Comments on: Analysis: No big threat to investment houses

By: Craig Reed

Craig Reed — Wed, 17 Oct 2007 01:27:31 +0000

Google is your friend – a search for “carolene usury” on Google, and the results point to a US Supreme Court case from 1938

Since I’m no lawyer, I’ll quote from the start of the opinion by Justice Stone:

STONE, J., Opinion of the Court

SUPREME COURT OF THE UNITED STATES

304 U.S. 144
United States v. Carolene Products Co.
APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF ILLINOIS
No. 640 Argued: April 6, 1938 — Decided: April 25, 1938

MR. JUSTICE STONE delivered the opinion of the Court

The question for decision is whether the “Filled Milk Act” of Congress of March 4, 1923 (c. 262, 42 Stat. 1486, 21 U.S.C. § 61-63), [n1] which prohibits the shipment in [p146] interstate commerce of skimmed milk compounded with any fat or oil other than milk fat, so as to resemble milk or cream, transcends the power of Congress to regulate interstate commerce or infringes the Fifth Amendment.

Appellee was indicted in the district court for southern Illinois for violation of the Act by the shipment in interstate commerce of certain packages of “Milnut,” a compound of condensed skimmed milk and coconut oil made in imitation or semblance of condensed milk or cream. The indictment states, in the words of the statute, that Milnut “is an adulterated article of food, injurious to the public health,” and that it is not a prepared food product of the type excepted from the prohibition of the Act. The trial court sustained a demurrer to the indictment on the authority of an earlier case in the same court, United States v. Carolene Products Co., 7 F.Supp. 500. The case was brought here on appeal under the Criminal Appeals Act of March 2, 1907, 34 Stat. 1246, 18 U.S.C. § 682. The Court of Appeals for the Seventh Circuit has meanwhile, in another case, upheld the Filled Milk Act as an appropriate exercise of the commerce power in Carolene Products Co. v. Evaporated Milk Assn., 93 F. (2d) 202.

By: Jack Payne

Jack Payne — Sun, 14 Oct 2007 05:33:43 +0000

I write on stock fraud all the time, but must admit to a certain level of ignorance. I love the term, “Carolene Usury,” but I must have been living in a closet. Haven’t the vaguest idea of what it means.

By: Stephen Mann

Stephen Mann — Wed, 10 Oct 2007 22:11:05 +0000

The issue is the dramatic expansion in the number of putative defendants, not the test of ultimate liability. If the Court holds for the plaintiffs there are thousands of companies, individuals and professionals at risk of being sued. Without a strong bright line summary judgment test, the threat of litigation will be the lever to extract settlements so any incursion into the “no aider and abetter liability” will be great for the plaintiffs’ bar (as well as the dendants’) but not a very smart allocation of resources.

By: Steve

Steve — Wed, 10 Oct 2007 19:25:59 +0000

What I don’t understand is why the Court granted cert in the first place.

Unless they’re looking to dramatically change the law, everyone knows there’s no aiding and abetting liability. The Court rarely takes cases just to issue a no-brainer affirmance.

It’s hard to understand how there were 4 votes to grant cert in this seemingly vanilla case.

By: M. Simon

M. Simon — Wed, 10 Oct 2007 06:43:17 +0000

Say. If the law prevents fraud how do you explain Enron?

Or Climate Scientist James Hansen’s dealings with Enron?

By: F. Andino Reynal

F. Andino Reynal — Wed, 10 Oct 2007 03:05:13 +0000

Critical, and seemingly overlooked by the comments and the Justices, is the SEC’s position favoring liability for primary actors without speaking parts. Isn’t the SEC due a little Chevron deference?

By: Daniel Thomas

Daniel Thomas — Wed, 10 Oct 2007 01:18:37 +0000

This case still puzzles me, primarly because I still think that Central Bank overreached. The conduct at issue in that case was not aiding and abetting, in the ordinary meaning of those terms; it was neglect. The claim in this case, as I understand it , is that the actors were actively and knownly engaged in futhering the fraud. This addresses Alito’s concern. Kennedy’s concern is curious because he seems to infer that the real problem is that the law will do eaxctly what it is supposed to do: prevent fraud. Why that is a problem for him I don’t understand. The Chief’s line of thinking is circular and doesn’t even deserve comment.

By: Elliot Silverman

Elliot Silverman — Tue, 09 Oct 2007 22:30:48 +0000

What in the wide world of sports is “Carolene usury”?

By: A MR JONATHAN MACCABEE

A MR JONATHAN MACCABEE — Tue, 09 Oct 2007 17:53:03 +0000

Investment fraud is no simple thing to prosecute never because it depends on Carolene usury, as basic an toleratee as Griswold/Gibbs.