by the Supreme Court since Chiarella v. United States. (35)
and confidence." Chiarella v. United States, 445 U.S.
Four years later, the United States Supreme Court, in Chiarella v. United States
, (2) disagreed.
(31) Arguably the most influential case resulting from this progeny was Chiarella v. United States, (32) where the Supreme Court established the classical theory of insider trading by requiring a fiduciary duty in order for the "disclose or abstain" rule to yield insider trading liability.
646, 654-55 (1983) (reaffirming requirement of breach of fiduciary duty for imposition of insider trading liability); Chiarella v. United States, 445 U.S.
Finally, according to Justice Ginsberg, the Eighth Circuit misread prior Supreme Court holdings as precluding [sections] 10(b) liability under the misappropriation theory.(237) The Eighth Circuit's reliance on Chiarella v. United States
,(238) said Justice Ginsberg, was misplaced since that case expressly left unanswered the validity of the misappropriation theory.(239) Dirks v.
This emphasis might be read to call into question the Court's position in Chiarella, in which the Court expressly rejected the lower court's argument that "[t]he use by anyone of material information not generally available is fraudulent because such information gives certain buyers or sellers an unfair advantage over less informed buyers and sellers." Chiarella v. United States
, 445 U.S.
19, 24 (1987) (decided after Justice Powell retired but before Justice Kennedy took his seat); see also Chiarella v. United States
, 445 U.S.
The landmark case of Chiarella v. United States
210 provided the first girder in this framework.
Of course, one might argue that this doesn't reflect a lack of congressional will to act but rather a principal of comity or deference toward the Court, which after all was the first mover in this space when it decided Chiarella v. United States
(23) in 1980, thereby establishing insider trading liability under Rule 10b-5.
The first case, Chiarella v. United States
, involved a sympathetic defendant, and resulted in a narrower reading of the scope of the prohibition than the SEC and federal prosecutors wanted.
(10) In Chiarella v. United States
(11) the Court held that liability for silence in connection with the purchase or sale of securities under Section 10(b) "is premised upon a duty to disclose arising from a relationship of trust and confidence between parties to a transaction." (12) This case involved a financial printer who was able to deduce the identities of takeover targets from documents sent to the printer, although the names of the bidder and target were coded (apparently not very cleverly).