RESPONDENT: Securities Investor Protection Corporation et al.
LOCATION: Residence of Jacobson
DOCKET NO.: 90-727
DECIDED BY: Rehnquist Court (1991-1993)
LOWER COURT: United States Court of Appeals for the Ninth Circuit
CITATION: 503 US 258 (1992)
ARGUED: Nov 13, 1991
DECIDED: Mar 24, 1992
G. Robert Blakey - on behalf of the Respondents
Jack I. Samet - on behalf of the Petitioner
Facts of the case
Media for Holmes v. Securities Investor Protection CorporationAudio Transcription for Oral Argument - November 13, 1991 in Holmes v. Securities Investor Protection Corporation
Audio Transcription for Opinion Announcement - March 24, 1992 in Holmes v. Securities Investor Protection Corporation
William H. Rehnquist:
The opinions of the Court in three cases will be announced by Justice Souter.
David H. Souter:
The first of the three is Holmes and Securities Investor Protection Corporation, No. 90-727.
This case comes to us on writ of certiorari to the United States Court of Appeals for the Ninth Circuit.
Acting under the Securities Investor Protection Act, the respondent, Securities Investor Protection Corporation which we have been calling SIPC, caused the liquidation of two security broker dealers after they failed to meet obligations to their customers.
Under the statute, SIPC must reimburse customers of broker dealers who lose money after their broker dealer becomes insolvent, and SIPC says it had to pay millions of dollars to the customers of the two broker dealers at issue here.
SIPC sought to recoup some of the millions by suing petitioners, Robert Holmes and others, saying that they had conspired to manipulate the price of stocks that the broker dealers have bought some of the stocks at inflated prices, that the stock price later plummeted because the fraud came to light, and that this forced the broker dealers into insolvency triggering SIPC's duty to reimburse the customers and of course, ultimately causing SIPC's loses.
SIPC alleged that by doing so, the conspirators broke the securities laws for which SIPC could sue them under the Racketeer Influenced and Corrupt Organizations Act or the RICO statute.
District Court entered summary judgment for Holmes saying, among other things, that SIPC did not have standing to sue the conspirators because SIPC itself had never bought any of the manipulated stocks.
The Court of Appeals reversed holding that RICO does not require that a plaintiff buy a security to be allowed to sue.
In an opinion filed with the Clerk today, we reverse the Ninth Circuit intern but on a different ground.
We think that a plaintiff cannot sue under the RICO statute unless the defendant's acts proximately caused the plaintiff's injury.
That means that there must be a direct relationship between the plaintiff's injury and the defendant's conduct, a requirement that SIPC cannot meet.
SIPC claims to have sued in two different capacities.
First, it says that it stands in the shoes of the broker dealers' customers and can assert any right the customers could assert.
But even if this is true, the link between the customer's injury and the conspirators' act is too attenuated to allow recovery since the customers were harmed only because the conspirators first injured the broker dealers.
Second, SIPC says that a section of the statute entitles it to recover.
However, we think that the provision in question deals only with intervention and is thus, beside the point of the issue before us.
Because we hold that the conspirators' acts did not approximately caused SIPC's injury, we need not determine whether a plaintiff suing under the RICO statute and alleging that the defendant broke the securities law must always have been a buyer or a seller of the security in order to be entitled to sue.
Justice O'Connor has filed a separate opinion concurring in part and concurring in the judgment in which Justice White and Justice Stevens have joined; Justice Scalia has filed a separate opinion concurring in the judgment.