The Supreme Court voted 9 to 0 yesterday to affirm a decision that the Securities and Exchange Commission charge "eviscerates one of the principal tools . . . for protecting the investing public against suspected fraud or manipulation of the market for particular securities."
The decision, handed down in November 1976 by the 2d U.S. Circuit Court of Appeals, concerned the authority of the agency under the 1934 SEC law "summarily to suspend trading in any security . . . for a period not exceeding 10 days" if "in its opinion the public interest and the protection of investors so require."
The central issue in the litigation was whether the commission is empowered in a single set of circumstances to issue a series of summary orders suspending trading beyond the initial 10-day period. The appeals court said the SEC lacked such authority, and the Supreme Court agreed in an opinion by Justice William Rehnquist.
Justice William Brennan Jr., joined by Justice Thurgood Marshall, concurred only in the judgement Rehnquist's opinion doesn't reveal "how flagrantly abusive" of its authority the SEC has been, Brennan wrote. He cited an admittedly "extreme example" in which the agency suspended trading in a security for 13 years, but said that "the record is replete with suspensions lasting the better part of a year."
Justice Harry Blackmun, also concurring only in the judgment, wrote that he was "less sure" than the majority that the SEC doesn't have "at least some power to suspend trading in a nonexempt security for successive 10-day periods despite the absence of a new set of circumstances."
The case involves Canadian Javelin Ltd. (CJL), an exploration and mineral-holding enterprise based in Newfoundland, and Samuel Sloan of New York City, who owned 13 shares of CJL and who engaged in substantial purchases and short sales of the stock.
CJL issued press releases about certain of its business activities that the SEC deemed false and misleading. On Nov. 29, 1973, the commission issued the first of what became a series of 10-day suspension orders. The orders prevented trading in CJL stock for 14 months - until Jan. 26, 1975.
Meanwhile, in a suit in the appeals court, Sloan charged that "tacking" one order on another was an abuse of the agency's authority.
In April 1975, while the suit was pending, the SEC issued what became a new series of 37 10-day suspension orders based on a Royal Canadian Mounted Police investigation into alleged manipulation of CJL common stock on the American Stock Exchange and on several Canadian stock exchanges.
In the opinion for the Supreme Cort, Justice Rehnquist rejected a government argument that the 10-day limit applied only to a single suspension order. That "is not the most natural of logical" reading of the law, he said.
The court took other actions:
In a case involving Sears, Roebuck & Co. and the San Diego District County Council of Carpenters, the court held 6 to 3 that the National Labor Relations Act did not prevent a state court from enforcing state trespass laws against picketing that "is arguably - but not definitely - prohibited or protected" by the federal law.
Justice John Paul Stevens wrote the opinion for the court. Justice Brennan, in a 23-page dissent joined by Justices Marshall and Potter Stewart, said that the decision will introduce "inconsistency and confusion that will threaten the fabric of national labor policy.
In a case involving Midas Muffler dealers, the court agreed to decide whether a non-profit trade association composed entirely of a single manufacturer's franchised dealers is a "business league" exempt from federal income taxation.
In a case from the 5th U.S. Ciricuit Court of Appeals, the court agreed to decide whether liens filed by the government will have priority on a uniform basis over competing liens.