Source: https://supreme.justia.com/cases/federal/us/486/622/
Timestamp: 2019-04-23 02:42:56+00:00

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Petitioner Pinter, an oil and gas producer and registered securities dealer, sold unregistered securities consisting of fractional undivided interests in oil and gas leases to respondent Dahl, a real estate broker and investor who was experienced in oil and gas ventures. Dahl touted the venture to the other respondents -- his friends, family, and business associates -- and assisted them in completing subscription agreement forms prepared by Pinter, but received no commission from Pinter when each of them invested in unregistered interests on the basis of Dahl's involvement. When the venture failed, respondents sued Pinter in Federal District Court, seeking rescission under § 12(1) of the Securities Act of 1933 (Act) for the unlawful sale of unregistered securities. After a bench trial, the court granted judgment for respondents, apparently rejecting Pinter's common law in pari delicto defense to Dahl's suit. The Court of Appeals affirmed, ruling that such defense was not available because § 12(1) creates a "strict liability offense," rather than liability based on intentional conduct, and distinguishing Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U. S. 299, which held that the defense applies in actions under § 10(b) of the Securities Exchange Act of 1934, on the ground that § 10(b) contains an element of scienter. The court also held that Dahl was not a "seller" within the meaning of § 12(1), and therefore could not be held liable in contribution for the other respondents' claims against Pinter, since, although Dahl's conduct was a "substantial factor" in causing the other respondents' purchases, there was no evidence that he had sought or received financial benefit for himself or anyone other than the other respondents.
1. The in pari delicto defense is available in a § 12(1) private rescission action. Pp. 486 U. S. 632-641.
(a) Bateman Eichler is not limited to § 10(b) claims, to cases involving willful or negligent misconduct, or to implied, as opposed to express, private causes of action. Rather, the decision provides the appropriate test for allowance of the in pari delicto defense in a private action under any of the federal securities laws, including a § 12(1) rescission suit. Pp. 486 U. S. 633-635.
(b) The first prong of the Bateman Eichler test is satisfied in the § 12(1) context if the plaintiff is at least equally responsible for the issuer's illegal failure to register the securities or to conduct the sale in a manner that satisfies the Act's registration exemption provisions. A purchaser's knowledge that the securities are unregistered cannot, by itself, constitute equal culpability, even where he is a sophisticated buyer who may not necessarily need the Act's protection. Rather, the relative responsibility assessment turns upon the facts of each case. The second prong of the Bateman Eichler test is satisfied in the § 12(1) context where the plaintiff's role is primarily as a promoter, rather than as an investor. The determination depends on a host of readily accessible factors, including, but not limited to, the extent of the plaintiff's financial involvement compared to that of the third parties he solicited, the incidental nature of his promotional activities, the benefits he received for those activities, and the extent of his involvement in the offering's planning stages. Pp. 486 U. S. 635-639.
(c) The District Court's findings are inadequate to determine whether Dahl may be subjected to Pinter's in pari delicto defense under the Bateman Eichler test, as it applies to § 12(1) actions. Pp. 486 U. S. 639-641.
2. A nonowner of securities must solicit the purchase, motivated at least in part by a desire to serve his own financial interests or those of the securities owner, in order to qualify as a "seller" within the meaning of § 12(1), which provides that "[a]ny person who . . . offers or sells a security" in violation of the Act's registration requirement "shall be liable to the person purchasing such security from him." Pp. 486 U. S. 641-655.
(a) Section 12(1)'s language and history, as well as the statutory purpose of protecting investors, demonstrate that "seller" is not limited to an owner who passes title, or other interest in a security, to the buyer for value, but extends to a broker or other person who successfully solicits a purchase of securities, so long as he is motivated at least in part by a desire to serve his own financial interests or those of the securities owner. It strains the meaning of § 2(3) of the Act, which defines "offer" for § 12(1)'s purposes as including every "solicitation of an offer to buy . . . for value," to say that a person who gratuitously urges another, even strongly or enthusiastically, to make a securities purchase solely for the buyer's benefit is "soliciting" or is requesting value in exchange for his suggestion or seeking the value the titleholder will obtain in exchange for the ultimate sale. Only if the soliciting person is motivated by such a financial interest can it be fairly said that the buyer "purchased" the security from him, such that he can be aligned with the owner in a rescission action. Pp. 486 U. S. 642-647.
is defined as one whose participation in the buy-sell transaction is a substantial factor in causing the transaction to take place, is not an appropriate standard for assessing § 12(1) liability as a statutory seller. Without affording guidelines for determining when the defendant's conduct is sufficiently integral to the sale, the test would expand primary § 12(1) liability beyond persons who pass title and those who "offer" or "solicit" offers for financial gain to persons who merely participate in unlawful sales transactions but are only remotely related to the relevant aspects of the transactions, including accountants and lawyers simply performing their professional services. Such persons do not even arguably fit within the definitions set out in § 2(3). Congress did not intend such a gross departure from the statutory language. Pp. 486 U. S. 648-654.
(c) The record is insufficient to determine whether Dahl may be liable as a statutory "seller" under § 12(1). The District Court's finding that Dahl solicited the other respondents' purchases is not clearly erroneous. However, the Court of Appeals' apparent conclusion that Dahl was motivated entirely by a gratuitous desire to share an attractive investment opportunity with his friends and associates was premature, since the District Court made no findings that focused on whether he urged the other respondents' purchases in order to further some financial interest of his own or of Pinter. Pp. 486 U. S. 654-655.
787 F.2d 985, vacated and remanded.
BLACKMUN, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BRENNAN, WHITE, MARSHALL, O'CONNOR, and SCALIA, JJ., joined. STEVENS, J., filed a dissenting opinion, post, p. 486 U. S. 655. KENNEDY, J., took no part in the consideration or decision of the case.
action brought under § 12(1) of the Securities Act of 1933 (Securities Act), 48 Stat. 74, as amended, 15 U.S.C. § 77a et seq., for the rescission of the sale of unregistered securities, and (b) whether one must intend to confer a benefit on himself or on a third party in order to qualify as a "seller" within the meaning of § 12(1).
The controversy arises out of the sale prior to 1982 of unregistered securities (fractional undivided interests in oil and gas leases) by petitioner Billy J. "B. J." Pinter to respondents Maurice Dahl and Dahl's friends, family, and business associates. [Footnote 1] Pinter is an oil and gas producer in Texas and Oklahoma, and a registered securities dealer in Texas. Dahl is a California real estate broker and investor, who, at the time of his dealings with Pinter, was a veteran of two unsuccessful oil and gas ventures. In pursuit of further investment opportunities, Dahl employed an oil field expert to locate and acquire oil and gas leases. This expert introduced Dahl to Pinter. Dahl advanced $20,000 to Pinter to acquire leases, with the understanding that they would be held in the name of Pinter's Black Gold Oil Company and that Dahl would have a right of first refusal to drill certain wells on the leasehold properties. Pinter located leases in Oklahoma, and Dahl toured the properties, often without Pinter, in order to talk to others and "get a feel for the properties." App. to Pet.
for Cert. 32. Upon examining the geology, drilling logs, and production history assembled by Pinter, Dahl concluded, in the words of the District Court, that "there was no way to lose." Ibid.
Dahl assisted his fellow investors in completing the subscription agreement form prepared by Pinter. Each letter contract signed by the purchaser stated that the participating interests were being sold without the benefit of registration under the Securities Act, in reliance on Securities and Exchange Commission (SEC or Commission) Rule 146, 17 CFR § 230.146 (1982). [Footnote 3] In fact, the oil and gas interests involved in this suit were never registered with the Commission. Respondents' investment checks were made payable to Black Gold Oil Company. Dahl received no commission from Pinter in connection with the other respondents' purchases.
that, because the securities were unregistered, respondents were entitled to rescission pursuant to § 12(1). Ibid. [Footnote 7] The court also concluded that the evidence was insufficient to sustain Pinter's counterclaim against Dahl. The District Court made no mention of the equitable defenses asserted by Pinter, but it apparently rejected them.
A divided panel of the Court of Appeals for the Fifth Circuit affirmed. 787 F.2d 985 (1986). The court first held that Dahl's involvement in the sales to the other respondents did not give Pinter an in pari delicto defense to Dahl's recovery. Id. at 988. [Footnote 8] The court concluded that the defense is not available in an action under § 12(1), because that section creates "a strict liability offense," rather than liability based on intentional misconduct. It thereby distinguished our recent decision in Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U. S. 299 (1985), where we held that the in pari delicto defense is applicable in an action under § 10(b) of the Securities Exchange Act of 1934, 48 Stat. 891, 15 U.S.C. § 78j(b), which contains an element of scienter. Noting that Dahl was "as culpable' as Pinter in the sense that his conduct was an equal producing cause of the illegal transaction," the court nevertheless held that, "[a]bsent a showing that Dahl's conduct was `offensive to the dictates of natural justice,'" the in pari delicto defense was not available. 787 F.2d at 988, quoting Keystone Driller Co. v. General Excavator Co., 290 U. S. 240, 290 U. S. 245 (1933).
"(1) one who parts with title to securities in exchange for consideration or (2) one whose participation in the buy-sell transaction is a substantial factor in causing the transaction to take place."
Ibid. Accordingly, since the court found no evidence that Dahl sought or received any financial benefit in return for his advice, it declined to impose liability on Dahl for "mere gregariousness." Ibid.
The Court of Appeals, by an 8-6 vote, denied rehearing en banc. 794 F.2d 1016 (1986). The judges who dissented from that denial asserted that the panel majority's addition of the financial-benefit requirement to the definition of a "seller," "has absolutely no foundation in either settled securities law or its underlying policies." Id. at 1017. They also criticized the panel majority for misinterpreting Bateman Eichler to limit application of the in pari delicto doctrine to fraud actions under § 10(b). 794 F.2d at 1017.
Because of the importance of the issues involved to the administration of the federal securities law, we granted certiorari. 481 U.S. 1012 (1987).
The equitable defense of in pari delicto, which literally means "in equal fault," is rooted in the common law notion that a plaintiff's recovery may be barred by his own wrongful conduct. See Bateman Eichler, 472 U.S. at 472 U. S. 306, and nn. 12 and 13. Traditionally, the defense was limited to situations where the plaintiff bore "at least substantially equal responsibility for his injury," id. at 472 U. S. 307, and where the parties' culpability arose out of the same illegal act. 1 J. Story, Equity Jurisprudence 399-400 (14th ed.1918). Contemporary courts have expanded the defense's application to situations more closely analogous to those encompassed by the "unclean hands" doctrine, where the plaintiff has participated "in some of the same sort of wrongdoing" as the defendant. See Perma Life Mufflers, Inc. v. International Parts Corp., 392 U. S. 134, 392 U. S. 138 (1968). In Perma Life, however, the Court concluded that this broadened construction is not appropriate in litigation arising under federal regulatory statutes. Ibid. Nevertheless, in separate opinions, five Justices recognized that a narrow, more traditional formulation should be available in private actions under the antitrust laws. See id. at 392 U. S. 145 (WHITE, J., concurring); id. at 392 U. S. 147-148 (Fortas, J., concurring in result); id. at 392 U. S. 148-149, 151 (MARSHALL, J., concurring in result); id. at 392 U. S. 154-155 (Harlan, J., joined by Stewart, J., concurring in part and dissenting in part).
"only where (1) as a direct result of his own actions, the plaintiff bears at least substantially equal responsibility for the violations he seeks to redress, and (2) preclusion of suit would not significantly interfere with the effective enforcement of the securities laws and protection of the investing public."
Id. at 472 U. S. 310-311. The first prong of this test captures the essential elements of the classic in pari delicto doctrine. See id. at 472 U. S. 307. The second prong, which embodies the doctrine's traditional requirement that public policy implications be carefully considered before the defense is allowed, see ibid., ensures that the broad judge-made law does not undermine the congressional policy favoring private suits as an important mode of enforcing federal securities statutes. Cf. Perma Life, 392 U.S. at 392 U. S. 139-140. Applying this test to the § 10(b) claim before it, the Court concluded that, in such tipster-tippee situations, the two factors precluded recognition of the in pari delicto defense. Bateman Eichler, 472 U.S. at 472 U. S. 317.
We do not share the Court of Appeals' narrow vision of the applicability of Bateman Eichler. Nothing in this Court's opinion in that case suggests that the in pari delicto defense is limited to § 10(b) claims. Nor does the opinion suggest that the doctrine applies only when the plaintiff's fault is intentional or willful.
strict liability offenses is without support in history or logic. [Footnote 11] The doctrine traditionally has been applied in any action based on conduct that "transgresses statutory prohibitions." 2 Restatement of Contracts § 598, Comment a (1932). Courts have recognized the defense in cases involving strict liability offenses. See, e.g., UFITEC, S.A. v. Carter, 20 Cal.3d 238, 250, 571 P.2d 990, 996-997 (1977) (violation of Federal Reserve margin requirements); Miller v. California Roofing Co., 55 Cal.App.2d 136, 130 P.2d 740 (1942) (sale of stock without permit from State Corporation Commission). One of the premises on which the in pari delicto doctrine is grounded is that "denying judicial relief to an admitted wrongdoer is an effective means of deterring illegality." Bateman Eichler, 472 U.S. at 472 U. S. 306. The need to deter illegal conduct is not eliminated simply because a statute creates a strict liability offense, rather than punishing willful or negligent misconduct. Regardless of the degree of scienter, there may be circumstances in which the statutory goal of deterring illegal conduct is served more effectively by preclusion of suit than by recovery. In those circumstances, the in pari delicto defense should be afforded. Cf. A. C. Frost & Co. v. Coeur D'Alene Mines Corp., 312 U. S. 38, 312 U. S. 43-44, and n. 2 (1941).
securities laws] may be barred on the grounds of the plaintiff's own culpability."
Id. at 472 U. S. 310. Nevertheless, the Court's rejection of the distinction between implied and express private causes of action, especially when considered in light of the broad question on which the Court granted certiorari, makes clear that the Court assumed that the in pari delicto defense should be equally available when Congress expressly provides for private remedies. Thus, we conclude that Bateman Eichler provides the appropriate test for allowance of the in pari delicto defense in a private action under any of the federal securities laws.
Our task, then, is to determine whether, pursuant to this test, recognition of the defense is proper in a suit for rescission brought under § 12(1) of the Securities Act. All parties in this case, as well as the Commission, maintain that the defense should be available. [Footnote 12] We agree, but find it necessary to circumscribe the scope of its application.
illegality. The plaintiff must be an active, voluntary participant in the unlawful activity that is the subject of the suit. See Woolf v. S.D. Cohn & Co., 515 F.2d 591, 604 (CA5 1975), vacated and remanded on other grounds, 426 U.S. 944 (1976); see also Bateman Eichler, 472 U.S. at 472 U. S. 312. "Plaintiffs who are truly in pari delicto are those who have themselves violated the law in cooperation with the defendant." Perma Life, 392 U.S. at 392 U. S. 153 (Harlan, J., concurring in part and dissenting in part). Unless the degrees of fault are essentially indistinguishable or the plaintiff's responsibility is clearly greater, the in pari delicto defense should not be allowed, and the plaintiff should be compensated. See id. at 392 U. S. 146 (WHITE, J., concurring); id. at 392 U. S. 147 (Fortas, J., concurring in result); id. at 392 U. S. 149 (MARSHALL, J., concurring in result); Bateman Eichler, 472 U.S. at 472 U. S. 312-314. Refusal of relief to those less blameworthy would frustrate the purpose of the securities laws; it would not serve to discourage the actions of those most responsible for organizing forbidden schemes; and it would sacrifice protection of the general investing public in pursuit of individual punishment. See CanAm Petroleum Co. v. Beck, 331 F.2d 371, 373 (CA10 1964).
. . . § 12(1)."
3 L. Loss, Securities Regulation 1694 (2d ed.1961). [Footnote 13] Although a court's assessment of the relative responsibility of the plaintiff will necessarily vary depending on the facts of the particular case, courts frequently have focused on the extent to which the plaintiff and the defendant cooperated in developing and carrying out the scheme to distribute unregistered securities. See, e.g., Katz v. Amos Treat & Co., 411 F.2d 1046, 1054 (CA2 1969); Lawler v. Gilliam, 569 F.2d 1283, 1292-1293 (CA4 19783); Malamphy v. Real-Tex Enterprises, Inc., 527 F.2d 978 (CA4 1975). In addition, if the plaintiff were found to have induced the issuer not to register, he well might be precluded from obtaining § 12(1) rescission.
does not offend the underlying statutory policies. The primary purpose of the Securities Act is to protect investors by requiring publication of material information thought necessary to allow them to make informed investment decisions concerning public offerings of securities in interstate commerce. SEC v. Ralston Purina Co., 346 U. S. 119, 346 U. S. 124 (1953); A. C. Frost & Co. v. Coeur D'Alene Mines Corp., 312 U.S. at 312 U. S. 43, and n. 2. See H.R.Rep. No. 85, 73d Cong., 1st Sess., 1-5 (1933). [Footnote 14] The registration requirements are the heart of the Act, and § 12(1) imposes strict liability for violating those requirements. Liability under § 12(1) is a particularly important enforcement tool, because in many instances a private suit is the only effective means of detecting and deterring a seller's wrongful failure to register securities before offering them for sale. Lawler v. Gilliam, 569 F.2d at 1293, citing Woolf v. S.D. Cohn & Co., 515 F.2d at 605. See also Bateman Eichler, 472 U.S. at 472 U. S. 310.
suit should not be barred where his promotional efforts are incidental to his role as an investor. See Can-Am Petroleum Co. v. Beck, 331 F.2d at 373-374 (plaintiff's "relationship as a pure investor became adulterated when she actively assisted in selling others but she at no time had the degree of culpability attributed to defendants and should not be considered as in pari delicto"). Cf. Athas v. Day, 186 F.Supp. 385, 389 (Colo.1960) (barring recovery to plaintiff who participated extensively as promoter of unlawful securities distribution). Thus, the in pari delicto defense may defeat recovery in a § 12(1) action only where the plaintiff's role in the offering or sale of nonexempted, unregistered securities is more as a promoter than as an investor.
Whether the plaintiff in a particular case is primarily an investor or primarily a promoter depends upon a host of factors, all readily accessible to trial courts. These factors include the extent of the plaintiff's financial involvement compared to that of third parties solicited by the plaintiff, compare Can-Am Petroleum Co. v. Beck, supra, with Athas v. Day, supra; the incidental nature of the plaintiff's promotional activities, see Malamphy v. Real-Tex Enterprises, Inc., 527 F.2d at 980; the benefits received by the plaintiff from his promotional activities; and the extent of the plaintiff's involvement in the planning stages of the offering (such as whether the plaintiff has arranged an underwriting or prepared the offering materials). We do not mean to suggest that these factors provide conclusive evidence of culpable promotional activity, or that they constitute an exhaustive list of factors to be considered. The courts are free, in the exercise of their sound discretion, to consider whatever facts are relevant to the inquiry.
for his endeavors, and drafted none of the offering documents. Furthermore, the District Court made no findings as to who was responsible for the failure to register or for the manner in which the offering was conducted. Those findings will be made on the remand of this case for further proceedings.
What we have said as to the availability to Pinter of the in pari delicto defense against Dahl's § 12(1) action does not obviate the need to consider the second question presented by petitioner. [Footnote 17] We turn now to that issue.
securities. [Footnote 19] But the Securities Act nowhere delineates who may be regarded as a statutory seller, and the sparse legislative history sheds no light on the issue. The courts, on their part, have not defined the term uniformly.
"The statutory terms ['offer' and 'sell'], which Congress expressly intended to define broadly, . . . are expansive enough to encompass the entire selling process, including the seller/agent transaction."
Ibid. See also Rubin v. United States, 449 U. S. 424, 449 U. S. 430 (1981) ("It is not essential under the terms of the Act that full title pass to a transferee for the transaction to be an offer' or a `sale'").
Several courts and commentators have stated that the purchase requirement necessarily restricts § 12 primary liability to the owner of the security . E.g., Beck v. Cantor, Fitzgerald & Co., 621 F.Supp. 1547, 1560-1561 (ND Ill.1985); Abrams, The Scope of Liability Under Section 12 of the Securities Act of 1933: "Participation" and the Pertinent Legislative Materials, 15 Ford.Urban L.J. 877 (1987); see also Collins v. Signetics Corp., 605 F.2d 110, 113 (CA3 1979) (absent some "special relationship" -- e.g., control -- § 12 requires privity between statutory seller and buyer). In effect, these authorities interpret the term "purchase" as complementary to only the term "sell" defined in § 2(3). Thus, an offeror, as defined by § 2(3), may incur § 12 liability only if the offeror also "sells" the security to the plaintiff, in the sense of transferring title for value. Abrams, 15 Ford. Urban L.J. at 922-923.
acting as agent of the owner liable as a statutory seller), cert. denied, 311 U.S. 705 (1940).
The applicability of § 12 liability to brokers and others who solicit securities purchases has been recognized frequently since the passage of the Securities Act. It long has been "quite clear" that, when a broker acting as agent of one of the principals to the transaction successfully solicits a purchase, he is a person from whom the buyer purchases within the meaning of § 12, and is therefore liable as a statutory seller. See Loss, at 1016. Indeed, courts had found liability on this basis prior to the 1954 amendment of the statute. See, e.g., Wall v. Wagner, 125 F.Supp. 854, 858 (Neb.1954), aff'd sub nom. Whittaker v. Wall, 226 F.2d 868, 873 (CA8 1955) (principal and its agents); Schillner v. H. Vaughan Clarke & Co., 134 F.2d 875, 879 (CA2 1943) (seller's broker); Cady v. Murphy, supra, (seller's broker); Boehm v. Granger, 42 N.Y. S.2d 246, 248 (Sup.1943), aff'd, 268 App.Div. 855, 50 N.Y.S.2d 845 (1944) (buyer's broker). Had Congress intended liability to be restricted to those who pass title, it could have effectuated its intent by not adding the phrase "offers or" when it split the definition of "sell" in § 2(3).
being persuaded to purchase securities without full and fair information. Given Congress' overriding goal of preventing this injury, we may infer that Congress intended solicitation to fall under the mantle of § 12(1).
The Court of Appeals acknowledged that Dahl would be liable as a statutory seller under this test. 787 F.2d at 990.
Further, no congressional intent to incorporate tort law doctrines of reliance and causation into § 12(1) emerges from the language or the legislative history of the statute. Indeed, the strict liability nature of the statutory cause of action suggests the opposite. See Douglas & Bates, 43 Yale L.J. at 177. By injecting these concepts into § 12(1) litigation, the substantial factor test introduces an element of uncertainty into an area that demands certainty and predictability. As the Fifth Circuit has conceded, the test affords no guidelines for distinguishing between the defendant whose conduct rises to a level of significance sufficient to trigger seller status, and the defendant whose conduct is not sufficiently integral to the sale. See Pharo v. Smith, 621 F.2d at 667. [Footnote 28] None of the courts employing the approach has articulated what measure of participation qualifies a person for seller status, and logically sound limitations would be difficult to develop. As a result, decisions are made on an ad hoc basis, offering little predictive value to participants in securities transactions. See Croy v. Campbell, 624 F.2d 709, 714 (CA5 1980); Pharo v. Smith, 621 F.2d at 667. We find it particularly unlikely that Congress would have ordained sub silentio the imposition of strict liability on such an unpredictably defined class of defendants.
§ 12 liability pursuant to the test protects investors and serves the "remedial purposes" of the Securities Act. See also, e.g., Lennerth v. Mendenhall, 234 F.Supp. 59, 65 (ND Ohio 1964). The Court has acknowledged that "it is proper for a court to consider . . . policy considerations in construing terms in [the federal securities] Acts." Landreth Timber Co. v. Landreth, 471 U. S. 681, 471 U. S. 695, n. 7 (1985). And the Court has recognized that Congress had "broad remedial goals" in enacting the securities laws and providing civil remedies. Ernst & Ernst v. Hochfelder, 425 U.S. at 425 U. S. 200; Tcherepnin v. Knight, 389 U. S. 332, 389 U. S. 336 (1967). Accordingly, the Court itself has construed securities law provisions "not technically and restrictively, but flexibly to effectuate [their] remedial purposes.'" Affiliated Ute Citizens v. United States, 406 U. S. 128, 406 U. S. 151 (1972), quoting SEC v. Capital Gains Research Bureau, 375 U. S. 180, 375 U. S. 195 (1963). But the Court never has conducted its analysis entirely apart from the statutory language.
"The ultimate question is one of congressional intent, not one of whether this Court thinks it can improve upon the statutory scheme that Congress enacted into law."
Touche Ross & Co. v. Redington, 442 U.S. at 442 U. S. 578. The ascertainment of congressional intent with respect to the scope of liability created by a particular section of the Securities Act must rest primarily on the language of that section. See Santa Fe Industries, Inc. v. Green, 430 U. S. 462, 430 U. S. 472 (1977). The broad remedial goals of the Securities Act are insufficient justification for interpreting a specific provision "more broadly than its language and the statutory scheme reasonably permit.'" Touche Ross, 442 U.S. at 442 U. S. 578, quoting SEC v. Sloan, 436 U. S. 103, 436 U. S. 116 (1978). We must assume that Congress meant what it said.
meaning." Ernst & Ernst v. Hochfelder, 425 U.S. at 425 U. S. 199. We conclude that Congress did not intend such a gross departure from the statutory language. Accordingly, we need not entertain Pinter's policy arguments. [Footnote 29] Being merely a "substantial factor" in causing the sale of unregistered securities is not sufficient in itself to render a defendant liable under § 12(1).
"Dahl solicited each of the other plaintiffs (save perhaps Grantham) in connection with the offer, purchase, and receipt of their oil and gas interests."
a person who solicits the buyer's purchase in order to serve the financial interests of the owner may properly be liable under § 12(1) without showing that he expects to participate in the benefits the owner enjoys.
Petitioners are Pinter, individually and d.b.a. Black Gold Oil Company, Pinter Energy Company, and Pinter Oil Company. Throughout this opinion, we often refer to petitioners collectively as "Pinter."
Respondents are Maurice Dahl, Gary Clark, W. Grantham, Robert J. Daniele, Charles Dahl, Dowayne C. Bockman, Ray Dilbeck, Richard Koon, Art Overgaard, Jack Yeager, Accra Tronics Seals Corp., and Aaron Heller. These persons are Dahl's brother, his accountant, his partner in a construction business, the bank officer handling his construction loans, his construction business insurance agent, a business owned by a long-time friend, and other business associates and friends of Maurice Dahl. See App. 101-104.
The venture included still others who were either interested in additional ventures organized by Pinter or were new investors who met Pinter through sources other than Dahl. Those investors are not parties to this litigation.
"WHEREAS the parties constitute a predetermined and limited group of sophisticated and knowledgeable, well informed investors who desire to arrange for participation in an oil and/or gas drilling venture as an investment and do declare that it is not for the purpose of reselling their interest therein. (These participating interests are being sold without the benefit of registration under the Securities Act of 1933, as amended, and on reliance of rule 146 thereunder)."
App. 95. See also n 4, infra.
Rule 146 was rescinded, effective June 30, 1982, by SEC Release No. 336389, 47 Fed.Reg. 11251 (1982), and superseded by provisions of Regulation D, 17 CFR, p. 425 (1987).
"Any person who -- (1) offers or sells a security in violation of section  . . . shall be liable to the person purchasing such security from him, who may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security."
Section 5, 15 U.S.C. § 77e, referred to in § 12, states, in pertinent part, that if a security is unregistered, it is unlawful for a person to sell or deliver the security in interstate commerce.
A number of exemptions, however, enable an issuer to avoid the registration requirement of the Securities Act. One of these, § 4(2), 15 U.S.C. § 77d(2), commonly referred to as the "private-offering" exemption, relieves from registration "transactions by an issuer not involving any public offering." See SEC v. Ralston Purina Co., 346 U. S. 119 (1953) (establishing criteria for determining whether an offering fits the private offering exemption).
"[T]he offering must 1) not be made by any means or form of general solicitation or advertising; 2) be made only to those persons whom the issuer has reasonable grounds to believe are of knowledge and experience which would enable them to evaluate the merits of the issue or who are financially able to bear the risk; 3) be made only to those persons who have access to the same kind of information as would be contained in a registration statement. Under this rule, the issuer must have reasonable grounds to believe, and must believe, that there are no more than thirty-five purchasers from the issuer."
Mary S. Krech Trust v. Lakes Apartments, 642 F.2d 98, 101 (CA5 1981). See 3 H. Bloomenthal, Securities and Federal Corporate Law § 4.05 (1981 ed.). Pinter sought to take advantage of this "safe harbor" in issuing the oil and gas interests involved in this case.
In addition to their § 12(1) claim, respondents alleged that Pinter made material misrepresentations regarding the oil and gas properties and his oil experience, thereby entitling them to damages under § 10(b) of the Securities Exchange Act of 1934, 48 Stat. 891, 15 U.S.C. § 78j(b), and SEC Rule 10b-5 thereunder, 17 CFR § 240.10b-5 (1987), and to rescission under § 12(2) of the Securities Act, 15 U.S.C. § 771(2). Respondents also asserted pendent claims under Texas and California law. None of these additional claims is before us.
Pinter apparently meant to contend that Dahl was responsible for the loss of the private offering exemption from registration under § 4(2) and Rule 146, see n 4, supra, although Pinter did not make this assertion explicit in his pleadings. Cf. Second Amended Proposed Findings of Fact and Conclusions of Law of Defendants Billy J. "B. J." Pinter, et al., App. 85-86 (claiming that petitioners had met the requirements of the private offering exemption).
Pinter contended that all the respondents should be estopped from recovery because of Dahl's fraudulent conduct. He asserted his in pari delicto defense solely against Dahl.
Having reached this conclusion, the District Court found it unnecessary to consider respondents' § 12(2) claim. App. to Pet. for Cert. 37-38. The court rejected respondents' claim under § 10(b) and Rule 10b-5. App. to Pet. for Cert. a-37.
The court also rejected Pinter's estoppel defense. 787 F.2d at 988-989. That holding is not challenged in this Court. We express no view as to whether this equitable defense is available in a § 12(1) action.
Because none of the other plaintiffs sought recovery from Dahl, Dahl's liability on their claims is at issue only if contribution is available to Pinter.
The Court of Appeals addressed Pinter's contention that Dahl was liable as a § 12(1) seller and thus should be accountable to Pinter in contribution for the amounts awarded to the other plaintiffs. 787 F.2d at 987. It is not entirely clear how this claim was raised below. Pinter's pleadings do not state an explicit cause of action for contribution against Dahl, although Pinter did move, although unsuccessfully, to realign Dahl as a third-party defendant, based on Pinter's assertion that Dahl was a "seller" of the unregistered securities to the remaining plaintiffs and had made the allegedly actionable misrepresentations to them in connection with the sales. See 1 Record 164-165, 189. Presumably, the Court of Appeals construed Pinter's affirmative defense for contributory fault and his incorporation of this defense into his counterclaims, as effectively seeking contribution.
Unlike § 11 of the Securities Act, see 15 U.S.C. § 77k(f), § 12 does not expressly provide for contribution. The Court of Appeals did not reach the question whether Pinter is entitled to contribution under § 12(1), because it found that Dahl was not a seller for purposes of § 12(1), and therefore would not be the proper subject of a contribution claim. The parties have not raised or addressed the contribution issue before this Court, and we express no view as to whether a right of contribution exists under § 12(1) of the Securities Act.
The dissent addressed the "seller" issue in the context of Pinter's asserted in pari delicto defense. In its view, Dahl's role as a seller of the unregistered securities "put him in the same boat as Pinter," making him vulnerable to that defense. 787 F.2d at 991. The dissent also indicated that it "would go further" and hold that "Pinter is entitled to contribution from Dahl since Dahl is at least equally culpable for the sale to the other plaintiffs." Id. at 995, n. 5.
The Court of Appeals found that this conclusion was compelled by its decision in Henderson v. Hayden, Stone Inc., 461 F.2d 1069 (1972). See 787 F.2d at 987-988. That case, we note, does not discuss the in pari delicto defense. Accord, 794 F.2d at 1017 (opinion dissenting from denial of rehearing of the present case en banc).
Among the Courts of Appeals that have addressed the issue, the Fifth Circuit is alone in concluding that the defense is unavailable. The defense, however, rarely has succeeded on the facts of any particular case. See, e.g., Lawler v. Gilliam, 569 F.2d 1283, 1294 (CA4 1978); Woolf v. S.D. Cohn & Co., 515 F.2d 591, 604 (CA5 1975), vacated and remanded on other grounds, 426 U.S. 944 (1976); Malamphy v. Real-Tex Enterprises, Inc., 527 F.2d 978 (CA4 1975); Katz v. Amos Treat & Co., 411 F.2d 1046, 1054 (CA2 1969); Can-Am Petroleum Co. v. Beck, 331 F.2d 371, 373-374 (CA10 1964). Commentators also have suggested that the defense should be available under proper circumstances in actions under § 12(1). See, e.g., Ruder, Multiple Defendants in Securities Law Fraud Cases: Aiding and Abetting, Conspiracy, In Pari Delicto, Indemnification, and Contribution, 120 U.Pa.L.Rev. 597, 662-663 (1971-1972); Note, In Pari Delicto Under the Federal Securities Laws: Bateman Eichler, Hill Richards, Inc. v. Berner, 72 Cornell L.Rev. 345, 359-362 (1987).
The panel dissent below expressed concern that failure to provide the in pari delicto defense in these circumstances would allow sophisticated investors who purchase unregistered securities to place themselves in a no-lose situation. If the venture proves profitable, the buyer comes out ahead. If the investment goes bad, the buyer can sue to recover his investment in a § 12(1) action. See 787 F.2d at 995. The statute, however, permits such maneuvers. See Shulman, Civil Liability and the Securities Act, 43 Yale L.J. 227, 246-247 (1933) (Shulman); accord, L. Loss, Fundamentals of Securities Regulation 1003, n. 74 (2d. ed.1988) (Loss). Section 12(1)'s deterrent effect is achieved, to a great extent, by a provision allowing suits for a full year following sale. See 15 U.S.C. § 77m. Thus, the purchaser of unregistered securities may keep his securities and reap his profit if the securities perform well during the year, but rescind the sale if they do not. See, e.g., Straley v. Universal Uranium & Milling Corp., 289 F.2d 370 (CA9 1961). Although this provision may appear to offend a sense of fair play, allowing the investor to sue, regardless of his knowledge of the violation when he purchased the securities, furthers the interest of the Securities Act: the seller then has strong incentive to comply with the registration disclosure provisions. These provisions are concerned with affording the unsophisticated investor information necessary to make a knowledgeable investment decision. Permitting the sophisticated investor to recover also serves to protect the unknowing and innocent investor.
Courts have discerned beneath the registration provisions the same broad policies as those furthered by the securities laws generally: protection of investors as a group, not as individuals, and the need for a healthy economy constantly purged by full disclosure. See, e.g., SEC v. North American Research & Development Corp., 280 F.Supp. 106, 121 (SDNY 1968) (purpose of § 5 is to protect public investors through disclosure), aff'd in part and vacated in part on other grounds, 424 F.2d 63 (CA2 1970). See generally 1 Loss, Securities Regulation 178-179 (2d ed.1961) (aim of registration provision is "to protect honest enterprise . . . ; to restore the confidence of the prospective investor . . . ; to bring into productive channels of industry and development capital which has grown timid . . . ; and to aid in providing employment and restoring buying and consumer power'"), quoting S.Rep. No. 47, 73d Cong., 1st Sess., 1 (1933).
The parties vigorously dispute whether Pinter has a valid defense under the in pari delicto doctrine. Pinter argues that Dahl was a "preeminent factor in the violations he seeks to redress." Brief for Petitioners 29. He maintains that the venture would not have been undertaken or, at least, completed, had it not been for Dahl's involvement. According to Pinter, Dahl's responsibility for causing the unlawful sales was at least substantially equal to his own. Nevertheless, Pinter concedes that nothing in the record indicates whether Dahl was a participant in the decision not to register the securities, although Pinter would infer that Dahl was aware of the duty to register. See id. at 27.
"Pinter made the first step in the dissemination of unregistered securities, and he will be more responsive to the deterrent pressure of potential sanctions."
In dictum, the Court of Appeals ventured that, even if it were to apply the Bateman Eichler standard, Pinter would not be permitted to advance an in pari delicto defense against Dahl's recovery. 787 F.2d at 989, n. 6. Because the court did not have our delineation today of the proper inquiry regarding § 12(1) actions, and because we conclude that the District Court's findings were insufficient to conduct this analysis, the Court of Appeals' views on this point are not conclusive of the issue.
Even if the Court of Appeals were ultimately to conclude that Dahl's actions bar his recovery against Pinter pursuant to the in pari delicto doctrine, that conclusion would not resolve the issue whether, based on Dahl's actions as a "seller" under § 12(1), Dahl might be held liable for contribution as to the remaining investor-respondents' claims against Pinter. We therefore are constrained to address, as did the Court of Appeals, whether Dahl is a "seller" for purposes of § 12(1).
Section 12 was adapted from common law (or equitable) rescission, Loss, at 888, which provided for restoration of the status quo by requiring the buyer to return what he received from the seller. The statute, however, differs significantly from the source material. In particular, it permits the buyer who has disposed of the security to sue for damages -- "the consideration paid for such security with interest thereon, less the amount of any income received thereon." 15 U.S.C. § 771. This damages calculation results in what is the substantial equivalent of rescission. See Randall v. Loftsgaarden, 478 U. S. 647, 478 U. S. 655-656 (1986); Loss, at 886; Shulman, 43 Yale L.J., at 244.
In addition, § 15 of the Securities Act, 15 U.S.C. § 770, makes a "controlling person" liable for the § 12 liability of a controlled person. That provision is not at issue in this case.
The "offers or sells" and the "purchasing such security from him" language that governs § 12(1) also governs § 12(2), which provides a securities purchaser with a similar rescissionary cause of action for misrepresentation. See 15 U.S.C. § 771. Most courts and commentators have not defined the defendant class differently for purposes of the two provisions. See, e.g., Pharo v. Smith, 621 F.2d 656, 665-668, and nn. 6-8 (CA5 1980); Schneider, Section 12 of the Securities Act of 1933: The Privity Requirement in the Contemporary Securities Law Perspective, 51 Tenn.L.Rev. 235, 261, and nn. 144 and 145 (1983-1984). See also Schillner v. H. Vaughan Clarke & Co., 134 F.2d 875, 878 (CA2 1943) ("Clearly the word [sell] has the same meaning in subdivision (2) as in subdivision (1) of section 12").
The question whether anyone beyond the transferor of title, or immediate vendor, may be deemed a seller for purposes of § 12 has been litigated in actions under both § 12(1) and § 12(2). Decisions under § 12(2) addressing the "seller" question are thus relevant to the issue presented to us in this case, and, to that extent, we discuss them here. Nevertheless, this case does not present, nor do we take a position on, the scope of a statutory seller for purposes of § 12(2).
One important consequence of this provision is that § 12(1) imposes liability on only the buyer's immediate seller; remote purchasers are precluded from bringing actions against remote sellers. Thus, a buyer cannot recover against his seller's seller. Loss, at 1023-1024; Douglas & Bates, 43 Yale L.J., at 177.
It is noteworthy that, in 1940, Congress considered a proposal that would have excluded the solicitation clause from the definition of "sell" in § 2(3). See S. 3985, 76th Cong., 3d Sess., 1-2 (1940), as introduced, 86 Cong.Rec. 6026 (1940). This amendment clearly would have reduced the meaning of the term "sell" to transferring title for value, and would have eliminated the potential for liability of brokers or other persons soliciting a sale of securities. The proposal was not adopted.
Those commentators who argue that § 12 confines seller status to the transferor maintain that the section's provision of rescissionary relief supports their conclusion. E.g., Abrams, 15 Ford.Urban L.J. at 924. There is authority at common law, however, for granting a plaintiff rescission against a defendant who was not a party to the contract in question, in particular, against the agent of the vendor. See, e.g., Keskal v. Modrakouwski, 249 N.Y. 406, 408, 164 N.E. 333 (1928); Peterson v. McManus, 187 Iowa 522, 545-549, 172 N.W. 460, 468-470 (1919). Indeed, there is nothing incongruous about forcing a broker or other solicitor to assume ownership of the securities. When rescission is predicated on fraud, rather than based on contract theory, privity is not essential. Loss, at 1017, quoting Gordon v. Burr, 506 F.2d 1080, 1085 (CA2 1974) ("[A]s between the innocent purchaser and the wrongdoer who, though not a privy to the fraudulent contract, nonetheless induced the victim to make the purchase, equity requires the wrongdoer to restore the victim to the status quo"). In any event, there is no reason to think that Congress wanted to bind itself to the common law notion of the circumstances in which rescission is an appropriate remedy. The Court, in the context of § 12(2), has noted that Congress enabled investors to demand rescission upon tender of the securities to the defendant, in part because of the additional measure of deterrence provided by rescission as compared to a purely compensatory measure of damages. Randall v. Loftsgaarden, 478 U.S. at 478 U. S. 659. Thus, we may infer that Congress, in order to effectuate its goals, chose to impose this relief on any defendant it classified as a statutory seller, regardless of the fact that such imposition was somewhat inconsistent with the use of rescission at common law. Congress chose rescission for its effects; there is no indication that Congress employed the remedy for its delineation of potential defendants.
The Fifth Circuit's test is only one of several approaches that have emerged in expanding § 12 liability beyond the security titleholder. See generally O'Hara, Erosion of the Privity Requirement in Section 12(2) of the Securities Act of 1933: The Expanded Meaning of Seller, 31 UCLA L.Rev. 921 (1983-1984); Rapp, Expanded Liability Under Section 12 of the Securities Act: When Is a Seller Not a Seller?, 27 Case W.Res.L.Rev. 445 (1977); Note, Seller Liability Under Section 12(2) of the Securities Act of 1933: A Proximate Cause-Substantial Factor Approach Limited by a Duty of Inquiry, 36 Vand.L.Rev. 361 (1983); Comment, Attorneys and Participant Liability Under § 12(2) of the Securities Act of 1933, 1982 Ariz.S.L.J. 529. All but one of these theories reflect the courts' views of who constitutes a § 12 seller. The remaining approach -- the aiding and abetting theory -- is actually a method by which courts create secondary liability in persons other than the statutory seller. See, e.g., Mayer v. Oil Field Systems Corp., 803 F.2d 749, 756 (CA2 1986); In re Caesars Palace Securities Litigation, 360 F.Supp. 366 (SDNY 1973); see also Collins v. Signetics Corp., 605 F.2d 110, 113-114 (CA3 1979) (leaving open whether aiding and abetting liability is available). Because this case deals exclusively with primary liability under § 12(1), we need not consider whether civil liability for aiding and abetting is appropriate under that section. Compare Comment, 1982 Ariz.S.L.J. at 550-577 (endorsing aiding and abetting liability under § 12(2)); Ruder, 120 U.Pa.L.Rev. at 620-644 (same), with Abrams, 15 Ford.Urban L.J. at 942-947 (disapproving secondary liability under § 12); O'Hara, 31 UCLA L.Rev. at 979-1002 (arguing that any form of participant liability, whether primary or secondary, is inappropriate under § 12(2)).
"must lie somewhere between the narrow view, which holds only the parties to the sale, and the too-liberal view which would hold all who remotely participated in the events leading up to the transaction."
Lennerth v. Mendenhall, 234 F.Supp. 59, 65 (ND Ohio 1964). That court elected to "borrow a phrase from the law of negligence" and to premise liability on proximate cause. It imposed § 12(1) liability on the issuer that transferred title and the issuer's president, vice president, and another employee. The Fifth Circuit adopted the proximate cause rationale in Hill York Corp. v. American International Franchises, Inc., 448 F.2d 680, 693 (1971) (holding that promoters of a nationwide franchising scheme were § 12 sellers), and two years later refined the doctrine to impose liability on defendants whose actions were a "substantial factor'" in causing a plaintiff's purchases. See Lewis v. Walston & Co., 487 F.2d 617, 622 (CA5 1973) (affirming § 12(1) judgment against a brokerage firm and its representative who touted unregistered securities and arranged for their purchase by the plaintiff).
A number of courts have followed that view. See Lawler v. Gilliam, 569 F.2d at 1287-1288 (§ 12(1)); Adalman v. Baker, Watts & Co., 807 F.2d 359, 363 (CA4 1986) (§ 12(2)); Davis v. Avco Financial Services, Inc., 739 F.2d 1057, 1067 (CA6 1984) (§ 12(2)), cert. denied, 470 U.S. 1005 (1985); Stokes v. Lokken, 644 F.2d 779, 785 (CA8 1981) (§ 12 generally); Foster v. Jesup & Lamont Securities Co., 759 F.2d 838, 843-844 (CA11 1985) (§ 12 generally).
The Ninth Circuit has shaped its own version of the test. See Anderson v. Aurotek, 774 F.2d 927, 930 (1985) (imposing § 12 liability on "participants' whose acts are `both necessary to and a substantial factor in the sales transaction'"). See also SEC v. Rogers, 790 F.2d 1450, 1456 (CA9 1986) (explaining that the "necessary" and "substantial factor" prongs require separate showings: "The first prong . . . requires a defendant's participation to be a `but for' cause of the unlawful sale, and the second requires the participation to be more than `de minimis'").
Congress knew of the collateral participation concept and employed it in the Securities Act and throughout its unified program of securities regulation. Liabilities and obligations expressly grounded in participation are found elsewhere in the Act, see, e.g., 15 U.S.C. § 77b(11) (defining "underwriter," who is liable under § 5, as including direct and indirect participants), and in the later Roosevelt administration securities Acts. For example, § 9 of the 1934 Act, passed by the same Congress that enacted the Securities Act, creates a private right of action that expressly imposes liability on participants. 15 U.S.C. § 7si(e). See Abrams, 15 Ford.Urban L.J. at 925-937.
Section 11 of the Securities Act, 15 U.S.C. § 77k, lends strong support to the conclusion that Congress did not intend to extend § 12 primary liability to collateral participants in the unlawful securities sales transaction. That section provides an express cause of action for damages to a person acquiring securities pursuant to a registration statement that misstates or omits a material fact. Section 11(a) explicitly enumerates the various categories of persons involved in the registration process who are subject to suit under that section, including many who are participants in the activities leading up to the sale. There are no similar provisions in § 12, and therefore we may conclude that Congress did not intend such persons to be defendants in § 12 actions.
For similar reasons, we reject the Commission's suggestion that persons who "participate in soliciting the purchase" may be liable as statutory sellers. Brief for SEC as Amicus Curiae 22. The Commission relies on Katz v. Amos Treat & Co., 411 F.2d 1046 (CA2 1969), where the court held that an attorney who had been "a party to the solicitation" of the plaintiff purchaser was liable under § 12(1) because he had placed the brokerage firm for which he worked in a position "to tackle [the purchaser] for the money" owed on an investment he had made. Id. at 1053. Although in Katz the attorney spoke directly to the plaintiff prior to the delivery of money in plaintiff's investment, the "party to a solicitation" concept could easily embrace those who merely assist in another's solicitation efforts. See Schneider, 51 Tenn.L.Rev. at 273 (suggesting that the Katz approach allows courts to interpret solicitation activities "rather broadly"). It is difficult to see more than a slight difference between this approach and the participation theory, which we have concluded does not comport with Congress' intent.
Even in the tort law context, the substantial factor test is recognized as inadequate for determining whether the defendant's conduct was so significant and important a cause that the law should extend responsibility for the conduct to the consequences that occurred. See W. Prosser, Law of Torts § 42, pp. 244, 248 (4th ed.1971).
We observe, however, that although every rule that extends liability serves on some level to protect investors, the substantial factor test does not necessarily further the remedial purposes of § 12(1). Imposing a strict liability rescission remedy on those who are only tangentially involved with the sale might result in less and poorer information to investors, rather than more and better information. Because strict liability is involved, once a person became involved in the transaction, even peripherally, it would be impossible to avoid the risk of liability. There is little danger that this risk will deter true sellers from giving information, for they have no other way to go about their business. They also have the most control over conducting the sale in a manner that avoids liability. For those more attenuated to the sales transaction, however, who have far less, if any, control over the transaction, the harshness of § 12(1) might deter them from assisting. Particularly since the test produces unpredictable results, it risks over-deterring activities related to lawful securities sales.
Of course, on remand, the Court of Appeals may find it necessary to address some of the difficult and unsettled questions raised by the dissent concerning the availability of contribution in § 12(1) cases in general and in this case in particular.
III because I am persuaded that the discussion of the § 12(1) term "seller" in the context of a contribution suit is both advisory, because no such suit was brought in this case, and misleading, because it assumes that the class of persons who sell securities to purchasers (i.e., § 12(1) "sellers") is coextensive with the class of potential defendants in claims for contribution, not brought directly under § 12(1), asserted by § 12(1) sellers. § 12(1), Securities Act of 1933, 15 U.S.C. § 771(1).
"The Plaintiff, M. Dahl, engaged in fraudulent misrepresentations to Pinter and the other Plaintiffs, all as set forth in the Defendant's Counterclaim. He is therefore barred from recovery for the causes of action set forth in [Plaintiffs' First Amended Complaint], by reason of his conduct in pari delicto in connection with the offer, sale and delivery of the securities of that which he complains."
App. 67. In light of the fact that the District Court expressly found that the "evidence did not establish that defendants are entitled to any relief on their counterclaims,"App. to Pet. for Cert. a-38, it would seem to follow that the District Court also found that there was no factual basis for the in pari delicto affirmative defense as pleaded.
"[a]s a result of his participation in the solicitation of the investment by other Plaintiffs in the subject lease transactions, Dahl is in pari delicto, and cannot recover in this action as a matter of law."
"received or collected most of the investment proceeds from [the other investors] and hand-delivered the funds to Pinter. He had disclosure of or access to all of the information requisite to a registration statement."
"the Court of Appeals construed Pinter's affirmative defense for contributory fault and his incorporation of this defense into his counterclaims, as effectively seeking contribution."
"successfully solici[t] the purchase, motivated at least in part by a desire to serve his own financial interests or those of the securities owner."
Ante at 486 U. S. 647. Thus, the Court's discussion of the "seller" issue is neither sufficient nor necessary for the resolution of Pinter's putative contribution claim.
such security. . . ."
"have judgment against B. J. Pinter, individually and d/b/a/ Black Gold Oil Company, in the amount of their purchase price for the securities purchased, plus prejudgment interest thereon at the rate of 6% annum from the date of payment of their purchase price in May, 1981, less the amount of any income a Plaintiff received on the security. . . ."
"Dahl did not receive from defendants any commission, by way of discount or otherwise, in connection with the purchase by any plaintiff of the fractional undivided oil and gas interests involved in this suit."
"In light of the clear purpose of section 12(1) to disgorge the purchase price from the seller of unregistered securities, we view as unsound any result which would permit Pinter to retain part of the consideration paid by plaintiffs."
787 F.2d 985, 990, n. 8 (CA5 1986). In my opinion, this is a sufficient reason for affirming the judgment of the Court of Appeals.
"[i]n the context of a private action under § 12(1), the first prong of the [in pari delicto] test is satisfied if the plaintiff is at least equally responsible for the actions that render the sale of the unregistered securities illegal -- the issuer's failure to register the securities before offering them for sale, or his failure to conduct the sale in such a manner as to meet the registration exemption provisions."
Ante at 486 U. S. 636. I agree that a plaintiff who is at least equally responsible for "the issuer's failure to register the securities before offering them for sale" can be held in pari delicto. I am perplexed, though, by the Court's conclusion that a plaintiff who is at least equally responsible for "the issuer's failure to conduct the sale in such a manner as to meet the registration exemption provision" can be held in pari delicto. Such a failure is of course never a sufficient condition for § 12(1) strict liability; regardless of how many exemptions for which an offering fails to qualify, § 12(1) is not violated unless the securities in question are offered or sold without registration. Thus, it is hard for me to understand how a plaintiff who bears substantially equal responsibility for the loss of an exemption but who does not bear similar responsibility for the proximate cause of the illegality -- the failure to register -- can be considered in pari delicto. Part I, infra, reflects my view of how the in pari delicto issue in this case should be resolved under what I deem to be the proper view of the defense.
"There is no evidence, however, that Dahl knew that Pinter's failure to register was in violation of federal and state securities laws." 787 F.2d 985, 987 (CA5 1986). Pinter's "infer[ence] that Dahl was aware of the duty to register," ante at 640, n. 15; see Brief for Petitioner 27, is thus directly contradicted by the Court of Appeals' conclusion.
Indeed, the Court of Appeals may find that Texas law requires a reentry of its judgment. The District Court found that Pinter had violated not only § 12(1) of the Securities Act of 1933 but also Tex.Rev.Civ.Stat.Ann., Art. 581-33(A), (D) (Vernon Supp.1988), and that the same remedy was authorized by both statutes. See App. to Pet. for Cert. a-37 - a-38. The Court of Appeals affirmed the finding of liability under Texas law, and also squarely held that Dahl was not a "seller" within the meaning of the Texas statute. See 787 F.2d at 991. It is true that the Court of Appeals did not reach the question whether an in pari delicto defense might be available under Texas law. Id. at 990. If it should conclude, however, that Texas would not recognize that defense on the facts of this case, its judgment should stand regardless of the outcome of any further proceedings concerning the federal issues.
Thus, the Court of Appeals on remand may have no choice but to affirm the District Court's judgment once again, this time on the ground that no contribution claim is properly before it.
The Court "express[es] no view as to whether a right of contribution exists under § 12(1) of the Securities Act." Ante at 486 U. S. 630, n. 9. The Court of Appeals pointed out that "no code section specifically allows for a right of contribution against a seller' in Dahl's position." 787 F.2d at 990, n. 8. Such a right might be found, the court stated, in § 16 of the Act, 15 U.S.C. § 77p, which provides that "[t]he rights and remedies provided by this subchapter shall be in addition to any and all other rights and remedies that may exist at law or in equity." Whether the availability of such additional rights and remedies depends upon the satisfaction of conditions set forth elsewhere in the Act -- such as § 12(1) -- is surely an open question.
I note also that this Court has been reluctant to imply a right to contribution in statutes silent on the issue. Compare Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U. S. 630 (1981) (no right to contribution under the federal antitrust laws); Northwest Airlines, Inc. v. Transport Workers, 451 U. S. 77 (1981) (no right to contribution by employer against union for violations of either the Equal Pay Act of 1963 or Title VII of the Civil Rights Act of 1964); and Halcyon Lines v. Haenn Ship Ceiling & Refitting Corp., 342 U. S. 282, 342 U. S. 285 (1952) (Court refuses to fashion right to maritime contribution in noncollision cases, concluding that "the solution of this problem should await congressional action"); with United States v. Yellow Cab Co., 340 U. S. 543 (1951) (Congress waived sovereign immunity in the Federal Tort Claims Act for contribution claims against the United States).
It should be noted that the statutory remedy for damages is not applicable in this case, because that remedy is only available if the purchaser "no longer owns the security." 15 U.S.C. § 771(1).
Another way of putting this is that a defendant in a rescission suit cannot claim contribution when he received the entire proceeds of sale and merely returned those proceeds to the plaintiff in exchange for the plaintiff's tender of the purchased item (here, the securities). See Olson v. Thompson, 273 Minn. 152, 154-155, 140 N.W.2d 321, 322 (1966) ("While the action is one sounding in tort, the relief sought is for rescission, requiring restitution of the purchase price and a reassignment of the leases. In his third-party action, Thompson makes no demand for damages, and the theory on which he claims contribution is not clear, since the parties, by the nature of the action, are merely restored to the status quo ante"). Thus, it is a basic principle of equity jurisprudence that a claim for contribution only lies for a defendant who "has actually paid or satisfied more than his proportionate share of the debt or obligation." 4 S. Symons, Pomeroy's Equity Jurisprudence 1071-1072 (5th ed.1941); see also Restatement (Second) of Torts § 886A(2) (1979) ("The right of contribution exists only in favor of a tortfeasor who has discharged the entire claim for the harm by paying more than his equitable share of the common liability, and is limited to the amount paid by him in excess of his share. No tortfeasor can be required to make contribution beyond his own equitable share of the liability").

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 § 12
 § 12
 § 12
 § 12
 § 12
 § 12
 § 12
 § 771
 § 12
 § 12
 § 12
 § 12
 Art. 581
 § 12
 § 16
 § 77
 § 12
 v. 
 v. 
 v. 
 v. 
 § 771
 v. 
 § 886