Stare Decisis – Definition

Cite this article as:"Stare Decisis – Definition," in The Business Professor, updated December 2, 2019, last accessed October 26, 2020,

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Stare Decisis Definition

Stare decisis is a lawful rule that asks courts to take inspiration from previous cases while judging a case of a similar nature. This doctrine makes sure that cases having the same facts and circumstances are handled in a similar manner. In simpler terms, it makes courts obligatory to consider lawful precedents set by jury’s decisions in the past.

The term ‘Stare decisis’ is derived from a Latin word that means to abide by something that is already decided.

A Little More on What is Stare Decisis

The common law structure of the United States follows a combined approach of judging legitimate matters with stare decisis. It has made the rule of legal precedent really significant in court decisions. A precedent refers to a judgment made on a case in the past. The principle of stare decisis says that courts consider precedents at the time of dealing cases of similar nature.

Key points to remember

  1. Stare decisis refers to a lawful principle that allows courts to consider past cases when making decision on the same case.
  2. Stare decisis states that cases are free to take inspiration from similar cases in the same courts.
  3. The US Supreme Court, being the biggest court of the country, lets all provinces follow precedents of Supreme Court.

What Makes a Precedent?

A case that is unique in nature and doesn’t have any previous reference material can be a precedent when the jury passes a decision on it. In addition to this, the latest rule on the same present case overrides any type of precedent that was rescinded for the present case. As per stare decisis, judges are required to follow the past decisions or decisions that supreme courts made in the similar court scenario.

For instance, the courts of Kansas are obligated to consider the Kansas Supreme court as their precedent, and the U.S. Supreme court precedent. They are not supposed to take precedence from court cases or decisions made in courts from other provinces. However, there can be an exception when it is about handling a special or unique case. This means Kansas may take precedence from the court of California or other province that follows a special process for creating its precedent.

Also, courts from all provinces are bound to take the Supreme Court’s decisions as precedence. This states that the decisions taken by the supreme court or the highest authority become precedent or work as stare decisis for the other courts in the judicial process. In case, the Supreme Court cancels a precedent that lower courts made, the latest rule will act as stare decisis on the court cases of similar type. When a case in Kansas court is considered as a precedent for many years, and is further appealed to the U.S. Supreme court where the case of Kansas is revoked, then the overrule of court acts as a substitute for the past precedent, and it would be obligated for Kansas judicial system to abide by the newly set rule.

Real Word Examples

Insider trading refers to the exploitation of material and private data related to financial securities so as to have a financial benefit. The insider can earn profits by trading insights for his or her portfolio or selling information with an outsider in exchange for a heavy price. For dealing with cases of insider trading, courts take the case of Dirks vs SEC, 1983 as a precedence. As per this case, the U.S. Supreme Court stated that if an insider is trading information for having material gains, will be considered to be guilty. Also, private information can also be leaked by giving it to a friend or relative. This decision taken by the supreme court acted as a precedent, and is followed by courts while dealing with similar crimes in the finance industry.

Using Stare Decisis

The latest example is of Salman vs The United States, 2016 case where the Supreme Court followed stare decisis to establish the rule. According to the case, Maha Kara, working as a Citigroup investment banker, offered inside information to Bassam Salman that helped him in earning approximately $1.2 million. When the advocate of Salman tried to defend him saying that he should be found guilty only if he offered some compensation to Maher for receiving the information, the Supreme Court considered Dirks vs SEC as precedent. The court said that the person received the confidential financial information as a gift, and as per the Dirks vs SEC case, the person would be found guilty even if he doesn’t pay anything in cash or kind.

Considering Precedent

In the year 2014, there was an overturning of the insider trading made by the U.S. Circuit Court in New York for a couple of hedge fund analysts named Todd Newman and Anthony Chiasson. They stated that an insider is said to be at fault only when the leaked information resulted in an individual gain for someone. When Salman used the Second Circuit’s decision as precedent, the Ninth U.S. Circuit of Appeals in San Francisco didn’t follow the New York’s precedent. Hence, the Appeals Court didn’t release Salman from charges.

Salman’s case was further taken to the U.S. Supreme Court because of the inconsistency in the ruling of the Second Circuit and the Supreme Court’s precedent of Dirks vs SEC. Hence, the Appeal Court didn’t abide by stare decisis. In case, it was under the precedent of the Supreme Court, Todd and Anthony would have been considered guilty.

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