SCOTUS
FS Credit Opportunities Corp. v. Saba Capital Master Fund, Ltd.
DecidedJun 11, 2026
6-3decision
Source: CourtListener.
Court rules private investors cannot sue under Investment Company Act to cancel contracts
Impact4/10
What it does
The Court held that Section 47(b) of the Investment Company Act does not give private parties an implied right to sue to cancel contracts that violate the Act. The provision is a directive to courts about how to handle rescission requests when parties are already before them — not a grant of a new right to file a lawsuit. Private parties seeking to enforce the Act must rely on the SEC or on the two specific private rights of action Congress expressly created elsewhere in the statute.
Who benefits
Investment companies and closed-end mutual funds that have adopted shareholder voting restrictions under state law, who can no longer be sued directly by activist investors seeking to cancel those arrangements under the Investment Company Act.
Who is affected
Shareholders and activist investors who purchase large stakes in closed-end mutual funds and seek to use federal law to cancel fund governance arrangements they believe violate equal-voting-rights requirements.
Practical impact
Activist investors and shareholders who believe an investment company has violated the Investment Company Act's equal-voting-rights requirement can no longer bring a federal lawsuit under Section 47(b) to cancel the offending contract or corporate resolution. Enforcement of the Act's voting-rights provisions now rests primarily with the SEC, and private parties must look to state law or the two express private rights of action in the Act for any judicial remedy. Closed-end funds that have adopted state-law voting restrictions — such as Maryland's Control Share Acquisition Act — gain significant protection from direct federal litigation by activist shareholders.
Majority reasoning
The majority held that Congress — not courts — decides who may sue to enforce federal law, and that courts should not invent private rights of action that Congress did not expressly create. Reading Section 47(b)'s text, the Court found that the provision is addressed to courts ("a court may not deny rescission"), not to individual parties, and that it presupposes litigants are already before the court rather than granting anyone a new right to file suit. The Court also pointed to the statute's structure: Congress gave the SEC broad enforcement authority and expressly created only two narrow private rights of action elsewhere in the Act, which shows it knew how to authorize private suits and chose not to do so in Section 47(b). The majority further reasoned that a 1980 amendment to Section 47(b) — which deleted the original "shall be void" language and replaced it with court-focused remedial language — distinguished the provision from a similar Investment Advisers Act section that a prior ruling (TAMA) had found to carry an implied private right of action. Because changed statutory language typically signals changed meaning, the Court concluded the 1980 revision moved Section 47(b) away from, not toward, a private right of action.
Dissent reasoning
The dissent argued that the majority misread both the text of Section 47(b) and the history surrounding it. Justice Jackson, joined by Justices Sotomayor and Kagan, contended that when Congress amended Section 47(b) in 1980, it did so with full knowledge of the TAMA ruling — which had found an implied private right of action for rescission in nearly identical language — and deliberately chose to preserve that right rather than eliminate it. The dissent pointed out that Congress inserted the word "rescission" (the very term used in TAMA) and added the phrase "at the instance of any party," which it read as affirmatively rights-creating language that goes beyond what TAMA's original text contained. The dissent also argued that committee reports from both the House and Senate explicitly stated Congress's intent that courts continue to imply private rights of action under the amended statute to the same extent as before, and that the majority improperly ignored this direct evidence of congressional intent. Justice Kagan filed separately to note that, while she is more cautious about using legislative history than Justice Jackson, she agreed that the text, structure, and statutory history of Section 47(b) support recognizing a private right of action.
Constitutional question
Does Section 47(b) of the Investment Company Act give private parties an implied right to sue in court to cancel (rescind) contracts that allegedly violate the Act, even though Congress never expressly created that right?
Precedent changed
The ruling effectively limits the reach of Transamerica Mortgage Advisors, Inc. v. Lewis (TAMA), 444 U.S. 11 (1979), by holding that the 1980 amendment to Section 47(b) of the ICA broke the textual parallel with the Investment Advisers Act provision on which TAMA's implied-right-of-action reasoning depended; TAMA is not overruled but is confined to the narrower IAA context.