Florida International University College of Law eCollections Faculty Publications Faculty Scholarship 1996 Statutory Interpretation in Securities Jurisprudence: A Failure of Textualism Ediberto Román Florida International University College of Law, [email protected] Follow this and additional works at: https://ecollections.law.fiu.edu/faculty_publications Part of the Jurisprudence Commons Recommended Citation Ediberto Román, Statutory Interpretation in Securities Jurisprudence: A Failure of Textualism , 75 Neb. L. Rev. 377 (1996). Available at: https://ecollections.law.fiu.edu/faculty_publications/320 This Article is brought to you for free and open access by the Faculty Scholarship at eCollections. It has been accepted for inclusion in Faculty Publications by an authorized administrator of eCollections. For more information, please contact [email protected]. +(,121/,1( Citation: 75 Neb. L. Rev. 377 1996 Provided by: FIU College of Law Content downloaded/printed from HeinOnline Thu Jun 22 12:08:06 2017 -- Your use of this HeinOnline PDF indicates your acceptance of HeinOnline's Terms and Conditions of the license agreement available at http://heinonline.org/HOL/License -- The search text of this PDF is generated from uncorrected OCR text. -- To obtain permission to use this article beyond the scope of your HeinOnline license, please use: Copyright Information Ediberto Romdn* Statutory Interpretation in Securities Jurisprudence: A Failure of Textualism** TABLE OF CONTENTS I. Introduction .......................................... 378 II. The Central Bank Decision and the Theories of Statutory Interpretation Applied to the Federal Securities Statutes .................................... 382 A. The Central Bank Decision ........................ 382 B. The Theories of Statutory Interpretation Applied to the Federal Securities Statutes .................... 385 1. Textualism .................................... 385 2. Intentionalism ................................. 388 3. Purposivism ................................... 389 III. Forms of Secondary Liability Affected by Central Bank ................................................. 391 A. Conspiracy Liability ............................... 392 B. Aider and Abettor Liability ........................ 393 C. Respondeat Superior Liability ..................... 393 D. Post-Central Bank: The Death of Common Law Secondary Liability Under Section 10(b) ........... 395 IV. The Genesis and Evolution of the Supreme Court's Theory of Statutory Interpretation with Respect to Section 10(b)'s Private Right of Action ................. 398 Copyright held by the NEBRA iA LAw REVIEW. * Associate Professor of Law at St. Thomas University, BA., 1985, Lehman Col- lege, J.D., 1988, University of Wisconsin. The Author would like to thank Profes- sor Ed Fallone of Marquette University, and Professors Peter Margulies, Stephen Plass, Siegfried Wiessner, Amy Ronner, and Jennifer O'Hare of St. Thomas Uni- versity for their suggestions on earlier drafts, and Roberto Ortiz, Cristina Rubio, and Margaret Nocero for their able research assistance. The Author would also like to give special thanks to Professor Michael Olivas for seeing that the Author, along with scores of others, receive the opportunity to fulfill the dream of teach- ing law. ** The Author dedicates this work in loving memory to his greatest love, truest friend, and mother, Carmen Hernandez, who left this world on September 17, 1996, but who will never cease to provide the Author with strength and inspiration. NEBRASKA LAW REVIEW [Vol. 75:377 A. The Early Cases ................................... 400 B. The Cort v. Ash Test for Implying Private Rights of A ction ............................................ 401 C. The Move Towards Textualism .................... 402 D. How Central Bank Illustrates an Inherent Flaw in the Textualist Approach ........................... 405 V. The Issues Left Unresolved by and the Impact of the Central Bank Decision ............ 407 VI. An Alternative Approach-A Systematic Archeological Intentionalist Approach ............................... 410 VII. Pre- & Post-CentralBank Conflict over Section 20(a)... 411 VIII. The Exclusivity of Section 20(a) ....................... 412 IX. Section 20(a)'s Intended Coverage ..................... 417 X. Other Implications of the Decision: Equally Troubling Statutory Reform ..................................... 421 XI. Benefits of Recognizing the Appropriate Role of Section 20(a) .................................................. 422 XII. Conclusion ............................................ 424 I. INTRODUCTION Theory in statutory interpretation has engendered considerable scholarly debate in recent years.' Much of this debate has centered on 2 the renewed allure of a textualist theory in statutory interpretation. Textualist construction, also referred to recently as the new textual- ism, 3 demands that, when interpreting a statute, a judge is to limit her inquiry to the text of the statute. 4 Thus, the judge is forbidden 1. See, e.g., Maxwell 0. Chibundu, Structure and Structuralism in the Interpretation of Statutes, 62 U. CIN. L. REV. 1439 (1994); William N. Eskridge, Jr., The New Textualism, 37 UCLA L. Rav. 621 (1990)[hereinafter Eskridge, Textualism]; Wil- liam N. Eskridge, Jr., Symposium on Statutory Interpretation: Legislative His- tory Values, 66 Cm.-KErTr L. REv. 365 (1990)[hereinafter Eskeridge, Symposium]; Daniel A. Farber & Philip P. Frickey, Legislative Intent and Public Choice, 74 VA. L. REv. 423 (1988); Philip P. Frickey, From the Big Sleep to the Big Heat: The Revival of Theory in Statutory Interpretation,77 MnqN. L. REv. 241 (1992); Carlos E. Gonzalez, ReinterpretingStatutory Interpretation,74 N.C. L. Rlv. 585 (1996); Earl M. Maltz, Rhetoric and Reality in the Theory of Statutory Interpretation: Underenforcement, Overenforcement, and the Problem of Legislative Supremacy, 71 B.U. L. REv. 767 (1991). 2. Compare Eskridge, Symposium, supra note 1, at 366 and George Kannar, The ConstitutionalCatechism of Antonin Scalia, 99 YALE L. J. 1297 (1990) with Ste- phen A. Plass, The Illusion and Allure of Textualism, 40 VuL. L. REv. 93 (1995) and Nicholas S. Zeppos, Legislative History and the Interpretationof Statutes: Toward a Fact-FindingModel of Statutory Interpretation,76 VA. L. REv. 1295 (1990). 3. Eskridge, Textualism, supra note 1, at 621. 4. Zeppos, supra note 2, at 1299; Plass, supra note 2, at 94-95; Eskridge, Textual- ism, supra note 1, at 652. 1996] STATUTORY INTERPRETATION FOR SECURITIES 379 from using the legislative history as a statutory interpretation tool.5 To the textualist, the legislature demonstrates its intent through the text of the statute.6 Accordingly, a judge's role is to "interpret laws," and not to "reconstruct the legislators' intentions." 7 Justice Scalia, one of textualism's most outspoken advocates, argues that a text- based theory reduces the potential for arbitrariness and abuse that may arise by having a judge substitute her values for that of the legislature. 8 In theory, the textualist's argument for judicial restraint is compel- ling. However, in practice, like other theories of statutory interpreta- tion, textualism is also a malleable theory which can be manipulated to alter the legislature's intent. Yet, this theory in application can dis- guise its usurpation of the legislative function. Indeed, a judge apply- ing textualism can actually alter the meaning of a statute, but still claim that her holding was merely what was called for by the plain meaning of the statutory text. Federal securities jurisprudence provides a vivid example of the ease with which a court can usurp the legislative function. The Supreme Court's recent decision concerning the enforcement provi- sions of the federal securities laws provides an example of this sort of usurpation.9 In Central Bank of Denver v. First Interstate Bank of Denver,1O the Court refused to recognize aider and abettor claims under the Securities Exchange Act of 1934's ("Exchange Act") enforce- ment provision, section 10(b),11 by announcing that in interpreting 5. Eskridge, Textualism, supra note 1, at 652; T. Alexander Aleinikoff, Updating Statutory Interpretation,87 MICH. L. REv. 20 (1988). 6. See Zeppos, supra note 2, at 1300. 7. Immigration and Naturalization Serv. v. Cardoza-Fonseca, 480 U.S. 421, 452-53 (1987)(Scalia, J., concurring). 8. Antonin Scalia, The Rule of Law as a Law ofRules, 56 U. CM. L. REv. 1175, 1185 (1989)(noting that a text-based approach can avoid the appearance of judicial leg- islation). But see Plass, supra note 2, at 95 (critiquing Justice Scalia's application of textualism). 9. But see Public Citizen v. United States Dept. of Justice, 491 U.S. 440, 470 (1989)(Kennedy, J. concurring) ("Where the language of a statute is clear in its application, the normal rule is that we are bound by it. There is, of course, a legitimate exception to this rule... [wihere the plain language of the statute would lead to patently absurd consequences. .. ."); Immigration and Naturaliza- tion Serv. v. Cardoza-Fonseca, 480 U.S. 421,452 (1987)(Scalia, J., concurring) ("If the language of a statute is clear, that language must be given effect-at least in the absence of a patent absurdity."). 10. 511 U.S. 164 (1994). 11. Securities Exchange Act, 15 U.S.C. § 78j (1994) provides in part: 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)