Tuesday, June 19, 2007

Does Text Matter?

OK, enough golf frivolities, back to stuff where I can actually add some value.

Our illustrious Supreme Court never seems to stop fighting over the most basic questions of statutory interpretation, including the fundamental question of whether text matters. Sometimes the Court says that it is Congress's helpless slave, bound to follow statutory text mindlessly; other times, it discovers power to depart from statutory text in the name of some other goal. And sometimes it does both on the same day!

The Court followed text slavishly in yesterday's decision in Powerex Corp. v. Reliant Energy Services. In this rather complex case (which is simplified here), plaintiffs sued various power companies in state court for allegedly conspiring to fix energy prices in California. The defendants removed to federal court on the ground that some of them were foreign sovereigns -- they were power companies owned by foreign governments (e.g., Canada). The federal district court decided that one of them wasn't a foreign sovereign and remanded the case to state court.

Now the defendant appealed to the Ninth Circuit on the question of whether it was a foreign sovereign. Unfortunately for the defendant, 28 U.S.C. 1447(d) provides that "[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise."

You might think that would be it. And you would be right. The Supreme Court said, look, 1447(d) makes these matters not appealable. We have to follow the text of the statute -- even though, as the Court acknowledged, in other cases the Court hasn't followed the text of this statute; it has, by its own admission, "interpreted §1447(d) to cover less than its words alone suggest." In other cases, the Court found that certain appeals weren't within the policy of §1447(d), even if they were within its text. But not this time. Although acknowledging that denying potential foreign sovereigns appeals on the issue of whether they are foreign sovereigns has undesirable policy consequences, the Court said that "what the text of §1447(d) indisputably does prevails over what it ought to have done." The end.

Meanwhile, on the same day, the Court faced the question of whether the securities laws so thoroughly regulate the behavior of investment banks that underwrite IPOs that they implicitly preclude application of the antitrust laws to the same conduct. When this question arose in a case called Credit Suisse Securities, Justice Thomas pointed out that the text of the securities laws provides a clear answer: no. The securities laws say, "the rights and remedies provided by this subchapter shall be in addition to any and all other rights and remedies that may exist in law or in equity." That seems pretty clear, doesn't it? It says that the securities laws provide extra remedies, in addition to any and all other remedies that other law provides.

You might think that our text-obsessed Supreme Court would follow this statutory text as mindlessly as the text involved in the Powerex case, but no. The Court noted that in some prior cases, it had departed from the literal meaning of the text (also true in Powerex, as we saw a moment ago), and it therefore felt licensed to reconcile the securities laws with the antitrust laws on a policy basis. The Court decided that it wasn't a good idea to have both antitrust regulation and SEC regulation of the same underwriting conduct, so it held antitrust suits implicitly prohibited.

So does text matter or not? This problem just keeps cropping up again and again. Just last week, the Court threw out an appeal filed a couple of days late -- because the district judge specified the wrong deadline! The district judge granted the appellant an extension of time to appeal until February 27, not realizing that it only had power to grant an extension until February 24. The Supreme Court read the appeal deadline strictly and said it was the appellant's tough luck that the district court had made such a mistake. But when it wants to, as in the securities case, it treats statutory text as merely advisory and considers itself empowered to make policy decisions contradicting the text.

My own scholarly writings suggest that a firm policy of slavishly following text is a mistake. It seems appealing to think that courts should just do what statutes say without exercising policy judgment, and one might imagine that Congress would write better statutes if it really understood that courts would not rescue it from its drafting errors. But these hopes are illusory. Poorly drafted statutes are inherent in the hurly-burly of the legislative process, and courts have the advantage of seeing the problem at the moment the statute is applied, whereas Congress has to look at things only in advance. That's why courts have to have (and always have had) some power to ameliorate statutory errors. The great trick is knowing when it's appropriate to deviate a little from statutory text and when courts should just follow the text. Even I think deviations should be rare. For the full theory, read my articles -- the short version is that courts should be guided by background principles of law. When a statute startlingly deviates from the way things are usually done without apparent justification, the time may be right for the court to deviate from the statute.

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