of action in the 1934 Act. See Musick, Peeler &
Garrett v. Employers Ins. of Wausau,
508 U. S. 286,294. None
of the express private causes of action in the federal securities
laws imposes liability on aiders and abettors. It thus can be
inferred that Congress likely would not have attached such
liability to a private § lO(b) cause of action. See
id., at
297. Pp. 178-180.
(c) Contrary to respondents' contention, the statutory silence
cannot be interpreted as tantamount to an explicit congressional
intent to impose § lO(b) aiding and abetting liability. Congress
has not enacted a general civil aiding and abetting tort liability
statute, but has instead taken a statute-by-statute approach to
such liability. Nor did it provide for aiding and abetting
liability in any of the private causes of action in the 1933 and
1934 securities Acts, but mandated it only in provisions
enforceable in actions brought by the Securities and Exchange
Commission (SEC). Pp. 180-185.
(d) The parties' competing arguments based on other post-1934
legislative developments-respondents' contentions that
congressional acquiescence in their position is demonstrated by
1983 and 1988 Committee Reports making oblique references to §
10(b) aiding and abetting liability and by Congress' failure to
enact a provision denying such liability after the lower courts
began interpreting § lO(b) to include it, and petitioner's
assertion that Congress' failure to pass 1957, 1958, and 1960 bills
expressly creating such liability reveals an intent not to cover
it-deserve little weight in the interpretive process, would not
point to a definitive answer in any event, and are therefore
rejected. Pp. 185-188.
(e) The SEC's various policy arguments in support of the aiding
and abetting cause of action--e.
g., that the cause of
action deters secondary actors from contributing to fraudulent
activities and ensures that defrauded plaintiffs are made
whole-cannot override the Court's interpretation of the Act's text
and structure because such arguments do not show that adherence to
the text and structure would lead to a result so bizarre that
Congress could not have intended it. Demarest v. Manspeaker,
498 U. S. 184,
191. It is far from clear that Congress in 1934 would have decided
that the statutory purposes of fair dealing and efficiency in the
securities markets would be furthered by the imposition of private
aider and abettor liability, in light of the uncertainty and
unpredictability of the rules for determining such liability, the
potential for excessive litigation arising therefrom, and the
resulting difficulties and costs that would be experienced by
client companies and investors. Pp. 188-190.
(f) The Court rejects the suggestion that a private civil §
10(b) aiding and abetting cause of action may be based on 18 U. S.
C. § 2, a general
166
aiding and abetting statute applicable to all federal criminal
offenses. The logical consequence of the SEC's approach would be
the implication of a civil damages cause of action for every
criminal statute passed for the benefit of some particular class of
persons. That would work a significant and unacceptable shift in
settled interpretive principles. pp. 190-191.
969 F.2d
891, reversed.
KENNEDY, J., delivered the opinion of the Court, in which
REHNQUIST, C. J., and O'CONNOR, SCALIA, and THOMAS, JJ., joined.
STEVENS, J., filed a dissenting opinion, in which BLACKMUN, SOUTER,
and GINSBURG, JJ., joined, post, p. 192.
Tucker K. Trautman argued the cause for petitioner.
With him on the briefs was Van Aaron Hughes.
Miles M. Gersh argued the cause for respondents. With him on the
brief was James S. Helfrich.
Edwin S. Kneedler argued the cause for the Securities and
Exchange Commission as amicus curiae urging affirmance. With him on
the brief were Solicitor General Days, Paul Gonson, Jacob H.
Stillman, and Brian D. Bellardo.
*
JUSTICE KENNEDY delivered the opinion of the Court.
As we have interpreted it, § 10(b) of the Securities Exchange
Act of 1934 imposes private civil liability on those who commit a
manipulative or deceptive act in connection with the purchase or
sale of securities. In this case, we
*Theodore B. Olson, Theodore
J. Boutrous, Jr., and
William
J. Fitzpatrick filed a brief for the Securities
Industry Association as amicus curiae urging reversal.
Briefs of amicus curiae urging affirmance were filed for the
Association of the Bar of the City of New York by Harvey
J.
Goldschmid, John D. Feerick, Sheldon H. Elsen, and Jill E. Fisch;
and for the Trial Lawyers for Public Justice, P. C., et al. by
Priscilla R. Budeiri and Arthur H. Bryant.
Briefs of amici curiae were filed for the American Institute of
Certified Public Accountants by Louis A. Craco, Richard I. Miller,
and David P. Murray; and for the National Association of Securities
and Commercial Law Attorneys by William S. Lerach, Leonard B.
Simon, Kevin P. Roddy, and Paul F. Bennett.
167
must answer a question reserved in two earlier decisions:
whether private civil liability under § 10(b) extends as well to
those who do not engage in the manipulative or deceptive practice,
but who aid and abet the violation. See Herman
& MacLean
v. Huddleston,
459 U.
S. 375, 379, n. 5 (1983); Ernst & Ernst v. Hochfelder,
425 U. S. 185,
191-192, n. 7 (1976).
I
In 1986 and 1988, the Colorado Springs-Stetson Hills Public
Building Authority (Authority) issued a total of $26 million in
bonds to finance public improvements at Stetson Hills, a planned
residential and commercial development in Colorado Springs.
Petitioner Central Bank of Denver served as indenture trustee for
the bond issues.
The bonds were secured by landowner assessment liens, which
covered about 250 acres for the 1986 bond issue and about 272 acres
for the 1988 bond issue. The bond covenants required that the land
subject to the liens be worth at least 160% of the bonds'
outstanding principal and interest. The covenants required Am West
Development, the developer of Stetson Hills, to give Central Bank
an annual report containing evidence that the 160% test was
met.
In January 1988, AmWest provided Central Bank with an updated
appraisal of the land securing the 1986 bonds and of the land
proposed to secure the 1988 bonds. The 1988 appraisal showed land
values almost unchanged from the 1986 appraisal. Soon afterwards,
Central Bank received a letter from the senior underwriter for the
1986 bonds. Noting that property values were declining in Colorado
Springs and that Central Bank was operating on an appraisal over 16
months old, the underwriter expressed concern that the 160% test
was not being met.
Central Bank asked its in-house appraiser to review the updated
1988 appraisal. The in-house appraiser decided that the values
listed in the appraisal appeared optimistic considering the local
real estate market. He suggested that
168
Central Bank retain an outside appraiser to conduct an
independent review of the 1988 appraisal. After an exchange of
letters between Central Bank and AmWest in early 1988, Central Bank
agreed to delay independent review of the appraisal until the end
of the year, six months after the June 1988 closing on the bond
issue. Before the independent review was complete, however, the
Authority defaulted on the 1988 bonds.
Respondents First Interstate Bank of Denver and Jack K.
Naber had purchased $2.1 million of the 1988 bonds. After the
default, respondents sued the Authority, the 1988 underwriter, a
junior underwriter, an Am West director, and Central Bank for
violations of § 10(b) of the Securities Exchange Act of 1934. The
complaint alleged that the Authority, the underwriter defendants,
and the Am West director had violated § 10(b). The complaint also
alleged that Central Bank was "secondarily liable under § 10(b) for
its conduct in aiding and abetting the fraud." App. 26.
The United States District Court for the District of Colorado
granted summary judgment to Central Bank. The United States Court
of Appeals for the Tenth Circuit reversed. First Interstate Bank of
Denver, N. A. v. Pring,
969 F.2d
891 (1992).
The Court of Appeals first set forth the elements of the § 10(b)
aiding and abetting cause of action in the Tenth Circuit: (1) a
primary violation of § 10(b); (2) recklessness by the aider and
abettor as to the existence of the primary violation; and (3)
substantial assistance given to the primary violator by the aider
and abettor. Id., at 898-903.
Applying that standard, the Court of Appeals found that Central
Bank was aware of concerns about the accuracy of the 1988
appraisal. Central Bank knew both that the sale of the 1988 bonds
was imminent and that purchasers were using the 1988 appraisal to
evaluate the collateral for the bonds. Under those circumstances,
the court said, Central Bank's awareness of the alleged
inadequacies of the updated,
169
but almost unchanged, 1988 appraisal could support a finding of
extreme departure from standards of ordinary care. The court thus
found that respondents had established a genuine issue of material
fact regarding the recklessness element of aiding and abetting
liability. Id., at 904. On the separate question whether Central
Bank rendered substantial assistance to the primary violators, the
Court of Appeals found that a reasonable trier of fact could
conclude that Central Bank had rendered substantial assistance by
delaying the independent review of the appraisal. Ibid.
Like the Court of Appeals in this case, other federal courts
have allowed private aiding and abetting actions under § 10(b). The
first and leading case to impose the liability was Brennan v.
Midwestern United Life Ins. Co., 259 F. Supp. 673 (ND Ind. 1966),
aff'd,
417 F.2d
147 (CA7 1969), cert. denied, 397 U. S. 989 (1970). The court
reasoned that "[i]n the absence of a clear legislative expression
to the contrary, the statute must be flexibly applied so as to
implement its policies and purposes." 259 F. Supp., at 680-681.
Since 1966, numerous courts have taken the same position. See, e.
g., Cleary v. Perfectune, Inc.,
700 F.2d
774, 777 (CAl1983); Kerbs v. Fall River Industries, Inc.,
502 F.2d
731, 740 (CAlO 1974).
After our decisions in Santa Fe Industries, Inc. v. Green,
430 U. S. 462
(1977), and Ernst & Ernst v. Hochfelder,
425 U. S. 185 (1976),
where we paid close attention to the statutory text in defining the
scope of conduct prohibited by § 10(b), courts and commentators
began to question whether aiding and abetting liability under §
10(b) was still available. Professor Fischel opined that the
"theory of secondary liability [under § 10(b) was] no longer viable
in light of recent Supreme Court decisions strictly interpreting
the federal securities laws." Secondary Liability Under Section
10(b) of the Securities Act of 1934, 69 Calif. L. Rev. 80, 82
(1981). In 1981, the District Court for the Eastern District of
Michigan found it "doubtful that a claim for 'aiding and abetting'
...
170
will continue to exist under 10(b)." Benoay v. Decker, 517 F.
Supp. 490, 495, aff'd,
735 F.2d
1363 (CA6 1984). The same year, the Ninth Circuit stated that
the "status of aiding and abetting as a basis for liability under
the securities laws [was] in some doubt." Little v. Valley National
Bank of Arizona,
650 F.2d
218, 220, n. 3. The Ninth Circuit later noted that "[a]iding
and abetting and other 'add-on' theories of liability have been
justified by reference to the broad policy objectives of the
securities acts .... The Supreme Court has rejected this
justification for an expansive reading of the statutes and instead
prescribed a strict statutory construction approach to determining
liability under the acts." SEC v. Seaboard Corp.,
677 F.2d
1301, 1311, n. 12 (1982). The Fifth Circuit has stated: "[I]t
is now apparent that openended readings of the duty stated by Rule
10b-5 threaten to rearrange the congressional scheme. The added
layer of liability ... for aiding and abetting ... is particularly
prob lematic ... There is a powerful argument that ... aider
andabettor liability should not be enforceable by private parties
pursuing an implied right of action." Akin v. Q-L Investments,
Inc.,
959 F.2d
521, 525 (1992). Indeed, the Seventh Circuit has held that the
defendant must have committed a manipulative or deceptive act to be
liable under § 10(b), a requirement that in effect forecloses
liability on those who do no more than aid or abet a 10b-5
violation. See, e.
g., Barker v. Henderson, Franklin,
Starnes & Holt,
797 F.2d
490, 495 (1986).
We granted certiorari to resolve the continuing confusion over
the existence and scope of the § 10(b) aiding and abetting action.
508 U. S. 959 (1993).
II
In the wake of the 1929 stock market crash and in response to
reports of widespread abuses in the securities industry, the 73d
Congress enacted two landmark pieces of securities legislation: the
Securities Act of 1933 (1933 Act) and the
171
Securities Exchange Act of 1934 (1934 Act). 48 Stat. 74, as
amended, 15 U. S. C. § 77a et seq. (1988 ed. and Supp. IV); 48
Stat. 881, as amended, 15 U. S. C. § 78a et seq. (1988 ed. and
Supp. IV). The 1933 Act regulates initial distributions of
securities, and the 1934 Act for the most part regulates
postdistribution trading. Blue Chip Stamps v. Manor Drug Stores,
421 U. S. 723,
752 (1975). Together, the Acts "embrace a fundamental purpose ...
to substitute a philosophy of full disclosure for the philosophy of
caveat emptor." Affiliated Ute Citizens of Utah v. United States,
406 U. S. 128,
151 (1972) (internal quotation marks omitted).
The 1933 and 1934 Acts create an extensive scheme of civil
liability. The Securities and Exchange Commission (SEC) may bring
administrative actions and injunctive proceedings to enforce a
variety of statutory prohibitions. Private plaintiffs may sue under
the express private rights of action contained in the Acts. They
may also sue under private rights of action we have found to be
implied by the terms of §§ 10(b) and 14(a) of the 1934 Act.
Superintendent of Ins. of N. Y. v. Bankers Life & Casualty Co.,
404 U. S. 6, 13, n.
9 (1971) (§ 10(b));
J. 1. Case Co. v. Borak,
377 U. S. 426, 430-435
(1964) (§ 14(a)). This case concerns the most familiar private
cause of action: the one we have found to be implied by § 10(b),
the general antifraud provision of the 1934 Act. Section 10(b)
states:
"It shall be unlawful for any person, directly or indirectly, by
the use of any means or instrumentality of interstate commerce or
of the mails, or of any facility of any national securities
exchange-
"(b) To use or employ, in connection with the purchase or sale
of any security registered on a national securities exchange or any
security not so registered, any manipulative or deceptive device or
contrivance in contravention of such rules and regulations as the
[SEC] may prescribe." 15 U. S. C. § 78j.
172
Rule 10b-5, adopted by the SEC in 1942, casts the proscription
in similar terms:
"It shall be unlawful for any person, directly or indirectly, by
the use of any means or instrumentality of interstate commerce, or
of the mails or of any facility of any national securities
exchange,
"(a) To employ any device, scheme, or artifice to defraud,
"(b) To make any untrue statement of a material fact or to omit
to state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they were made,
not misleading, or
"(c) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any person,
"in connection with the purchase or sale of any security." 17
CFR § 240.10b-5 (1993).
In our cases addressing § 10(b) and Rule 10b-5, we have
confronted two main issues. First, we have determined the scope of
conduct prohibited by § 10(b). See, e. g., Dirks v. SEC,
463 U. S. 646 (1983);
Aaron v. SEC,
446 U.
S. 680 (1980); Chiarella v. United States,
445 U. S. 222 (1980);
Santa Fe Industries, Inc. v. Green,
430 U. S. 462 (1977);
Ernst & Ernst v. Hochfelder,
425 U. S. 185 (1976).
Second, in cases where the defendant has committed a violation of §
10(b), we have decided questions about the elements of the 10b-5
private liability scheme: for example, whether there is a right to
contribution, what the statute of limitations is, whether there is
a reliance requirement, and whether there is an in pari delicto
defense. See Musick, Peeler & Garrett v. Employers Ins. of
Wausau,
508 U. S.
286 (1993); Lampf, Pleva, Lipkind, Prupis & Petigrow v.
Gilbertson,
501 U. S.
350 (1991); Basic Inc. v. Levinson,
485 U. S. 224 (1988);
Bateman Eichler, Hill Richards, Inc. v. Berner,
472 U. S. 299 (1985); see
also Blue Chip Stamps, supra; Schlick v. Penn-Dixie Cement
Corp.,
173
507 F.2d
374 (CA2 1974); cf. Virginia Bankshares, Inc. v. Sandberg,
501 U. S. 1083
(1991) (§ 14); Schreiber v. Burlington Northern, Inc.,
472 U. S. 1 (1985)
(same).
The latter issue, determining the elements of the 10b-5 private
liability scheme, has posed difficulty because Congress did not
create a private § 10(b) cause of action and had no occasion to
provide guidance about the elements of a private liability scheme.
We thus have had "to infer how the 1934 Congress would have
addressed the issue[s] had the 10b-5 action been included as an
express provision in the 1934 Act." Musick, Peeler, supra, at
294.
With respect, however, to the first issue, the scope of conduct
prohibited by § 10(b), the text of the statute controls our
decision. In § 10(b), Congress prohibited manipulative or deceptive
acts in connection with the purchase or sale of securities. It
envisioned that the SEC would enforce the statutory prohibition
through administrative and injunctive actions. Of course, a private
plaintiff now may bring suit against violators of § 10(b). But the
private plaintiff may not bring a 10b-5 suit against a defendant
for acts not prohibited by the text of § 10(b). To the contrary,
our cases considering the scope of conduct prohibited by § 10(b) in
private suits have emphasized adherence to the statutory language,
"'[t]he starting point in every case involving construction of a
statute.''' Ernst & Ernst, supra, at 197 (quoting Blue Chip
Stamps, 421 U. S., at 756 (Powell, J., concurring)); see Chiarella,
supra, at 226; Santa Fe Industries, supra, at 472. We have refused
to allow 10b-5 challenges to conduct not prohibited by the text of
the statute.
In Ernst & Ernst, we considered whether negligent acts could
violate § 10(b). We first noted that "[t]he words 'manipulative or
deceptive' used in conjunction with 'device or contrivance'
strongly suggest that § 10(b) was intended to proscribe knowing or
intentional misconduct." 425 U. S., at 197. The SEC argued that the
broad congressional purposes behind the Act-to protect investors
from false and
174
misleading practices that might injure them-suggested that §
10(b) should also reach negligent conduct. Id., at 198. We rejected
that argument, concluding that the SEC's interpretation would "add
a gloss to the operative language of the statute quite different
from its commonly accepted meaning." Id., at 199.
In Santa Fe Industries, another case involving "the reach and
coverage of § 10(b)," 430 U. S., at 464, we considered whether §
10(b) "reached breaches of fiduciary duty by a majority against
minority shareholders without any charge of misrepresentation or
lack of disclosure." Id., at 470 (internal quotation marks
omitted). We held that it did not, reaffirming our decision in
Ernst & Ernst and emphasizing that the "language of § 10(b)
gives no indication that Congress meant to prohibit any conduct not
involving manipulation or deception." 430 U. S., at 473.
Later, in Chiarella, we considered whether § 10(b) is violated
when a person trades securities without disclosing inside
information. We held that § 10(b) is not violated under those
circumstances unless the trader has an independent duty of
disclosure. In reaching our conclusion, we noted that "not every
instance of financial unfairness constitutes fraudulent activity
under § 10(b)." 445 U. S., at 232. We stated that "the 1934 Act
cannot be read more broadly than its language and the statutory
scheme reasonably permit," and we found "no basis for applying ...
a new and different theory of liability" in that case. Id., at 234
(internal quotation marks omitted). "Section 10(b) is aptly
described as a catchall provision, but what it catches must be
fraud. When an allegation of fraud is based upon nondisclosure,
there can be no fraud absent a duty to speak." Id., at 234-235.
Adherence to the text in defining the conduct covered by § 10(b)
is consistent with our decisions interpreting other provisions of
the securities Acts. In Pinter v. Dahl,
486 U. S. 622 (1988), for
example, we interpreted the word "seller" in § 12(1) of the 1933
Act by "look[ing] first at the
175
language of § 12(1)." Id., at 641. Ruling that a seller is one
who solicits securities sales for financial gain, we rejected the
broader contention, "grounded in tort doctrine," that persons who
participate in the sale can also be deemed sellers. Id., at 649. We
found "no support in the statutory language or legislative history
for expansion of § 12(1),"
id., at 650, and stated that
"[t]he ascertainment of congressional intent with respect to the
scope of liability created by a particular section of the
Securities Act must rest primarily on the language of that
section." Id., at 653.
Last Term, the Court faced a similar issue, albeit outside the
securities context, in a case raising the question whether knowing
participation in a breach of fiduciary duty is actionable under the
Employee Retirement Income Security Act of 1974 (ERISA). Mertens v.
Hewitt Associates,
508 U. S. 248 (1993). The
petitioner in Mertens said that the knowing participation cause of
action had been available in the common law of trusts and should be
available under ERISA. We rejected that argument and noted that no
provision in ERISA "explicitly require[d] [nonfiduciaries] to avoid
participation (knowing or unknowing) in a fiduciary's breach of
fiduciary duty." Id., at 254. While plaintiffs had a remedy against
nonfiduciaries at common law, that was because "nonfiduciaries had
a
duty to the beneficiaries not to assist in the fiduciary's
breach." Id., at 255, n. 5. No comparable duty was set forth in
ERISA.
Our consideration of statutory duties, especially in cases
interpreting § 10(b), establishes that the statutory text controls
the definition of conduct covered by § 10(b). That bodes ill for
respondents, for "the language of Section 10(b) does not in terms
mention aiding and abetting." Brief for SEC as Amicus Curiae 8
(hereinafter Brief for SEC). To overcome this problem, respondents
and the SEC suggest (or hint at) the novel argument that the use of
the phrase "directly or indirectly" in the text of § 10(b) covers
aiding and abetting. See Brief for Respondents 15 ("Inclusion of
those who act 'indirectly' suggests a legislative purpose fully
176
consistent with the prohibition of aiding and abetting"); Brief
for SEC 8 ("[WJe think that when read in context [§ 10(b)] is broad
enough to encompass liability for such 'indirect' violations").
The federal courts have not relied on the "directly or
indirectly" language when imposing aiding and abetting liability
under § 10(b), and with good reason. There is a basic flaw with
this interpretation. According to respondents and the SEC, the
"directly or indirectly" language shows that "Congress ... intended
to reach all persons who engage, even if only indirectly, in
proscribed activities connected with securities transactions."
Ibid. The problem, of course, is that aiding and abetting liability
extends beyond persons who engage, even indirectly, in a proscribed
activity; aiding and abetting liability reaches persons who do not
engage in the proscribed activities at all, but who give a degree
of aid to those who do. A further problem with respondents'
interpretation of the "directly or indirectly" language is posed by
the numerous provisions of the 1934 Act that use the term in a way
that does not impose aiding and abetting liability. See §
7(f)(2)(C), 15 U. S. C. § 78g(f)(2)(C) (direct or indirect
ownership of stock); § 9(b)(2)-(3), 15 U. S. C. § 78i(b)(2)-(3)
(direct or indirect interest in put, call, straddle, option, or
privilege); § 13(d)(1), 15 U. S. C. § 78m(d)(1) (direct or indirect
ownership); § 16(a), 15 U. S. C. § 78p(a) (direct or indirect
ownership); § 20, 15 U. S. C. § 78t (direct or indirect control of
person violating Act). In short, respondents' interpretation of the
"directly or indirectly" language fails to support their suggestion
that the text of § 10(b) itself prohibits aiding and abetting. See
5B A. Jacobs, Litigation and Practice Under Rule 10b-5 §40.07, p.
2-465 (rev. 1993).
Congress knew how to impose aiding and abetting liability when
it chose to do so. See, e.
g., Act of Mar. 4, 1909, § 332,
35 Stat. 1152, as amended, 18 U. S. C. § 2 (general criminal aiding
and abetting statute); Packers and Stockyards Act, 1921, ch. 64, §
202, 42 Stat. 161, as amended, 7 U. S. C. § 192(g)
177
(1988 ed. and Supp. IV) (civil aiding and abetting provision);
see generally infra, at 181-185. If, as respondents seem to say,
Congress intended to impose aiding and abetting liability, we
presume it would have used the words "aid" and "abet" in the
statutory text. But it did not. Cf. Pinter v.
Dahl, 486 U.
S., at 650 ("When Congress wished to create such liability, it had
little trouble doing so"); Blue Chip Stamps, 421 U. S., at 734
("When Congress wished to provide a remedy to those who neither
purchase nor sell securities, it had little trouble in doing so
expressly").
We reach the uncontroversial conclusion, accepted even by those
courts recognizing a § 10(b) aiding and abetting cause of action,
that the text of the 1934 Act does not itself reach those who aid
and abet a § 10(b) violation. Unlike those courts, however, we
think that conclusion resolves the case. It is inconsistent with
settled methodology in § 10(b) cases to extend liability beyond the
scope of conduct prohibited by the statutory text. To be sure,
aiding and abetting a wrongdoer ought to be actionable in certain
instances. Cf. Restatement (Second) of Torts § 876(b) (1977). The
issue, however, is not whether imposing private civil liability on
aiders and abettors is good policy but whether aiding and abetting
is covered by the statute.
As in earlier cases considering conduct prohibited by § 10(b),
we again conclude that the statute prohibits only the making of a
material misstatement (or omission) or the commission of a
manipulative act. See Santa Fe Industries, 430 U. S., at 473
("language of § 10(b) gives no indication that Congress meant to
prohibit any conduct not involving manipulation or deception");
Ernst & Ernst, 425 U. S., at 214 ("When a statute speaks so
specifically in terms of manipulation and deception ... , we are
quite unwilling to extend the scope of the statute"). The
proscription does not include giving aid to a person who commits a
manipulative or deceptive act. We cannot amend the statute to
create liability for
178
acts that are not themselves manipulative or deceptive within
the meaning of the statute.
III
Because this case concerns the conduct prohibited by § 10(b),
the statute itself resolves the case, but even if it did not, we
would reach the same result. When the text of § 10(b) does not
resolve a particular issue, we attempt to infer "how the 1934
Congress would have addressed the issue had the 10b-5 action been
included as an express provision in the 1934 Act." Musick, Peeler,
508 U. S., at 294. For that inquiry, we use the express causes of
action in the securities Acts as the primary model for the § 10(b)
action. The reason is evident: Had the 73d Congress enacted a
private § 10(b) right of action, it likely would have designed it
in a manner similar to the other private rights of action in the
securities Acts. See
id., at 294-297.
In Musick, Peeler, for example, we recognized a right to
contribution under § 10(b). We held that the express rights of
contribution contained in §§ 9 and 18 of the Acts were "important
... feature[s] of the federal securities laws and that consistency
require[d] us to adopt a like contribution rule for the right of
action existing under Rule 10b-5." Id., at 297. In Basic Inc. v.
Levinson, 485 U. S., at 243, we decided that a plaintiff in a 10b-5
action must prove that he relied on the defendant's
misrepresentation in order to recover damages. In so holding, we
stated that the "analogous express right of action"-§ 18(a) of the
1934 Act"includes a reliance requirement." Ibid. And in Blue Chip
Stamps, we held that a 10b-5 plaintiff must have purchased or sold
the security to recover damages for the defendant's
misrepresentation. We said that "[t]he principal express
nonderivative private civil remedies, created by Congress
contemporaneously with the passage of § 10(b), ... are by their
terms expressly limited to purchasers or sellers of securities."
421 U. S., at 735-736.
179
Following that analysis here, we look to the express private
causes of action in the 1933 and 1934 Acts. See, e.
g.,
Musick, Peeler, supra, at 295-297; Blue Chip Stamps, supra, at
735-736. In the 1933 Act, § 11 prohibits false statements or
omissions of material fact in registration statements; it
identifies the various categories of defendants subject to
liability for a violation, but that list does not include aiders
and abettors. 15 U. S. C. § 77k. Section 12 prohibits the sale of
unregistered, nonexempt securities as well as the sale of
securities by means of a material misstatement or omission; and it
limits liability to those who offer or sell the security. 15 U. S.
C. § 77l. In the 1934 Act, § 9 prohibits any person from engaging
in manipulative practices such as wash sales, matched orders, and
the like. 15 U. S. C. § 78i. Section 16 regulates short-swing
trading by owners, directors, and officers. 15 U. S. C. § 78p.
Section 18 prohibits any person from making misleading statements
in reports filed with the SEC. 15 U. S. C. § 78r. And § 20A, added
in 1988, prohibits any person from engaging in insider trading. 15
U. S. C. § 78t-1.
This survey of the express causes of action in the securities
Acts reveals that each (like § 10(b)) specifies the conduct for
which defendants may be held liable. Some of the express causes of
action specify categories of defendants who may be liable; others
(like § 10(b)) state only that "any person" who commits one of the
prohibited acts may be held liable. The important point for present
purposes, however, is that none of the express causes of action in
the 1934 Act further imposes liability on one who aids or abets a
violation. Cf. 7 U. S. C. § 25(a)(1) (1988 ed. and Supp. IV)
(Commodity Exchange Act's private civil aiding and abetting
provision).
From the fact that Congress did not attach private aiding and
abetting liability to any of the express causes of action in the
securities Acts, we can infer that Congress likely would not have
attached aiding and abetting liability to § 10(b) had it provided a
private § 10(b) cause of action. See
180
Musick, Peeler, supra, at 297 ("[C]onsistency requires us to
adopt a like contribution rule for the right of action existing
under Rule 10b-5"). There is no reason to think that Congress would
have attached aiding and abetting liability only to § 10(b) and not
to any of the express private rights of action in the Act. In Blue
Chip Stamps, we noted that it would be "anomalous to impute to
Congress an intention to expand the plaintiff class for a
judicially implied cause of action beyond the bounds it delineated
for comparable express causes of action." 421 U. S., at 736. Here,
it would be just as anomalous to impute to Congress an intention in
effect to expand the defendant class for 10b-5 actions beyond the
bounds delineated for comparable express causes of action.
Our reasoning is confirmed by the fact that respondents'
argument would impose 10b-5 aiding and abetting liability when at
least one element critical for recovery under 10b-5 is absent:
reliance. A plaintiff must show reliance on the defendant's
misstatement or omission to recover under 10b-5. Basic Inc. v.
Levinson, supra, at 243. Were we to allow the aiding and abetting
action proposed in this case, the defendant could be liable without
any showing that the plaintiff relied upon the aider and abettor's
statements or actions. See also Chiarella, 445 U. S., at 228
(omission actionable only where duty to disclose arises from
specific relationship between two parties). Allowing plaintiffs to
circumvent the reliance requirement would disregard the careful
limits on 10b-5 recovery mandated by our earlier cases.
IV
Respondents make further arguments for imposition of § 10(b)
aiding and abetting liability, none of which leads us to a
different answer.
A
The text does not support their point, but respondents and some
amici invoke a broad-based notion of congressional
181
intent. They say that Congress legislated with an understanding
of general principles of tort law and that aiding and abetting
liability was "well established in both civil and criminal actions
by 1934." Brief for SEC 10. Thus, "Congress intended to include"
aiding and abetting liability in the 1934 Act. Id., at 11. A brief
history of aiding and abetting liability serves to dispose of this
argument.
Aiding and abetting is an ancient criminal law doctrine.
See United States v. Peoni, 100 F.2d 401, 402 (CA2 1938); 1 M.
Hale, Pleas of the Crown 615 (1736). Though there is no federal
common law of crimes, Congress in 1909 enacted what is now 18 U. S.
C. § 2, a general aiding and abetting statute applicable to all
federal criminal offenses. Act of Mar. 4, 1909, § 332, 35 Stat.
1152. The statute decrees that those who provide knowing aid to
persons committing federal crimes, with the intent to facilitate
the crime, are themselves committing a crime. Nye & Nissen v.
United States,
336 U.
S. 613, 619 (1949).
The Restatement of Torts, under a concert of action principle,
accepts a doctrine with rough similarity to criminal aiding and
abetting. An actor is liable for harm resulting to a third person
from the tortious conduct of another "if he ... knows that the
other's conduct constitutes a breach of duty and gives substantial
assistance or encouragement to the other .... " Restatement
(Second) of Torts § 876(b) (1977); see also W. Keeton, D. Dobbs, R.
Keeton, & D. Owen, Prosser and Keeton on Law of Torts 322-324
(5th ed. 1984). The doctrine has been at best uncertain in
application, however. As the Court of Appeals for the District of
Columbia Circuit noted in a comprehensive opinion on the subject,
the leading cases applying this doctrine are statutory securities
cases, with the common-law precedents "largely confined to isolated
acts of adolescents in rural society." Halberstam v. Welch,
705 F.2d
472, 489 (1983). Indeed, in some States, it is still unclear
whether there is aiding and abetting tort liability of the kind set
forth in § 876(b) of the Restatement.
182
See, e. g., FDIC v. S. Prawer & Co., 829 F. Supp. 453, 457
(Me. 1993) (in Maine, "[i]t is clear ... that aiding and abetting
liability did not exist under the common law, but was entirely a
creature of statute"); In re Asbestos School Litigation, No.
83-0268, 1991 U. S. Dist. LEXIS 10471, *34 (ED Pa., July 18, 1991)
(cause of action under Restatement § 876 "has not yet been applied
as a basis for liability" by Pennsylvania courts); Meadow Limited
Partnership v. Heritage Savings and Loan Assn., 639 F. Supp. 643,
653 (ED Va. 1986) (aiding and abetting tort based on Restatement §
876 "not expressly recognized by the state courts of the
Commonwealth" of Virginia); Sloane v. Fauque, 239 Mont. 383, 385,
784 P. 2d 895, 896 (1989) (aiding and abetting tort liability is
issue "of first impression in Montana").
More to the point, Congress has not enacted a general civil
aiding and abetting statute-either for suits by the Government
(when the Government sues for civil penalties or injunctive relief)
or for suits by private parties. Thus, when Congress enacts a
statute under which a person may sue and recover damages from a
private defendant for the defendant's violation of some statutory
norm, there is no general presumption that the plaintiff may also
sue aiders and abettors. See, e. g., Electronic Laboratory Supply
Co. v. Cullen,
977 F.2d
798, 805-806 (CA3 1992).
Congress instead has taken a statute-by-statute approach to
civil aiding and abetting liability. For example, the Internal
Revenue Code contains a full section governing aiding and abetting
liability, complete with description of scienter and the penalties
attached. 26 U. S. C. § 6701 (1988 ed. and Supp. IV). The Commodity
Exchange Act contains an explicit aiding and abetting provision
that applies to private suits brought under that Act. 7 U. S. C. §
25(a)(1) (1988 ed. and Supp. IV); see also, e.
g., 12 U. S.
C. § 93(b)(8) (1988 ed. and Supp. IV) (National Bank Act defines
violations to include "aiding or abetting"); 12 U. S. C. § 504(h)
(1988 ed. and Supp. IV) (Federal Reserve Act defines violations to
include
183
"aiding or abetting"); Packers and Stockyards Act, 1921, ch. 64,
§ 202, 42 Stat. 161, 7 U. S. C. § 192(g) (civil aiding and abetting
provision). Indeed, various provisions of the securities laws
prohibit aiding and abetting, although violations are remediable
only in actions brought by the SEC. See, e.
g., 15 U. S. C.
§ 78o(b)(4)(E) (1988 ed. and Supp. IV) (SEC may proceed against
brokers and dealers who aid and abet a violation of the securities
laws); Insider Trading Sanctions Act of 1984, Pub. L. 98-376, 98
Stat. 1264 (civil penalty provision added in 1984 applicable to
those who aid and abet insider trading violations); 15 U. S. C. §
78u-2 (1988 ed., Supp. IV) (civil penalty provision added in 1990
applicable to brokers and dealers who aid and abet various
violations of the Act).
With this background in mind, we think respondents' argument
based on implicit congressional intent can be taken in one of three
ways. First, respondents might be saying that aiding and abetting
should attach to all federal civil statutes, even laws that do not
contain an explicit aiding and abetting provision. But neither
respondents nor their amici cite, and we have not found, any
precedent for that vast expansion of federal law. It does not
appear Congress was operating on that assumption in 1934, or since
then, given that it has been quite explicit in imposing civil
aiding and abetting liability in other instances. We decline to
recognize such a comprehensive rule with no expression of
congressional direction to do so.
Second, on a more narrow ground, respondents' congressional
intent argument might be interpreted to suggest that the 73d
Congress intended to include aiding and abetting only in § 10(b).
But nothing in the text or history of § 10(b) even implies that
aiding and abetting was covered by the statutory prohibition on
manipulative and deceptive conduct.
Third, respondents' congressional intent argument might be
construed as a contention that the 73d Congress intended to impose
aiding and abetting liability for all of the express
184
causes of action contained in the 1934 Act-and thus would have
imposed aiding and abetting liability in § 10(b) actions had it
enacted a private § 10(b) right of action. As we have explained,
however, none of the express private causes of action in the Act
imposes aiding and abetting liability, and there is no evidence
that Congress intended that liability for the express causes of
action.
Even assuming, moreover, a deeply rooted background of aiding
and abetting tort liability, it does not follow that Congress
intended to apply that kind of liability to the private causes of
action in the securities Acts. Cf. Mertens, 508 U. S., at 254
(omission of knowing participation liability in ERISA "appears all
the more deliberate in light of the fact that 'knowing
participation' liability on the part of both cotrustees and third
persons was well established under the common law of trusts"). In
addition, Congress did not overlook secondary liability when it
created the private rights of action in the 1934 Act. Section 20 of
the 1934 Act imposes liability on "controlling person[s]" -persons
who "contro[l] any person liable under any provision of this
chapter or of any rule or regulation thereunder." 15 U. S. C. §
78t(a). This suggests that "[w]hen Congress wished to create such
[secondary] liability, it had little trouble doing so." Pinter v.
Dahl, 486 U. S., at 650; cf. Touche Ross & Co. v. Redington,
442 U. S. 560,
572 (1979) ("Obviously, then, when Congress wished to provide a
private damages remedy, it knew how to do so and did so
expressly"); see also Fischel, 69 Calif. L. Rev., at 96-98. Aiding
and abetting is "a method by which courts create secondary
liability" in persons other than the violator of the statute.
Pinter v. Dahl, supra, at 648, n. 24. The fact that Congress chose
to impose some forms of secondary liability, but not others,
indicates a deliberate congressional choice with which the courts
should not interfere.
We note that the 1929 Uniform Sale of Securities Act contained a
private aiding and abetting cause of action. And at
185
the time Congress passed the 1934 Act, the blue sky laws of 11
States and the Territory of Hawaii provided a private right of
action against those who aided a fraudulent or illegal sale of
securities. See Abrams, The Scope of Liability Under Section 12 of
the Securities Act of 1933: "Participation" and the Pertinent
Legislative Materials, 15 Ford. Urb. L. J. 877, 945, and n. 423
(1987) (listing provisions). Congress enacted the 1933 and 1934
Acts against this backdrop, but did not provide for aiding and
abetting liability in any of the private causes of action it
authorized.
In sum, it is not plausible to interpret the statutory silence
as tantamount to an implicit congressional intent to impose § 10(b)
aiding and abetting liability.
B
When Congress reenacts statutory language that has been given a
consistent judicial construction, we often adhere to that
construction in interpreting the reenacted statutory language. See,
e. g., Keene Corp. v. United States,
508 U. S. 200, 212-213
(1993); Pierce v. Underwood,
487 U. S. 552, 567
(1988); Lorillard v. Pons,
434 U. S. 575, 580-581
(1978). Congress has not reenacted the language of § 10(b) since
1934, however, so we need not determine whether the other
conditions for applying the reenactment doctrine are present. Cf.
Fogerty v. Fantasy, Inc.,
510 U. S. 517, 527-532
(1994).
Nonetheless, the parties advance competing arguments based on
other post-1934 legislative developments to support their differing
interpretations of § 10(b). Respondents note that 1983 and 1988
Committee Reports, which make oblique references to aiding and
abetting liability, show that those Congresses interpreted § 10(b)
to cover aiding and abetting. H. R. Rep. No. 100-910, pp. 27-28
(1988); H. R. Rep. No. 355, p. 10 (1983). But "[w]e have observed
on more than one occasion that the interpretation given by one
Congress (or a committee or Member thereof) to an earlier statute
is of little assistance in discerning the meaning of that
statute."
186
Public Employees Retirement System of Ohio v. Betts,
492 U. S. 158, 168
(1989); see Weinberger v. Rossi,
456 U. S. 25, 35 (1982);
Consumer Product Safety Comm'n v. GTE Sylvania, Inc.,
447 U. S. 102, 118, and
n. 13 (1980).
Respondents observe that Congress has amended the securities
laws on various occasions since 1966, when courts first began to
interpret § 10(b) to cover aiding and abetting, but has done so
without providing that aiding and abetting liability is not
available under § 10(b). From that, respondents infer that these
Congresses, by silence, have acquiesced in the judicial
interpretation of § 10(b). We disagree. This Court has reserved the
issue of 10b-5 aiding and abetting liability on two previous
occasions. Herman & MacLean v. Huddleston, 459 U. S., at 379,
n. 5; Ernst & Ernst, 425 U. S., at 191-192, n. 7. Furthermore,
our observations on the acquiescence doctrine indicate its
limitations as an expression of congressional intent. "It does not
follow ... that Congress' failure to overturn a statutory precedent
is reason for this Court to adhere to it. It is 'impossible to
assert with any degree of assurance that congressional failure to
act represents' affirmative congressional approval of the [courts']
statutory interpretation .... Congress may legislate, moreover,
only through the passage of a bill which is approved by both Houses
and signed by the President. See U. S. Const., Art. I, § 7, cl. 2.
Congressional inaction cannot amend a duly enacted statute."
Patterson v. McLean Credit Union,
491 U. S. 164, 175, n. 1
(1989) (quoting Johnson v. Transportation Agency, Santa Clara Cty.,
480 U. S. 616,
672 (1987) (SCALIA, J., dissenting)); see Helvering v. Hallock,
309 U. S. 106,
121 (1940) (Frankfurter, J.) ("[WJe walk on quicksand when we try
to find in the absence of corrective legislation a controlling
legal principle").
Central Bank, for its part, points out that in 1957, 1959, and
1960, bills were introduced that would have amended the securities
laws to make it "unlawful ... to aid, abet, counsel, command,
induce, or procure the violation of any provision"
187
of the 1934 Act. S. 1179, 86th Cong., 1st Sess. § 22 (1959); see
also S. 3770, 86th Cong., 2d Sess. § 20 (1960); S. 2545, 85th
Cong., 1st Sess. § 20 (1957). These bills prompted "industry fears
that private litigants, not only the SEC, may find in this section
a vehicle by which to sue aiders and abettors," and the bills were
not passed. SEC Legislation: Hearings before a Subcommittee of the
Senate Committee on Banking and Currency on S. 1178, S. 1179, S.
1180, S. 1181, and S. 1182, 86th Cong., 1st Sess., 288, 370 (1959).
According to Central Bank, these proposals reveal that those
Congresses interpreted § 10(b) not to cover aiding and abetting. We
have stated, however, that failed legislative proposals are "a
particularly dangerous ground on which to rest an interpretation of
a prior statute." Pension Benefit Guaranty Corporation v. LTV
Corp.,
496 U. S.
633, 650 (1990). "Congressional inaction lacks persuasive
significance because several equally tenable inferences may be
drawn from such inaction, including the inference that the existing
legislation already incorporated the offered change." Ibid.
(internal quotation marks omitted); see United States v. Wise,
370 U. S. 405,
411 (1962).
It is true that our cases have not been consistent in rejecting
arguments such as these. Compare Flood v. Kuhn,
407 U. S. 258, 281-282
(1972), with Pension Benefit Guaranty Corporation, supra, at 650;
compare Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran,
456 U. S. 353,
381-382 (1982), with Aaron v. SEC, 446 U. S., at 694, n. 11. As a
general matter, however, we have stated that these arguments
deserve little weight in the interpretive process. Even were that
not the case, the competing arguments here would not point to a
definitive answer. We therefore reject them. As we stated last
Term, Congress has acknowledged the 10b-5 action without any
further attempt to define it. Musick, Peeler, 508 U. S., at
293-294. We find our role limited when the issue is the scope of
conduct prohibited by the
188
statute. Id., at 291-292. That issue is our concern here, and we
adhere to the statutory text in resolving it.
C
The SEC points to various policy arguments in support of the
10b-5 aiding and abetting cause of action. It argues, for example,
that the aiding and abetting cause of action deters secondary
actors from contributing to fraudulent activities and ensures that
defrauded plaintiffs are made whole. Brief for SEC 16-17.
Policy considerations cannot override our interpretation of the
text and structure of the Act, except to the extent that they may
help to show that adherence to the text and structure would lead to
a result "so bizarre" that Congress could not have intended it.
Demarest v. Manspeaker,
498 U. S. 184, 191
(1991); cf. Pinter v. Dahl, 486 U. S., at 654 ("[W]e need not
entertain Pinter's policy arguments"); Santa Fe Industries, 430 U.
S., at 477 (language sufficiently clear to be dispositive). That is
not the case here.
Extending the 10b-5 cause of action to aiders and abettors no
doubt makes the civil remedy more far reaching, but it does not
follow that the objectives of the statute are better served.
Secondary liability for aiders and abettors exacts costs that may
disserve the goals of fair dealing and efficiency in the securities
markets.
As an initial matter, the rules for determining aiding and
abetting liability are unclear, in "an area that demands certainty
and predictability." Pinter v. Dahl, 486 U. S., at 652. That leads
to the undesirable result of decisions "made on an ad hoc basis,
offering little predictive value" to those who provide services to
participants in the securities business. Ibid. "[S]uch a shifting
and highly fact-oriented disposition of the issue of who may [be
liable for] a damages claim for violation of Rule 10b-5" is not a
"satisfactory basis for a rule of liability imposed on the conduct
of business transactions." Blue Chip Stamps, 421 U. S., at 755; see
also Virginia Bank-
189
shares, 501 U. S., at 1106 ("The issues would be hazy, their
litigation protracted, and their resolution unreliable. Given a
choice, we would reject any theory ... that raised such
prospects"). Because of the uncertainty of the governing rules,
entities subject to secondary liability as aiders and abettors may
find it prudent and necessary, as a business judgment, to abandon
substantial defenses and to pay settlements in order to avoid the
expense and risk of going to trial.
In addition, "litigation under Rule 10b-5 presents a danger of
vexatiousness different in degree and in kind from that which
accompanies litigation in general." Blue Chip Stamps, supra, at
739; see Virginia Bankshares, supra, at 1105; S. Rep. No. 792, 73d
Cong., 2d Sess., p. 21 (1934) (attorney's fees provision is
protection against strike suits). Litigation under 10b-5 thus
requires secondary actors to expend large sums even for pretrial
defense and the negotiation of settlements. See 138 Congo Rec.
S12605 (Aug. 12, 1992) (remarks of Sen. Sanford) (asserting that in
83% of 10b-5 cases major accounting firms pay $8 in legal fees for
every $1 paid in claims).
This uncertainty and excessive litigation can have ripple
effects. For example, newer and smaller companies may find it
difficult to obtain advice from professionals. A professional may
fear that a newer or smaller company may not survive and that
business failure would generate securities litigation against the
professional, among others. In addition, the increased costs
incurred by professionals because of the litigation and settlement
costs under 10b-5 may be passed on to their client companies, and
in turn incurred by the company's investors, the intended
beneficiaries of the statute. See Winter, Paying Lawyers,
Empowering Prosecutors, and Protecting Managers: Raising the Cost
of Capital in America, 42 Duke L. J. 945, 948-966 (1993).
We hasten to add that competing policy arguments in favor of
aiding and abetting liability can also be advanced. The point here,
however, is that it is far from clear that Congress
190
in 1934 would have decided that the statutory purposes would be
furthered by the imposition of private aider and abettor
liability.
D
At oral argument, the SEC suggested that 18 U. S. C. § 2 is
"significant" and "very important" in this case. Tr. of Oral Arg.
41, 43. At the outset, we note that this contention is inconsistent
with the SEC's argument that recklessness is a sufficient scienter
for aiding and abetting liability. Criminal aiding and abetting
liability under § 2 requires proof that the defendant "in some sort
associate[d] himself with the venture, that he participate[d] in it
as in something that he wishe[d] to bring about, that he [sought]
by his action to make it succeed." Nye & Nissen, 336 U. S., at
619 (internal quotation marks omitted). But recklessness, not
intentional wrongdoing, is the theory underlying the aiding and
abetting allegations in the case before us.
Furthermore, while it is true that an aider and abettor of a
criminal violation of any provision of the 1934 Act, including §
10(b), violates 18 U. S. C. § 2, it does not follow that a private
civil aiding and abetting cause of action must also exist. We have
been quite reluctant to infer a private right of action from a
criminal prohibition alone; in Cort v. Ash,
422 U. S. 66, 80 (1975),
for example, we refused to infer a private right of action from "a
bare criminal statute." And we have not suggested that a private
right of action exists for all injuries caused by violations of
criminal prohibitions. See Touche Ross, 442 U. S., at 568
("[Q]uestion of the existence of a statutory cause of action is, of
course, one of statutory construction"). If we were to rely on this
reasoning now, we would be obliged to hold that a private right of
action exists for every provision of the 1934 Act, for it is a
criminal violation to violate any of its provisions. 15 U. S. C. §
78ff. And thus, given 18 U. S. C. § 2, we would also have to hold
that a civil aiding and abetting cause of action is available for
every provision of the Act. There would be no logical
191
stopping point to this line of reasoning: Every criminal statute
passed for the benefit of some particular class of persons would
carry with it a concomitant civil damages cause of action.
This approach, with its far-reaching consequences, would work a
significant shift in settled interpretive principles regarding
implied causes of action. See, e. g., Transamerica Mortgage
Advisors, Inc. v. Lewis,
444 U. S. 11 (1979). We
are unwilling to reverse course in this case. We decline to rely
only on 18 U. S. C. § 2 as the basis for recognizing a private
aiding and abetting right of action under § 10(b).
V
Because the text of § 10(b) does not prohibit aiding and
abetting, we hold that a private plaintiff may not maintain an
aiding and abetting suit under § 10(b). The absence of § 10(b)
aiding and abetting liability does not mean that secondary actors
in the securities markets are always free from liability under the
securities Acts. Any person or entity, including a lawyer,
accountant, or bank, who employs a manipulative device or makes a
material misstatement (or omission) on which a purchaser or seller
of securities relies may be liable as a primary violator under
10b-5, assuming
all of the requirements for primary
liability under Rule 10b-5 are met. See Fischel, 69 Calif. L. Rev.,
at 107-108. In any complex securities fraud, moreover, there are
likely to be multiple violators; in this case, for example,
respondents named four defendants as primary violators. App.
24-25.
Respondents concede that Central Bank did not commit a
manipulative or deceptive act within the meaning of § 10(b). Tr. of
Oral Arg. 31. Instead, in the words of the complaint, Central Bank
was "secondarily liable under § 10(b) for its conduct in aiding and
abetting the fraud." App. 26. Because of our conclusion that there
is no private aiding and abetting liability under § 10(b), Central
Bank may not be held liable as an aider and abettor. The District
Court's grant
192
STEVENS, J., dissenting
of summary judgment to Central Bank was proper, and the judgment
of the Court of Appeals is
Reversed.
JUSTICE STEVENS, with whom JUSTICE BLACKMUN, JusTICE SOUTER, and
JUSTICE GINSBURG join, dissenting.
The main themes of the Court's opinion are that the text of §
10(b) of the Securities Exchange Act of 1934 (Exchange Act), 15 U.
S. C. § 78j(b), does not expressly mention aiding and abetting
liability, and that Congress knows how to legislate. Both
propositions are unexceptionable, but neither is reason to
eliminate the private right of action against aiders and abettors
of violations of § 10(b) and the Securities and Exchange
Commission's (SEG's) Rule 10b-5. Because the majority gives short
shrift to a long history of aider and abettor liability under §
10(b) and Rule 10b-5, and because its rationale imperils other
well-established forms of secondary liability not expressly
addressed in the securities laws, I respectfully dissent.
In hundreds of judicial and administrative proceedings in every
Circuit in the federal system, the courts and the SEC have
concluded that aiders and abettors are subject to liability under §
10(b) and Rule 10b-5. See 5B A. Jacobs, Litigation and Practice
Under Rule 10b-5 § 40.02 (rev. ed. 1993) (citing cases). While we
have reserved decision on the legitimacy of the theory in two cases
that did not present it, all 11 Courts of Appeals to have
considered the question have recognized a private cause of action
against aiders and abettors under § 10(b) and Rule 10b-5.1 The
early aiding
1 See, e. g., Cleary v. Perfectune, Inc.,
700
F.2d 774, 777
(CAI1983); IIT v. Cornfeld,
619 F.2d
909, 922 (CA2 1980); Monsen v. Consolidated Dressed Beef Co.,
579 F.2d
793, 799-800
(CA3 1978); Schatz v. Rosenberg,
943 F.2d
485, 496-497 (CA4 1991); Fine v. American Solar King Corp.,
919 F.2d
290, 300 (CA5 1990); Moore v. Fenex, Inc.,
809 F.2d
297, 303 (CA6), cert. denied sub nom. Moore v. Frost, 483 U. S.
1006 (1987); Schlifke v. Seafirst Corp.,
866
F.2d 935, 947 (CA7 1989); K & S Partnership v. Continental
Bank, N. A.,
952 F.2d
971, 977
(CA8 1991); Levine v.
193
and abetting decisions relied upon principles borrowed from tort
law; in those cases, judges closer to the times and climate of the
73d Congress than we concluded that holding aiders and abettors
liable was consonant with the Exchange Act's purpose to strengthen
the antifraud remedies of the common law.2 One described the aiding
and abetting theory, grounded in "general principles of tort law,"
as a "logical and natural complement" to the private § 10(b) action
that furthered the Exchange Act's purpose of "creation and
maintenance of a post-issuance securities market that is free from
fraudulent practices." Brennan v. Midwestern United Life Ins. Co.,
259 F. Supp. 673, 680 (ND Ind. 1966) (borrowing
Diamanthuset, Inc.,
950 F.2d
1478, 1483 (CA9 1991); Farlow v. Peat, Marwick, Mitchell &
Co.,
956 F.2d
982, 986 (CAW 1992); Schneberger v. Wheeler,
859 F.2d
1477, 1480
(CAll 1988). The only court not to have
squarely recognized aiding and abetting in private § 10(b) actions
has done so in an action brought by the SEC, see Dirks v. SEC,
681 F.2d
824, 844 (CADC), rev'd on other grounds,
463 U. S. 646 (1983), and
has suggested that such a claim was available in private actions,
see Zoelsch v. Arthur Andersen & Co.,
824
F.2d 27, 35-36 (CADC 1987). The Seventh Circuit's test differs
markedly from the other Circuits' in that it requires that the
aider and abettor "commit one of the 'manipulative or deceptive'
acts prohibited under section 10(b) and rule 10b-5." Robin v.
Arthur Young
& Co.,
915 F.2d
1120, 1123
(CA7 1990).
2When § 10(b) was enacted, aiding and abetting liability was
widely, albeit not universally, recognized in the law of torts and
in state legislation prohibiting misrepresentation in the marketing
of securities. See, e.
g., 1 T. Cooley, Law of Torts 244 (3d
ed. 1906) ("All who actively participate in any manner in the
commission of a tort, or who command, direct, advise, encourage,
aid or abet its commission, are jointly and severally liable
therefor"). Section 16(1) of the Uniform Sale of Securities Act, 9
U. L. A. 385 (1932), conferred a right to sue aiders and abettors
of securities fraud, as did the blue sky laws of 11 States. See
Abrams, The Scope of Liability Under Section 12 of the Securities
Act of 1933: "Participation" and the Pertinent Legislative
Materials, 15 Ford. Urb. L. J. 877, 945 (1987). The courts'
reliance on common-law tort principles in defining the scope of
liability under § lO(b) was by no means an anomaly. See, e. g.,
American Soc. of Mechanical Engineers, Inc. v. Hydrolevel Corp.,
456 U. S. 556,
565-574 (1982).
194
STEVENS, J., dissenting
formulation from the Restatement of Torts § 876(b) (1939)),
later opinion, 286 F. Supp. 702 (1968), aff'd,
417 F.2d
147 (CA7 1969), cert. denied, 397 U. S. 989 (1970). See also
Pettit v. American Stock Exchange, 217 F. Supp. 21, 28 (SDNY
1963).
The Courts of Appeals have usually applied a familiar three-part
test for aider and abettor liability, patterned on the Restatement
of Torts formulation, that requires (i) the existence of a primary
violation of § 10(b) or Rule 10b-5, (ii) the defendant's knowledge
of (or recklessness as to) that primary violation, and (iii)
"substantial assistance" of the violation by the defendant. See, e.
g., Cleary v. Perfectune, Inc.,
700 F.2d
774, 776-777 (CAl1983); IIT, An Int'l Investment Trust v. Co
rnfeld,
619 F.2d
909, 922 (CA2 1980). If indeed there has been "continuing
confusion" concerning the private right of action against aiders
and abettors, that confusion has not concerned its basic structure,
still less its "existence." See ante, at 170. Indeed, in this case,
petitioner assumed the existence of a right of action against
aiders and abettors, and sought review only of the subsidiary
questions whether an indenture trustee could be found liable as an
aider and abettor absent a breach of an indenture agreement or
other duty under state law, and whether it could be liable as an
aider and abettor based only on a showing of recklessness. These
questions, it is true, have engendered genuine disagreement in the
Courts of Appeals.3 But instead of simply addressing the questions
presented by the parties, on which the law really was unsettled,
the Court sua sponte directed
3 Compare, for example, the discussion in the opinion below of
scienter in cases in which defendant has no disclosure duty,
969 F.2d
891, 902-903 (CAlO 1993), with that in Schatz v. Rosenberg,
943 F.2d
485, 496 (CA4 1991), and Ross v. Bolton,
904
F.2d 819,824 (CA2 1990). See also Kuehnle, Secondary Liability
Under The Federal Securities Laws-Aiding and Abetting, Conspiracy,
Controlling Person, and Agency: Common-Law Principles and The
Statutory Scheme, 14 J. Corp. L. 313, 323-324, and n. 53
(1988).
195
the parties to address a question on which even the petitioner
justifiably thought the law was settled, and reaches out to
overturn a most considerable body of precedent.4
Many of the observations in the majority's opinion would be
persuasive if we were considering whether to recognize a private
right of action based upon a securities statute enacted recently.
Our approach to implied causes of action, as to other matters of
statutory construction, has changed markedly since the Exchange
Act's passage in 1934. At that time, and indeed until quite
recently, courts regularly assumed, in accord with the traditional
common-law presumption, that a statute enacted for the benefit of a
particular class conferred on members of that class the right to
sue violators of that statute.5 Moreover, shortly before the
Exchange Act was passed, this Court instructed that such "remedial"
legislation should receive "a broader and more liberal
interpretation than that to be drawn from mere dictionary
definitions of the words employed by Congress." Piedmont &
Northern R. Co. v. ICC,
286 U. S. 299, 311
(1932). There is a risk of anachronistic error in applying our
current approach to implied causes of action, ante, at 176177, to a
statute enacted when courts commonly read stat-
4 "As I have said before, 'the adversary process functions most
effectively when we rely on the initiative of lawyers, rather than
the activism of judges, to fashion the questions for review.' New
Jersey v. T. L. 0.,
468 U. S. 1214, 1216
(1984) (dissenting from order directing reargument)." Patterson v.
McLean Credit Union,
485 U. S. 617,623 (1988)
(STEVENS, J., dissenting from order directing reargument).
5 See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran,
456 U. S. 353,
374-378 (1982); Middlesex County Sewerage Authority v. National Sea
Clammers Assn.,
453 U.
S. 1, 22-25 (1981) (STEVENS, J., concurring in judgment in part
and dissenting in part); California v. Sierra Club,
451 U. S. 287, 298-301
(1981) (STEVENS, J., concurring). A discussion of the common-law
presumption is found in Justice Pitney's opinion for the Court in
Texas & Pacific R. Co. v. Rigsby,
241 U. S. 33, 39-40
(1916). See also, e. g., Texas & New Orleans R. Co. v. Railway
Clerks,
281 U. S.
548, 568570 (1930).
196
STEVENS, J., dissenting
utes of this kind broadly to accord with their remedial purposes
and regularly approved rights to sue despite statutory silence.
Even had § 10(b) not been enacted against a backdrop of liberal
construction of remedial statutes and judicial favor toward implied
rights of action, I would still disagree with the majority for the
simple reason that a "settled construction of an important federal
statute should not be disturbed unless and until Congress so
decides." Reves v. Ernst
& Young,
494 U. S. 56, 74 (1990)
(STEVENS, J., concurring). See Blue Chip Stamps v. Manor Drug
Stores,
421 U. S.
723, 733 (1975) (the "longstanding acceptance by the courts"
and "Congress' failure to reject" rule announced in landmark Court
of Appeals decision favored retention of the rule).6 A policy of
respect for consistent judicial and administrative interpretations
leaves it to elected representatives to assess settled law and to
evaluate the merits and demerits of changing it.7 Even when there
is no affirmative evidence of rati-
6 None of the cases the majority relies upon to support its
strict construction of § 10(b), ante, at 173-175, even arguably
involved a settled course of lower court decisions. See Mertens v.
Hewitt Associates,
508 U. S. 248 (1993);
Pinter v. Dahl,
486
U. S. 622, 635, n. 12 (1988); Chiarella v. United States,
445 U. S. 222,
229, n. 11 (1980); Sante Fe Industries, Inc. v. Green,
430 U. S. 462, 475-476,
n. 15 (1977); Ernst & Ernst v. Hochfelder,
425 U. S. 185, 191-192,
n. 7 (1976).
7 Of course, when a decision of this Court upsets settled law,
Congress may step in to reinstate the old law, cf. Securities
Exchange Act §27A, as added by Pub. L. 102-242, §476, 105 Stat.
2236, 2387, codified at 15 U. S. C. § 78aa-1 (1988 ed., Supp. IV)
(providing that relevant state limitations period should govern
actions pending when Lamp!, Pleva, Lipkind, Prupis & Petigrow
v. Gilbertson,
501 U.
S. 350 (1991), came down). However, we should not lightly heap
new tasks on the Legislature's already full plate. Moreover,
congressional efforts to address the problems posed by judicial
decisions that disrupt settled law frequently create special
difficulties of their own. See, e. g., Plaut v. Spendthrift Farm,
Inc.,
1 F.3d
1487 (CA6 1993) (holding §27A unconstitutional), cert. pending,
No. 931121; Pacific Mut. Life Ins. Co. v. First RepublicBank Corp.,
997 F.2d
39 (CA5 1993) (upholding it), cert. granted, 510 U. S.
1039 (1994). See also Rivers v. Roadway Express, Inc., post, at
304-313.
197
fication, the Legislature's failure to reject a consistent
judicial or administrative construction counsels hesitation from a
court asked to invalidate it. Cf. Burnet v. Coronado Oil
& Gas Co.,
285 U. S. 393, 406 (1932)
(Brandeis, J., dissenting). Here, however, the available evidence
suggests congressional approval of aider and abettor liability in
private § 10(b) actions. In its comprehensive revision of the
Exchange Act in 1975, Congress left untouched the sizable body of
case law approving aiding and abetting liability in private actions
under § 10(b) and Rule 10b-5.s The case for leaving aiding
8 By 1975, the renowned decision in Brennan v. Midwestern United
Life Ins. Co., 259 F. Supp. 673, 680 (ND Ind. 1966), had been on
the books almost a decade and several Courts of Appeals had
recognized aider and abettor liability in private actions brought
under § lO(b) and Rule 10b-5. See Kerbs v. Fall River Industries,
Inc.,
502 F.2d
731, 739-740 (CAlO 1974); Landy v. FDIC,
486
F.2d 139, 162-163 (CA3 1973), cert. denied, 416 U. S. 960
(1974); Strong v. France,
474 F.2d
747, 752 (CA9 1973); Buttrey v. Merrill Lynch, Pierce, Fenner
& Smith, Inc.,
410 F.2d
135, 144 (CA7), cert. denied, 396 U. S. 838 (1969). See also
Lanza v. Drexel
& Co.,
479 F.2d
1277, 1301, 1303-1304 (CA2 1973) (en bane); Ruder, Multiple
Defendants in Securities Law Fraud Cases: Aiding and Abetting,
Conspiracy, In Pari Delicto, Indemnification, and Contribution, 120
U. Pa. L. Rev. 597, 620-638 (1972). We have noted the significance
of the 1975 amendments in another case involving a "consistent line
of judicial decisions" on the implied right of action under § 10(b)
and Rule 10b-5. See Herman & MacLean v. Huddleston,
459 U. S. 375, 384-386
(1983). Those amendments emerged from "'the most searching
reexamination of the competitive, statutory, and economic issues
facing the securities markets, the securities industry, and, of
course, public investors, since the 1930's.''' Id., at 385, n. 20
(quoting H. R. Conf. Rep. No. 94-229, p. 91 (1975)).
Congress' more recent visits to the securities laws also suggest
approval of the aiding and abetting theory in private § 10(b)
actions. The House Report accompanying an aiding and abetting
provision of the 1983 Insider Trading Sanctions Act, see 15 U. S.
C. § 78u(d)(2)(A) (1982 ed., Supp. V), contains an approving
reference to "judicial application of the concept of aiding and
abetting liability to achieve the remedial purposes of the
securities laws," H. R. Rep. No. 98-355, p. 10 (1983), and notes
with favor Rolfv. Blyth, Eastman Dillon & Co.,
570 F.2d
38 (CA2), cert. denied, 439 U. S. 1039 (1978), which affirmed a
judgment against an aider and abettor in a private action under §
lO(b) and Rule lOb-5. Moreover, § 5 of the
198
STEVENS, J., dissenting
and abetting liability intact draws further strength from the
fact that the SEC itself has consistently understood § 10(b) to
impose aider and abettor liability since shortly after the rule's
promulgation. See Ernst & Young, 494 U. S., at 75 (STEVENS, J.,
concurring). In short, one need not agree as an original matter
with the many decisions recognizing the private right against
aiders and abettors to concede that the right fits comfortably
within the statutory scheme, and that it has become a part of the
established system of private enforcement. We should leave it to
Congress to alter that scheme.
The Court would be on firmer footing if it had been shown that
aider and abettor liability "detracts from the effectiveness of the
10b-5 implied action or interferes with the effective operation of
the securities laws." See Musick, Peeler
& Garrett v.
Employers Ins. of Wausau,
508 U. S. 286, 298
(1993). However, the line of decisions recognizing aider and
abettor liability suffers from no such infirmities. The language of
both § 10(b) and Rule 10b-5 encompasses "any person" who violates
the Commission's antifraud rules, whether "directly or indirectly";
we have read this "broad" language "not technically and
restrictively, but flexibly to effectuate its remedial purposes."
Affiliated Ute Citizens of Utah v. United States,
406 U. S. 128, 151
(1972). In light of the encompassing language of § 10(b), and its
acknowledged purpose to strengthen the antifraud remedies of the
common law, it was certainly no wild extrapolation for courts to
conclude that aiders and abettors should be subject to the
Insider Trading and Securities Fraud Enforcement Act of 1988,
Pub. L. 100-704, 102 Stat. 4681, contains an express
"acknowledgment," Musick, Peeler & Garrett v. Employers Ins. of
Wausau,
508 U. S.
286, 294 (1993), of causes of action "implied from a provision
of this title," 15 U. S. C. § 78t-1(d).
199
private action under § 10(b).9 Allowing aider and abettor claims
in private § 10(b) actions can hardly be said to impose unfair
legal duties on those whom Congress has opted to leave unregulated:
Aiders and abettors of § 10(b) and Rule 10b-5 violations have
always been subject to criminalliability under 18 U. S. C. § 2. See
15 U. S. C. § 78ff (criminalliability for willful violations of
securities statutes and rules promulgated under them). Although the
Court canvasses policy arguments against aider and abettor
liability, ante, at 188-190, it does not suggest that the aiding
and abetting theory has had such deleterious consequences that we
should dispense with it on those grounds.10 The agency charged with
primary responsibility for enforcing the securities laws does not
perceive such drawbacks, and urges retention of the private right
to sue aiders and abettors. See Brief for SEC as Amicus Curiae
5-17.
As framed by the Court's order redrafting the questions
presented, this case concerns only the existence and scope of
aiding and abetting liability in suits brought by private parties
under § 10(b) and Rule 10b-5. The majority's rationale,
9 In a similar context we recognized a private right of action
against secondary violators of a statutory duty despite the absence
of a provision explicitly covering them. See Merrill Lynch, Pierce,
Fenner & Smith, Inc. v. Curran, 456 U. S., at 394 ("Having
concluded that exchanges can be held accountable for breaching
their statutory duties to enforce their own rules prohibiting price
manipulation, it necessarily follows that those persons who are
participants in a conspiracy to manipulate the market in violation
of those rules are also subject to suit by futures traders who can
prove injury from these violations").
10 Indeed, the Court anticipates, ante, at 191, that many aiders
and abettors will be subject to liability as primary violators. For
example, an accountant, lawyer, or other person making oral or
written misrepresentations (or omissions, if the person owes a duty
to the injured purchaser or seller, cf. Dirks v. SEC,
463 U. S. 646, 654-655
(1983)) in connection with the purchase or sale of securities may
be liable for a primary violation of § 10(b) and Rule lOb-5. See,
e.
g., Akin v. Q-L Investments, Inc.,
959
F.2d 521, 525-526
(CA5 1992).
200
STEVENS, J., dissenting
however, sweeps far beyond even those important issues. The
majority leaves little doubt that the Exchange Act does not even
permit the
SEe to pursue aiders and abettors in civil
enforcement actions under § 10(b) and Rule 10b-5. See ante, at 177
(finding it dispositive that "the text of the 1934 Act does not
itself reach those who aid and abet a § 10(b) violation"). Aiding
and abetting liability has a long pedigree in civil proceedings
brought by the SEG under § 10(b) and Rule 10b-5, and has become an
important part of the SEG's enforcement arsenal.ll Moreover, the
majority's approach to aiding and abetting at the very least casts
serious doubt, both for private and SEG actions, on other forms of
secondary liability that, like the aiding and abetting theory, have
long been recognized by the SEG and the courts but are not
expressly spelled out in the securities statutes.12
11 See, e. g., SEC v. Coffey,
493 F.2d
1304, 1316 (CA6 1974); Ruder, 120 U. Pa. L. Rev., at 625-626,
nn. 124 and 125. The SEC reports that it asserted aiding and
abetting claims in 15 percent of its civil enforcement proceedings
in fiscal year 1992, and that elimination of aiding and abetting
liability would "sharply diminish the effectiveness of Commission
actions." Brief for SEC as Amicus Curiae 18, n. 15.
12 The Court's rationale would sweep away the decisions
recognizing that a defendant may be found liable in a private
action for conspiring to violate § 10(b) and Rule 10b-5. See, e.
g., U. S. Industries, Inc. v. Touche Ross & Co.,
854 F.2d
1223, 1231 (CAlO 1988); SEC v. Coffey,
493
F.2d 1304, 1316 (CA6 1974); Ferguson v. Omnimedia, Inc.,
469 F.2d
194, 197198 (CA1 1972); Shell v. Hensley,
430
F.2d 819, 827, n. 13 (CA5 1970); Dasho v. Susquehanna Corp.,
380 F.2d
262, 267, n. 2 (CA7), cert. denied sub nom. Bard v. Dasho, 389
U. S. 977 (1967). See generally Kuehnle, 14 J. Corp. L., at
343-348. Secondary liability is as old as the implied right of
action under § 10(b) itself; the very first decision to recognize a
private cause of action under the section and rule, Kardon v.
National Gypsum
Co., 69 F. Supp. 512 (ED Pa. 1946), involved
an alleged conspiracy. See also Fry v. Schumaker, 83 F. Supp. 476,
478 (ED Pa. 1947) (Kirkpatrick, C. J.). In addition, many courts,
concluding that § 20(a)'s "controlling person" provisions, 15 U. S.
C. § 78t, are not the exclusive source of secondary liability under
the Exchange Act, have imposed liability in § 10(b) actions based
upon respondeat superior and other common-law agency principles.
See, e. g., Hollinger v. Titan Capital Corp.,
914
F.2d 1564, 1576-1577, and
201
The principle the Court espouses today-that liability may not be
imposed on parties who are not within the scope of § 10(b)'s plain
language-is inconsistent with longestablished SEC and judicial
precedent.
As a general principle, I agree, "the creation of new rights
ought to be left to legislatures, not courts." Musick, Peeler, 508
U. S., at 291. But judicial restraint does not always favor the
narrowest possible interpretation of rights derived from federal
statutes. While we are now properly reluctant to recognize private
rights of action without an instruction from Congress, we should
also be reluctant to lop off rights of action that have been
recognized for decades, even if the judicial methodology that gave
them birth is now out of favor. Caution is particularly appropriate
here, because the judicially recognized right in question accords
with the longstanding construction of the agency Congress has
assigned to enforce the securities laws. Once again the Court has
refused to build upon a "'secure foundation ... laid by others,'"
Patterson v. McLean Credit Union,
491 U. S. 164, 222 (1989)
(STEVENS, J., dissenting) (quoting B. Cardozo, The Nature of the
Judicial Process 149 (1921)).
I respectfully dissent.
n. 27
(CA9 1990) (en banc) (citing and following
decisions to this effect from six other Circuits). See generally
Kuehnle, 14 J. Corp. L., at 350376. These decisions likewise appear
unlikely to survive the Court's decision. See ante, at 184.
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