FS Credit Opportunities Corp. v. Saba Capital Master Fund (24-345)
- Term
- OT 2025
- Argued
- 2025-12-10
- Decided
- 2026-06-11
- Vote
- 6-3 for FS Credit Opportunities Corp.
- Opinion
- Justice Barrett
- Majority
- Barrett, Roberts, Thomas, Alito, Gorsuch, Kavanaugh
- Dissent
- Kagan, Jackson, Sotomayor
Holding
Justice Barrett delivered the opinion of the Court, joined by Roberts, Thomas, Alito, Gorsuch, and Kavanaugh. Held: Section 47(b) of the Investment Company Act does NOT implicitly empower private parties to sue for rescission of contracts that allegedly violate the Act. Reversed and remanded; Second Circuit (which had followed Oxford Univ. Bank v. Lansuppe Feeder) reversed.
Pre-decision prediction
FS Credit Opportunities 6-3 (90% confidence).
Opinion of the Court
Authored by Justice Barrett (12,880 words total).
CAPITAL MASTER FUND, LTD., ET AL. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT No. 24–345.
Argued December 10, 2025—Decided June 11, 2026
The Investment Company Act (ICA) comprehensively regulates investment companies. The ICA designates the Securities and Exchange Commission as its primary enforcer and expressly permits shareholders and issuers of securities to enforce two of its provisions. The question presented in this case is whether Section 47(b) of the ICA impliedly empowers private parties to sue for rescission of any contract that allegedly violates the Act. Petitioners (“Funds”) are investment companies that manage closedend mutual funds. These funds are “closed” because each contains a fixed number of shares issued at one time, and the price of each share is determined by trading on the open market. Respondents Saba Capital Master Fund, Ltd., and Saba Capital Management, L. P., (collectively, Saba) engage in activist investing—a practice that involves identifying low-performing closed-end funds and purchasing a large enough stake to alter the funds’ investment strategies. The Funds are incorporated in Maryland, which has enacted the Maryland Control Share Acquisition Act (MCSAA), and have adopted resolutions opting into MCSAA provisions that limit voting rights for shareholders holding a disproportionate number of shares (like activist investors) unless other shareholders approve. In June 2023, Saba sued the Funds, alleging that the Funds’ resolutions violate the ICA’s requirement that every share of stock shall be a voting stock with equal voting rights. Saba’s suit invoked Section 47(b) of the ICA, which provides that “a court may not deny rescission” of contracts that violate the ICA “at the instance of any party” unless the court finds that doing so would be consistent with equity and the ICA’s goals. 15 U. S. C. §80a–46(b)(2).
MASTER FUND, LTD. Syllabus The District Court held that Section 47(b) creates an implied private right of action to sue for contract rescission and granted Saba summary judgment. The Second Circuit summarily affirmed.
Held: Section 47(b) of the ICA does not impliedly empower private parties to sue for rescission of contracts that allegedly violate the Act. Pp. 3–10. (a) Congress, not the Judiciary, decides who may enforce federal law; when Congress creates a private right of action, it usually does so expressly. The Court has rejected the practice of fashioning rights of action, Alexander v. Sandoval, 532 U. S. 275, 287, because judicially created causes of action are difficult to reconcile with “ ‘the Constitution’s separation of legislative and judicial power,’ ” Egbert v. Boule, 596 U. S. 482, 491. If a statute does not spell out a right of action, courts examine its text and structure to determine whether it implicitly provides one. To create a private right, a statute must use “ ‘rights-creating’ language” aimed at protecting “ ‘a particular class of persons.’ ” Sandoval, 532 U. S., at 288–289. Language that “focus[es] on the person regulated rather than the individuals protected” does not suffice. Id., at 289. And the existence of an express “remedial schem[e]” elsewhere in the statute may “foreclose a private cause of action to enforce even those statutes that admittedly create substantive private rights.” Id., at 290. Pp. 3–4. (b) Section 47 of the ICA—entitled “[v]alidity of contracts”—provides that any contractual waiver of compliance with the ICA “shall be void,” §80a–46(a), and that contracts made in violation of the ICA are generally unenforceable unless specific circumstances are met, §80a– 46(b)(1). Relevant here, if such a contract “has been performed, a court may not deny rescission at the instance of any party unless such court finds that under the circumstances the denial of rescission would produce a more equitable result than its grant and would not be inconsistent with the purposes of this subchapter.” §80a–46(b)(2). The phrase “rescission at the instance of any party” does not imply that private parties may sue. Section 47(b) is a “mandate directed to . . . courts,” rather than a provision that “confer[s] a right on a specified class of persons.” Thompson v. Thompson, 484 U. S. 174, 183. The key actor is a court, not an individual, §80a–46(b)(2), and it is instructed not to deny the remedy of rescission to parties who request it for performed contracts unless the equities and ICA’s goals favor a different result, ibid. Section 47(b)’s wording presupposes that parties are already before the court and directs the court’s use of its remedial authority; it says nothing about individual rights. Statutory structure points in the same direction. The Securities and Exchange Commission bears primary responsibility for ensuring
Syllabus compliance with the ICA and may investigate and bring enforcement actions in response to violations. §80a–41(a). Congress’s decision to create a comprehensive agency enforcement scheme supports the conclusion that private parties generally cannot enforce the ICA. Northwest Airlines, Inc. v. Transport Workers, 451 U. S. 77, 94. Pp. 4–8. (c) Saba’s counterarguments are unpersuasive. The phrase “at the instance of any party” ordinarily means “at the solicitation” or “suggestion of,” 7 Oxford English Dictionary 1040, directing a court’s remedial power when a party before it is urging rescission; the phrase says nothing about conferring a right to sue in the first place. Saba’s reliance on Transamerica Mortgage Advisors, Inc. v. Lewis (TAMA), 444 U. S. 11, which holds that the Investment Advisers Act (IAA) creates an implied right of action based on the phrase “shall be void,” §80b– 15(b), is unavailing because Congress amended Section 47(b) in 1980, deleting the “shall be void” language on which TAMA’s reasoning turns and shifting the focus toward regulating a court’s remedial authority. Congress made these changes despite retaining the phrase “shall be void” in the immediately preceding provision, §47(a), and in the IAA itself. Changed language typically indicates changed meaning, and that is true here. Even if TAMA applied, it blesses only a “limited private remedy . . . to void an investment advisers contract,” 444 U. S., at 24 (emphasis added); Saba would wield Section 47(b) to void any type of contract that violates the ICA. TAMA is thin support for such a sweeping right. Pp. 8–10. Reversed and remanded. BARRETT, J., delivered the opinion of the Court, in which ROBERTS, C. J., and THOMAS, ALITO, GORSUCH, and KAVANAUGH, JJ., joined. KAGAN, J., filed a dissenting opinion. JACKSON, J., filed a dissenting opinion, in which SOTOMAYOR, J., joined, and in which KAGAN, J., joined as to Parts I and II.
Opinion of the Court NOTICE: This opinion is subject to formal revision before publication in the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, pio@supremecourt.gov, of any typographical or other formal errors.
FS CREDIT OPPORTUNITIES CORP., ET AL., FUND, LTD., ET AL. ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT [June 11, 2026]
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