Does The Economy React to Supreme Court Decisions?


The title of this article may raise a few eyebrows. After all, how do legal matters in any way affect the ways in which our economy runs daily, ebbing and flowing accordingly?

But according to one research report published in late August of this year, it may be worth the time of stock traders and legal professionals to pay closer attention to economic surges and slumps after major Supreme Court decisions. That report was “Law on the Market? Evaluating the Securities Market Impact of Supreme Court Decisions” on the Social Science Research Network website.

The study examined all Supreme Court cases in the United States from the year 1999 to 2013. The study participants found that in 79 cases “the share price of one or more publicly traded company moved in direct response to the Supreme Court’s decision.”

Moreover, the study concluded that “over fifteen years, Supreme Court decisions where responsible for more than 140 billion dollars in absolute changes in wealth.” The study identifies such cases as “law on the market” events (or LOTM events). While such events did not occur in every case—and in fact, only 6% of Supreme Court cases over the past 15 years have significantly “moved markets”—they were certainly “not uncommon” on smaller scales.

One case that the authors of the report used as an example in the study’s introduction occurred on June 13, 2013—Association for Molecular Pathology vs. Myriad Genetics, Inc., 133 S. Ct. 2107 (2013).

This case forced the Supreme Court to consider several pressing issues: bioethical concerns; the role of scientific advancement and technology and how far “too far” may be when it comes to making such advancements; and perhaps most important of all, ownership of the individual body versus invasive scientific investigation for the greater good and “whether human genes could be subject to patent claims.”

According to the study, “the party to the litigation, Myriad Genetics, was sued over its patent claims relating to two types of biological material—BRCA1 and BRCA2, whose mutations are linked to increased risk for breast and ovarian cancer.” “Under the cover of its patent claim,” continues the report, “Myriad Genetics had sought to be the exclusive provider of ‘BRAC analysis’ and ‘BART analysis’ tests used to screen patients for cancer.”

The Court’s final decision, in its inherent “plenty-of-gray-area” matter of discussion, was one that still might be a lively issue of debate: “DNA sequences fall outside the definition of patentable subject matter under 35 U.S.C. 101, but cDNA (complementary DNA) sequences, which do not occur absent human intervention, may indeed be patented.” In other words, if the biological material is not naturally occurring, then it is up for grabs as far as patents are concerned.

The decision, of course, had a significant effect on the reputation and financial status of Myriad Genetics. At first, according to data provided in the study, the market was confused and revealed that the ruling had no adverse effect on Myriad Genetics. In fact, to some degree, with the help of sensationalizing media reports, Myriad Genetics benefited on the Stock Market, at least for the first couple of hours following the hearing.

Once people took the time to better analyze the matter, however, Myriad Genetics underwent some scrutiny, and the decision suddenly became “highly unfavorable to Myriad’s business interests.” The report continues with the following observation: “As a result, the stock began to trade down in the second half of the session. Media coverage following the initial trading day called it a ‘wild ride’ and a ‘market ripsaw.’”

As the implications of the case ruling continued to sink in for some, Myriad’s stock lost “in excess 20% of value over the two-day trading window.” The study also notices this particularly interesting trend: “Specifically, on the date of the decision, there was roughly a thirteen-fold increase in trading volume of the stock. The day thereafter witnessed an eighteen-fold increase in trading volume.”

The study stresses that while the effects on Myriad’s stocks were notably dynamic and rapid, Myriad’s case was in many ways unique. For this reason, it has not always been clear whether the market regularly responds to Supreme Court decisions in such vast ways. However, several other cases’ rulings have directly reflected a company’s standing on the market.

In the article “Do Supreme Court Decisions Move Markets?” by Nicole Hong on The Wall Street Journal website, Hong cites a case in June of 2014, when the Supreme Court ruled that Aereo Inc. “violated copyrights on programming.” As a result of the ruling, CBS Corp. benefited greatly because “a ruling in Aereo’s favor could have hurt traditional revenue streams for broadcasters.”

So does the economy react to Supreme Court decisions? It seems there is enough evidence to consider that a distinct possibility.




Jacqueline Hill, Esq.

This post was written by .

Jacqueline Hill is a partner at Lexacount Search, where she places top senior-level and other legal talent with law firms and corporate legal departments across the United States. She has been writing about careers, lawyers, attorney professional development, and the legal industry for more than a decade. She can be reached at or 215-740-0104, extension 101.

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