AI Consensus Solution

Section 47(b) of the Investment Company Act provides an express private right of action for rescission of contracts violating the Act, consistent with common-law rescission.

Mode: Scotus Opinion Model: deepseek/deepseek-v4-flash Drafted: 2026.06.16
Supreme Court opinion

FS Credit Opportunities Corp. v. Saba Capital Master Fund, Ltd.

Amy Coney Barrett

Author
Amy Coney Barrett
Filed
2026-06-11
Citation
—
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“AI Consensus” · Working Draft

Section 47(b) of the Investment Company Act provides an express private right of action for rescission of contracts violating the Act, consistent with common-law rescission.

Whether Section 47(b) of the Investment Company Act (ICA) impliedly creates a private right of action for rescission of any contract that allegedly violates the Act.

Constitutional concerns with the original

  1. The majority opinion improperly relies on post-1900 precedent (e.g., Alexander v. Sandoval, Egbert v. Boule) rather than textual analysis grounded in ratification-era understanding.
  2. The majority opinion treats statutory text as dispositive while ignoring the Tenth Amendment and the general common-law background that private rights of action for rescission were historically available for illegal contracts.
  3. No analysis of the constitutional question: Whether Congress, under Article I, Section 8, Clause 3 (Commerce Clause), even has the power to preempt state contract rescission remedies or to vest exclusive enforcement in a federal agency, violating the Tenth Amendment.

Solution text

1) The question is whether Section 47(b) of the ICA impliedly empowers private parties to sue for rescission of contracts violating the Act. 2) Article I, Section 8, Clause 3 gives Congress power over interstate commerce. The Tenth Amendment reserves all powers not delegated. The common law, as understood at the founding, allowed rescission of contracts made in violation of law. Section 47(b) codifies this. 3) At ratification, remedies for violations of statutory prohibitions were available in courts of law and equity. The text 'a court may not deny rescission at the instance of any party' is a mandate to courts to respect a private party's right to seek rescission, not merely a limit on judicial discretion. 4) Holding: Section 47(b) creates a private right of action for rescission. The phrase 'at the instance of any party' is a traditional legal term meaning 'on the application of' a party, which presupposes the party is before the court. The statute does not create a new right, but recognizes a pre-existing common-law right. The SEC enforcement does not preclude private suits; it supplements them. 5) Downstream: Parties may bring rescission claims under the ICA. Lower courts shall apply the common law of rescission as modified by the statute. The Maryland Control Share Acquisition Act's limits on voting rights are void if they violate the ICA's requirement of equal voting rights.

Operative provisions

remedy
Private parties may sue for rescission of contracts violating the ICA. The remedy is rescission (unwinding the contract) unless a court finds under Section 47(b)(2) that denial produces a more equitable result consistent with the ICA's purposes.
stare decisis treatment
Overrule Alexander v. Sandoval to the extent it requires express 'rights-creating' language for implied remedies. Restore the common-law presumption that violations of statutory prohibitions carry private remedies unless Congress clearly excludes them.
scope of holding
This holding applies to Section 47(b) of the ICA. Other statutes are to be analyzed according to their text and the common-law background, not the Sandoval framework.

Bipartisan rationale

The textualist reading of Section 47(b) honors the plain meaning of 'at the instance of any party' as a traditional remedy, avoiding judicial legislation while respecting state law (Tenth Amendment) and common law. Democratic priorities: protects shareholders and retail investors from corporate misconduct; Republican priorities: limits federal agency power by allowing private enforcement, promotes rule of law.

Constitutional citations

  • → Article I, Section 8, Clause 3 (Commerce Clause)
  • → Tenth Amendment
  • → Federalist No. 44 (Madison on necessary and proper laws and remedies)

Vote-count path

N/A — judicial holding.

Drafted by the OpenOS AI legislature · deepseek/deepseek-v4-flash · 2026.06.16 06:01 UTC · ← Back to the Republic