Barrett Says SCOTUS Liberals Rely on ‘Fictional Premise' in Their Dissent

The Supreme Court on Thursday ruled that federal law does not allow private parties to sue to unwind contracts under the Investment Company Act, with Justice Amy Coney Barrett sharply criticizing the court's liberal wing for relying on what she described as a flawed interpretation of the statute.

The 6-3 decision limits the ability of investors and activists to bring certain types of lawsuits under federal securities law, reinforcing the role of Congress-and not the courts-in deciding how laws are enforced.

The ruling affects investment funds, shareholders and activist investors who had sought to challenge fund governance rules through private litigation, and could curb similar cases going forward.

At the center of the case, FS Credit Opportunities Corp. v. Saba Capital Master Fund, was whether Section 47(b) of the Investment Company Act allows private plaintiffs to seek "rescission" of contracts alleged to violate the law-a question that had divided lower courts before the justices stepped in.

In its opinion, the court held that the statute does not create an implied private right of action, reversing lower court rulings that had sided with activist investor Saba Capital. The majority emphasized that Congress typically spells out when private parties can sue under federal law and had not done so here.

The dispute arose after Saba Capital, an activist hedge fund, challenged measures adopted by closed-end funds that limited the voting power of large shareholders. Saba argued those provisions violated the Investment Company Act's requirement of equal voting rights and sought to have them rescinded in court.

Lower courts agreed with Saba, concluding that Section 47(b) implicitly allowed such lawsuits. But the Supreme Court rejected that reading, clarifying that enforcement authority rests primarily with the Securities and Exchange Commission, alongside only the specific private rights Congress explicitly authorized elsewhere in the statute.

Barrett, writing for the majority, took direct aim at the dissenting justices' reasoning, arguing it was built on an unsound premise about how the statute operates and how private enforcement should function. While the dissent warned that the decision could weaken investor protections, the majority countered that expanding private lawsuits without clear congressional authorization would overstep the judiciary's role.

Barrett wrote, in part, “Notably, the dissent does not use the Committee Reports to clarify the meaning of Section 47(b). For instance, the dissent does not consult the Committee Reports to see how their authors used the words on which this case turns: ‘rescission at the instance of any party.’ Nor does it try to identify the circumstances that prompted Congress to retool Section 47(b). Instead, the dissent uses the Reports on a mission impossible: divining how Congress would have

wanted courts to resolve the question presented in this case. Its theory depends on the fictional premise that hundreds

of legislators (not to mention the President) shared a unified private view of how the statute should apply in a contested circumstance.”

The ruling is likely to have consequences for shareholder activism and corporate governance battles involving investment funds, particularly those structured as closed-end funds. By foreclosing this pathway for private lawsuits, the decision could shift future disputes back toward regulators rather than federal courts, narrowing one avenue investors have used to challenge fund practices.

This is a breaking news article. Updates to follow.

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This story was originally published June 11, 2026 at 9:37 AM.