October 10, 2006

Certs and Skirts

by PG

There's a supposed correlation between hemlines and stock prices: they tend to go up and down together. An e-mailer today wondered whether the relationship between grants of certiorari to cases in which a business is involved and won in the lower courts, and its stock price, might be inverse: if the case goes to the Highest, will the business's stock do the reverse?

The immediate catalyst for this thought was a Law.com article on Stephen Breyer's selling Duke Energy stock before the Supreme Court voted on whether to take Environmental Defense v. Duke Energy Corp.. Justice Breyer did so on behalf of a skirt -- specifically, his wife Joanna, the actual owner of the shares [1]. David Lat doesn't find a non-recusal story newsworthy, though don't be surprised if you see a Republican claim that Breyer either should have sold as soon as he knew the Court would review the case, or should have a blind trust for his wife's assets as well as his own.

Nonetheless, there's a nice empirical question. What effect do appellate grants of certiorari have on share prices for businesses involved in the litigation? It doesn't seem likely to come up in securities litigation, as the agency decisions sometimes do, because brokers, executives et al. are unlikely to get advance notice or warning about whether cert will be granted, whereas they do tend to have a pretty good idea as to whether the FDA's inclined to declare a product unfit for the market. (Speaking of Breyer...) Despite what's said about the anti-democratic nature of the judiciary, it's nonetheless quite public; an agency may keep an investigation quiet and give little public notice, but the briefs, motions, orders and decisions in appellate cases seem to be almost equally available to non-insiders.

[1] It's a retrograde rudeness to refer to any woman as a "skirt," but hopefully if Dr. Breyer ever sees this, she will understand the temptation to maintain theme.

October 10, 2006 10:00 PM | TrackBack
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