Securities and Exchange Commission Historical Society

Chasing the Devil Around the Stump: Securities Regulation, the SEC and the Courts

The Minds of the Justices

Courts and Judicial Deference

- 1953 Supreme Court Justices visit President Dwight Eisenhower

There were three distinct periods during which the Supreme Court decided securities law cases. From the 1930s to about 1970, the Court regularly adopted an expansive interpretation of the federal securities statutes and of SEC administrative authority. After about 1970, with the appointments of Justices Lewis Powell and William Rehnquist, it adopted a substantially more restrictive interpretation. Finally, after 1988, the Supreme Court has been almost evenly divided in its overall interpretation, ambivalent about expansive interpretations, and hard to predict.42

Scholars continue to disagree about the reasons for the variability of Supreme Court decisions. Some argue that the distinction between private law issues, such as those involved in securities and antitrust cases, which are much different and thus uniquely framed, rather than public law issues involving interpretations of Congressional legislation, plays a role. Others contend that those differences are not as much in the type of law, but rather in the minds or attitudes of the justices. Their politics, their pre-court experience, the manner in which they gained appointment to the bench, are all factors that determine how any particular judge decides a case. Still others account for the decisions by looking at, in the example of securities cases, the nature and extent of involvement by the SEC, either directly as a party or through its use of amicus briefs, where the agency expressed an opinion on a securities matter of interest to the Commission. The administrative expertise of the SEC, combined with the judicial philosophy that accepted a broad national role in economic regulation of the markets, helped to explain the SEC’s successes.43

Most likely, all of these factors influenced how the courts have decided securities cases. The personal papers of the justices provide insight, if not all the answers, to this mystery. In the case of the justices appointed during the New Deal, the majority of whom influenced the Supreme Court for decades, the power of judicial review often conflicted with the obligation to defer to the wisdom of the law-making bodies -- the Congress and the SEC -- in the field of securities law.

The role of courts to interpret law has long been a conflicted one. The idea of judicial review commands courts, especially those of last resort such as the Supreme Court, to be the final say on what the law is. Judges are expected to interpret and not make the law. Unlike the elected Congress, which makes federal law, judges are expected to be immune to popular majorities. A fine line exists between judicial interpretation and law making. Where the Congress has acted after conducting hearings as to the rational need for legislation, the philosophy of judicial deference requires courts to defer to the elected body except where there is a clear abuse of authority or where the rule violates the Constitution. After the New Deal, the SEC’s reputation as the respected expert on securities regulation gained tremendous credence as it made rules and testified before Congress. When confronted with securities rules developed by the SEC, justices who followed this philosophy were more likely to defer to Congress, and, to the extent the SEC was properly implementing Congressional policy, to the agency.


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Footnotes:

(42) Thompson and Sullivan, 1620-Appendix.

(43) Ibid.


Related Museum Resources

Papers

February 1, 1940
transcript pdf (Charles Evans Hughes Papers, courtesy Library of Congress)
March 1940
image pdf (Courtesy of National Archives and Records Administration)
March 28, 1940
image pdf (Courtesy of National Archives and Records Administration)
May 1940
image pdf (Harlan Fiske Stone Papers, courtesy Library of Congress)
May 24, 1940
transcript pdf (Harlan Fiske Stone Papers, courtesy Library of Congress)
November 1, 1941
transcript pdf (Harlan Fiske Stone Papers, courtesy Library of Congress)
July 1942
image pdf (Courtesy of National Archives and Records Administration)
October 5, 1942
transcript pdf (Harlan Fiske Stone Papers, courtesy Library of Congress)
November 1942
transcript pdf (Robert H. Jackson Papers, courtesy Library of Congress)
January 16, 1943
image pdf (Harold H. Burton Papers, courtesy of Library of Congress)
January 27, 1943
transcript pdf (Frederick Moore Vinson Collection, University of Kentucky)
January 28, 1943
image pdf (Wiley Rutledge Papers, courtesy Library of Congress)
March 18, 1943
transcript pdf (Harold H. Burton Papers, courtesy Library of Congress)
June 1944
transcript pdf (Hugo Black Papers, courtesy Library of Congress)
May 17, 1946
transcript pdf (Harold H. Burton Papers, courtesy Library of Congress)
September 23, 1946
transcript pdf (Wiley Rutledge Papers, courtesy Library of Congress)
January 30, 1947
transcript pdf (William O. Douglas Papers, courtesy Library of Congress)
February 7, 1947
transcript pdf (Frederick Moore Vinson Collection, University of Kentucky)
September 24, 1947
image pdf (Frederick Moore Vinson Collections, courtesy University of Kentucky)
November 23, 1947
transcript pdf (Frederick Moore Vinson Collection, University of Kentucky)
January 11-12, 1951
image pdf (Harold H. Burton Papers, courtesy of Library of Congress)
January 11, 1951
image pdf (Harold H. Burton Papers, courtesy Library of Congress)
January 11, 1951
transcript pdf (Harold H. Burton Papers, courtesy Library of Congress)
August 6, 1951
transcript pdf (Frederick Moore Vinson Collection, University of Kentucky)
May 9, 1957
transcript pdf (Earl Warren Papers, courtesy Library of Congress)
September 26, 1958
transcript pdf (Earl Warren Papers, courtesy Library of Congress)
January 21, 1959
transcript pdf (Earl Warren Papers, courtesy Library of Congress)
February 17, 1959
image pdf (Earl Warren Papers, courtesy Library of Congress)
April 11, 1959
transcript pdf (Earl Warren Papers, courtesy Library of Congress)
February 10, 1961
transcript pdf (Harry A. Blackmun Papers, courtesy Library of Congress)
February 13, 1961
transcript pdf (Harry A. Blackmun Papers, courtesy Library of Congress)
February 17, 1961
transcript pdf (Harry A. Blackmun Papers, courtesy Library of Congress)
February 20, 1961
image pdf (Harry A. Blackmun Papers, courtesy Library of Congress)
June 15, 1961
transcript pdf (Harry A. Blackmun Papers, courtesy Library of Congress)
June 19, 1961
transcript pdf (Harry A. Blackmun Papers, courtesy Library of Congress)
March 6, 1962
image pdf (Thurgood Marshall Papers, courtesy Library of Congress)
December 1964
image pdf (William J. Brennan, Jr. Papers, courtesy Library of Congress)
January 3, 1966
transcript pdf (Earl Warren Papers, courtesy Library of Congress)
January 10, 1966
transcript pdf (Earl Warren Papers, courtesy Library of Congress)
February 1, 1966
transcript pdf (Earl Warren Papers, courtesy Library of Congress)
April 15, 1966
image pdf (Earl Warren Papers, courtesy Library of Congress)
December 15, 1966
transcript pdf (Earl Warren Papers, courtesy Library of Congress)
February 21, 1968
transcript pdf (William J. Brennan, Jr. Papers, courtesy Library of Congress)
February 26, 1968
transcript pdf (William J. Brennan, Jr. Papers, courtesy Library of Congress)
February 28, 1968
transcript pdf (William J. Brennan, Jr. Papers, courtesy Library of Congress)
February 28, 1968
image pdf (Earl Warren Papers, courtesy Library of Congress)
February 29, 1968
image pdf (Earl Warren Papers, courtesy Library of Congress)
January 6, 1969
transcript pdf (William J. Brennan, Jr. Papers, courtesy Library of Congress)
January 8, 1969
transcript pdf (William J. Brennan, Jr. Papers, courtesy Library of Congress)
January 21, 1969
image pdf (Earl Warren Papers, courtesy Library of Congress)
January 22, 1969
image pdf (Thurgood Marshall Papers, courtesy Library of Congress)
January 30, 1969
transcript pdf (Thurgood Marshall Papers, courtesy Library of Congress)
May 6, 1969
image pdf (Earl Warren Papers, courtesy Library of Congress)
May 6, 1969
transcript pdf (Earl Warren Papers, courtesy Library of Congress)
May 10, 1969
transcript pdf (Earl Warren Papers, courtesy Library of Congress)
May 14, 1969
image pdf (Earl Warren Papers, courtesy Library of Congress)
May 15, 1969
transcript pdf (Earl Warren Papers, courtesy Library of Congress)
May 16, 1969
image pdf (Earl Warren Papers, courtesy Library of Congress)
July 6, 1970
image pdf (Harry A. Blackmun Papers, courtesy Library of Congress)
October 12, 1970
transcript pdf (Harry A. Blackmun Papers, courtesy Library of Congress)
March 4, 1971
image pdf (William J. Brennan, Jr. Papers, courtesy Library of Congress)
March 8, 1971
transcript pdf (William O. Douglas Papers, courtesy Library of Congress)
March 10, 1971
image pdf (William J. Brennan, Jr. Papers, courtesy Library of Congress)
March 11, 1971
transcript pdf (William O. Douglas Papers, courtesy Library of Congress)
April 1971
image pdf (Harry A. Blackmun Papers, courtesy Library of Congress)
November 10, 1971
transcript pdf (William O. Douglas Papers, courtesy Library of Congress)
November 16, 1971
transcript pdf (William O. Douglas Papers, courtesy Library of Congress)
December 21, 1971
image pdf (William J. Brennan, Jr. Papers, courtesy Library of Congress)
December 22, 1971
image pdf (William J. Brennan, Jr. Papers, courtesy Library of Congress)
January 1972
image pdf (Harry A. Blackmun Papers, courtesy Library of Congress)

Photos

1940
(Courtesy Library of Congress )
February 6, 1953
December 14, 1953

(standing) Associate Justice Tom Clark, Associate Justice Robert Jackson, Associate Justice Harold Burton and Associate Justice Sherman Minton; (seated) Associate Justice Felix Frankfurter, Associate Justice Hugo Black, Chief Justice Earl Warren, Associate Justice Stanley Reed and Associate Justice William Douglas

(Courtesy Library of Congress )

Oral Histories

29 March 2011

Paul Mahoney

Galleries

In the Midst of Revolution: The SEC, 1973-1981

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