On February 25, 2022, President Biden announced Judge Ketanji Brown Jackson as his nominee to replace retiring Justice Stephen Breyer on the United States Supreme Court. Judge Jackson has a long, diverse resume, with experience as a law clerk (at the district, appeals and Supreme Court levels), in private litigation, as a public defender and, for the past decade, as a trial and appellate judge. If confirmed, Judge Jackson will be the first Black woman appointed to the Supreme Court, as well as the first former public defender.
As the Supreme Court has drifted right during the Trump years, Judge Jackson is expected to preserve the current ideological balance on the Court. But while Justice Breyer was a consistent supporter of shareholder rights, he authored rulings that both increased and decreased plaintiffs’ burdens in prosecuting securities class action. Judge Jackson, on the other hand, comes to her nomination with decades of legal experience in a broad range of disciplines, but with no track record in shareholder litigation.
Justice Breyer’s Legacy on Shareholder Rights
During his twenty-seven-year tenure on the Court, Justice Breyer has been a steady protector of the rights of shareholders. He has long recognized and supported the private right of action under federal securities laws. Further, he has voted to strengthen shareholders’ ability to preserve the fraud-on-the-market presumption in proving reliance at class certification, recognized in Basic v. Levinson. Justice Breyer also authored Merck & Co., Inc. v. Reynolds, which held that statute of limitation for a plaintiff to file a federal securities fraud lawsuit begins to run as soon as a plaintiff discovers, or should have discovered, the facts showing a violation of securities law, including facts that the defendant knew that the statements were false.
In the securities law context, however, Justice Breyer will most be remembered as the author of Dura Pharmaceuticals, Inc. v. Broudo, which held that plaintiffs must show that a defendant’s material misrepresentation or omission caused a stock’s decline, rather than an intervening event. By clarifying that it is not enough for a plaintiff to merely allege that the price was artificially inflated by a defendant’s misrepresentation, Justice Breyer set the stage for the core proximate cause/economic loss analysis so pivotal to private securities shareholder litigation under Section 10(b) of the Securities Exchange Act of 1934.
Judge Jackson – A Shareholder Rights Blank Slate
During the nomination ceremony, President Biden praised Judge Jackson as “a proven consensus builder, an accomplished lawyer” and “a distinguished jurist.” After Judge Jackson offered an introduction to her family history and legal career, she commented, “[I]f I am fortunate enough to be confirmed . . . I can only hope that my life and career, my love of this country and the Constitution, and my commitment to upholding the rule of law and the sacred principles upon which this great nation was founded will inspire future generations of Americans.”
Judge Jackson has been nominated after serving eight years as a district court judge, and less than a year as an appellate judge on the Court of Appeals for the D.C. Circuit. During her tenure on the bench, Judge Jackson has not issued any rulings related to the Private Securities Litigation Reform Act of 1995 (“PSLRA”) or other shareholder-rights issues. This prompts the question: if confirmed, what impact will Judge Jackson have on securities litigation and investor protection? Given her background, and particularly her experience as a former clerk to Justice Breyer, Judge Jackson has the potential to be a reliable vote to preserve the private right of action and shareholder rights. But, of course, time will tell. With no securities litigation cases pending before the Court, the impact for investors of the new Court make-up could take years to play out.
Judge Jackson’s confirmation hearings are set to commence on March 21.