Investing

follow precedent

What is the precedent?

The principle of precedence is a legal principle that obliges courts to follow historical cases when deciding similar cases. Following precedent ensures that cases with similar scenarios and facts are handled the same way. In short, it binds courts to follow legal precedent set by previous decisions.

Stare decisis is a Latin word meaning “hold on to what has been decided”.

Understanding precedent decisions

The common law structure of the United States has a unified legal affairs adjudication system centered on the principle of precedent, so the concept of precedent is extremely important. Previous rulings or judgments in any case are called precedents. Following the precedent principle states that courts refer to precedent when overseeing ongoing cases with similar circumstances.

key takeaways

  • The principle of precedence is a legal principle that obliges courts to follow historical cases when deciding similar cases.
  • The principle of following precedent requires a case to follow the precedent of other similar cases in similar jurisdictions.
  • The U.S. Supreme Court is the highest court in the United States; therefore, all states rely on Supreme Court precedent.

Watch Now: What is a precedent decision?

What is the precedent?

Unique cases with hardly any past references may set a precedent when a judge makes a ruling. In addition, the new ruling in similar cases in this case supersedes any precedent that was overturned in this case. Under the principle of precedent, courts are obliged to uphold their previous decisions or those made by higher courts within the same court system.

For example, the Kansas Court of Appeals will follow their precedent, the Kansas Supreme Court precedent, and the U.S. Supreme Court precedent. Kansas is not obligated to follow the precedent set by other state appellate courts, such as California. However, when faced with a unique case, Kansas may refer to the precedents of California or any other state with established rulings as a guide for setting precedent.

Practically all courts must abide by the decisions of the Supreme Court, which is the highest court in the country. Thus, decisions made by the Supreme Court become binding or mandatory precedent decisions by lower courts in the system. When the Supreme Court overturns precedent set by its lower courts in the legal hierarchy, the new ruling will be a precedent decision similar to a court hearing. If a case adjudicated in a Kansas state court, which has adhered to a certain precedent for decades, is brought to the U.S. Supreme Court, and then overturned by that court, and the Supreme Court’s rejection supersedes the previous precedent, the Kansas state court needs to adapt to the new rules for precedent.

overturn precedent

On rare occasions, the Supreme Court has overturned its own previous rulings — David Schultz, a University of Minnesota law professor and a professor of political science at Hamline University, reported that it did so 145 times between 1789 and 2020, Among them “25,544 Supreme Court opinions and judgments following oral arguments.” This is only one-half of one percent.

Schultz noted that the most famous reversal to date is Brown v. Board of Education in 1954.The decision overturned the 1896 independent but equal doctrinal ruling in Plessy v. Ferguson that supported apartheid. If the court overturns the 1973 ruling that legalized abortion, Roe v. Wade, Dobbs v. Jackson Women’s Health may be the next big case to drop the gaze law. The decision should be made in June 2022.

real world example

Insider trading in the securities industry is the misuse of material non-public information for financial gain. Insiders can trade the information for their portfolio or sell the information to outsiders for a fee. The precedent used by courts in dealing with insider trading is the 1983 case of Dirks v. SEC. In this case, the U.S. Supreme Court ruled that insiders were guilty if they obtained a material advantage, directly or indirectly, by disclosing information to those who acted against them. In addition, when the information is given to relatives or friends, there are cases where confidential information is exploited. The decision set a precedent and was upheld by courts dealing with financial crimes of a similar nature.

Use to follow precedent

In the 2016 Salman v. United States decision, the Supreme Court adopted the principle of precedent. Bassam Salman earned an estimated $1.5 million from inside information indirectly obtained from his brother-in-law, Maher Kara, who was then an investment banker at Citigroup. While Salman’s lawyers argue that he should only be convicted if he compensates his brother-in-law in cash or in kind, the Supreme Court judge ruled that insiders don’t have to be rewarded for leaking company secrets. Confidential information given to Salman is considered a gift on the basis of precedent—as Dirks v. SEC makes clear that when a dumper provides confidential information as a gift, a fiduciary duty is breached. As a result, Salman was convicted of insider trading.

Consider precedent

In 2014, the U.S. Court of Appeals for the 2nd Circuit in New York overturned the insider trading convictions of two hedge fund managers, Todd Newman and Anthony Chiasson, saying an insider could only be convicted if the misappropriation of information yielded a genuine personal benefit. When Bassam Salam appealed his 2013 conviction, using the 2nd Circuit’s ruling as a precedent, the U.S. Court of Appeals for the 9th Circuit in San Francisco did not follow the 2nd Circuit’s precedent, which it has no obligation to uphold. An appeals court upheld Salman’s conviction.

As noted above, Salman appealed the decision to the U.S. Supreme Court, arguing that the Second Circuit’s decision was inconsistent with Supreme Court precedent established in Dirks v. SEC and that the appellate court did not follow the precedent principle. The Supreme Court disagreed and upheld the original judgment. “Salman’s conduct is at the heart of Dex’s rules on gifts,” Judge Alito wrote.

Related Posts

1 of 2,105

Leave A Reply

Your email address will not be published.