Brief Fact Summary. A statute established to address the abuses of Congress was used to support Petitioner’s private cause of action.
Synopsis of Rule of Law. If a statute does not express a private cause of action, then, that cause of action cannot be granted.
Although Capital Gains involved a federal securities statute, the Court's references to fraud in the equitable sense of the term were premised on its recognition that Congress intended the Investment Advisers Act to establish federal fiduciary standards for investment advisers.View Full Point of Law
Issue. Whether the Act creates a private cause of action for damages or other relief in favor of persons aggrieved by those who allegedly have violated it?
Held. (Justice Stewart). No. The Act does not create a private right of action for damages or other relief in favor of persons aggrieved by those who allegedly have violated it. Although the Act does not expressly provide for a private cause of action, Congress’ declaration that some contracts were void indicates that a suit for rescission would follow to end the contractual obligations, and an action for restitution may follow. There is a limited private remedy provided by the Act to void a contract of an investment adviser. The Act does not outline a private cause of action. “[t]he mere fact that the statute was designed to protect advisers’ clients does not require the implication of a private cause of action for damages on their behalf.” The judgment of the court of appeals is affirmed in part and reversed in part, and the case is remanded for further proceedings consistent with this opinion.
Dissent. (Justice White). The majority opinion departs from established principles governing the implication of private rights of action by confusing the inquiry into the existence of a right of action with the question of available relief.
Concurrence. (Justice Powell). The Court’s opinion is compatible with the J. Powell’s dissent in Cannon v. University of Chicago, 441 U.S. 677, 730.
Discussion. The ruling of this case seems to be inconsistent. The Court affirms the opinion of the court of appeals, which suggests that implying a private right of action is “necessary to achieve the goals of Congress in enacting the legislation,” but reverses because no private right of action for damages can be granted because there is no mention of damages in the Act.