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

Docket Number: 24-345
Citation: 608/2
Term: October Term 2025
Argued: December 10, 2025
Decided: June 11, 2026
Lower Court: United States Court of Appeals for the Second Circuit
Author: Associate Justice Amy Coney Barrett
Concurring: Amy Coney Barrett, John G. Roberts, Jr., Clarence Thomas, Samuel A. Alito, Jr., Neil M. Gorsuch, Brett M. Kavanaugh
Dissenting: Elena Kagan, Ketanji Brown Jackson, Sonia Sotomayor

AI-Generated Summary

1. Case Information:

Case Name: FS Credit Opportunities Corp. et al. v. Saba Capital Master Fund, Ltd., et al.
Docket Number: No. 24–345
Dates: Argued December 10, 2025; Decided June 11, 2026
Lower Court: United States Court of Appeals for the Second Circuit

2. Facts of the Case:

Petitioners (the “Funds”) are investment companies managing closed-end mutual funds incorporated in Maryland. They adopted resolutions opting into the Maryland Control Share Acquisition Act, which limits voting rights for shareholders holding disproportionate shares unless approved by others.
Respondents (collectively “Saba”) engage in activist investing by acquiring stakes in low-performing closed-end funds to alter strategies or convert them to open-end funds. Saba sued the Funds in June 2023, alleging the resolutions violate the Investment Company Act’s (ICA) requirement that every share of stock be a voting stock with equal voting rights (15 U.S.C. §80a–18(i)).
Saba invoked Section 47(b) of the ICA (15 U.S.C. §80a–46(b)(2)), which addresses rescission of contracts violating the Act.

Procedural History:

The District Court held that Section 47(b) creates an implied private right of action for contract rescission and granted summary judgment to Saba.
The Second Circuit summarily affirmed.
The Supreme Court granted certiorari to resolve a circuit split.

3. Legal Issues Presented:

Whether Section 47(b) of the ICA impliedly empowers private parties to sue for rescission of any contract that allegedly violates the Act.
The case involves statutory interpretation of the ICA, not the Constitution. The ICA designates the SEC as primary enforcer and expressly permits private enforcement of only two provisions.
Petitioners argued that Section 47(b) is a mandate to courts about remedial authority, not rights-creating language, and that the ICA’s structure precludes implied private actions. Respondents relied on the phrase “at the instance of any party” and precedent such as Transamerica Mortgage Advisors, Inc. v. Lewis (TAMA).

4. The Court's Decision (Main Opinion):

Author & Type: Justice Barrett delivered the opinion of the Court (Majority opinion, joined by Chief Justice Roberts and Justices Thomas, Alito, Gorsuch, and Kavanaugh).
Holding: Section 47(b) of the ICA does not impliedly empower private parties to sue for rescission of contracts that allegedly violate the Act.
Legal Reasoning: Congress decides who may enforce federal law and usually does so expressly. Section 47(b) uses language directing courts on remedial authority (“a court may not deny rescission”) rather than “rights-creating” language aimed at a protected class. The ICA’s structure vests primary enforcement in the SEC, with only two express private rights of action elsewhere in the statute. The 1980 amendments to Section 47(b) deleted “shall be void” language central to TAMA and shifted focus to court remedies, distinguishing it from the IAA provision upheld in TAMA. Contract rescission is a remedy, not a cause of action, typically supplied by other sources of law.
Disposition: Reversed and remanded.

5. Concurring Opinion(s) (if any):

6. Dissenting Opinion(s) (if any):

Justice Kagan filed a dissenting opinion, joining Parts I and II of Justice Jackson’s opinion.
Justice Jackson filed a dissenting opinion (joined by Justice Sotomayor; Justice Kagan joined as to Parts I and II). The dissent argued that the text (“at the instance of any party” and “rescission”), structure, statutory history (post-TAMA amendments), and legislative history (committee reports expressing intent to preserve implied private rights) support recognition of a private right of action for rescission under Section 47(b).

7. Potential Significance:

The ruling confirms that Section 47(b) does not create a broad implied private right of action for rescission under the ICA, limiting private enforcement to the two express provisions and reinforcing the SEC’s primary role. It underscores the Court’s reluctance to imply private remedies absent clear congressional intent in the statute’s text and structure.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Key terms: Private Lawsuits, Investment Companies, Contract Rescission