Covering the Front and Back Pages of the Newspaper
February 22, 2003
LAW: Injustice Douglas
From reading his opinions on matters I'm familiar with, I've long suspected that Justice William O. Douglas was a sloppy, careless, agenda-driven judge. To give an obvious example about which I've written at more length in an article in the Securities Regulation Law Journal ("The 'In Connection With' Requirement of Rule 10b-5 as an Expectation Standard," 26 Sec. Reg. L.J. 1), Douglas authored a unanimous opinion for the Court in Superintendant of Insurance of New York v. Bankers Life & Cas. Co., 404 U.S. 6 (1971), the first Supreme Court case to recognize the implied private right of action under section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Naturally, the opinion -- a brusque 7-0 opinion (the Court was short-handed) delivered less than a month after the case was argued -- gives no analysis to support the existence of such an implied right of action, but that's not the problem. The problem is that the Court found that the alleged fraud in the case was properly considered to be fraud "in connection with the purchase or sale of any security" within the meaning of the statute, on the theory that the Board of Directors of the Manhattan Casualty Company was deceived into selling $5 million worth of Treasury bonds in exchange for a certificate of deposit based upon the representation that the CD was worth $5 million, when in fact it was worthless. See id. at 8-10 & n.1. If this were true, the case would be rather uncomplicated, which is how the Court treated it -- but the Second Circuit Court of Appeals had rejected precisely the same theory below on the grounds that it was neither alleged in the complaint nor supported by any record evidence adduced after six years of discovery. See Superintendant of Insurance of New York v. Bankers Life & Cas. Co., 430 F.2d 357, 360 & n.3 (2d Cir. 1970), rev'd, 404 U.S. 6 (1971).
Seventh Circuit Chief Judge Richard Posner thinks the same about Justice Douglas as a judge, and more, in his review of a new book that sheds light on Douglas as:
one of the most unwholesome figures in modern American political history, a field with many contenders. . . a liar to rival Baron Munchausen . . . Apart from being a flagrant liar, Douglas was a compulsive womanizer, a heavy drinker, a terrible husband to each of his four wives, a terrible father to his two children, and a bored, distracted, uncollegial, irresponsible, and at times unethical Supreme Court justice who regularly left the Court for his summer vacation weeks before the term ended. Rude, ice-cold, hot-tempered, ungrateful, foul-mouthed, self-absorbed, and devoured by ambition, he was also financially reckless--at once a big spender, a tightwad, and a sponge--who, while he was serving as a justice, received a substantial salary from a foundation established and controlled by a shady Las Vegas businessman.
Posner also thinks Douglas would have been a good president, which probably says more about Posner's view of elective officials . . .