Merrill LYNCH, Pierce, Fenner & Smith, Inc. v. Manning (578 U.S. 374)
U.S. Supreme Court · decided May 16, 2016 · Supreme Court Database (Spaeth)
- Citation
- 578 U.S. 374 · 136 S. Ct. 1562
- Decided
- May 16, 2016
- Term
- October Term 2015
- Vote
- 8–0
- Majority author
- Justice Kagan
- Issue area
- Judicial Power
- Disposition
- Affirmed
- Outcome
- Petitioning party lost
- Ideological direction
- Conservative
Opinion excerpt
Justice KAGAN delivered the opinion of the Court. Section 27 of the Securities Exchange Act of 1934 (Exchange Act), 48 Stat. 992, as amended, 15 U.S.C. § 78a, et seq., grants federal district courts exclusive jurisdiction "of all suits in equity and actions at law brought to enforce any liability or duty created by [the Exchange Act] or the rules or regulations thereunder." § 78aa(a). We hold today that the jurisdictional test established by that provision is the same as the one used to decide if a case "arises under" a federal law. See 28 U.S.C. § 1331. I Respondent Greg Manning held more than two million shares of stock in Escala Group, Inc., a company traded on the NASDAQ. Between 2006 and 2007, Escala's share price plummeted and Manning lost most of his investment. Manning blames petitioners, Merrill Lynch and several other financial institutions (collectively, Merrill Lynch), for devaluing Escala during that period through "naked short sales" of its stock. A typical short sale of a security is one made by a borrower, rather than an owner, of stock. In such a transaction, a person borrows stock from a broker, sells it to a buyer on the open market, and later purchases the same number of shares to return to the broker. The short seller's hope is that the stock price will decline between the time he sells the borrowed shares and the time he buys replacements to pay back his…
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