Source: http://www.ecases.us/case/ca8/c534545/norman-j-ackerberg-v-clark-e-johnson-jr-roger-g-lindquist-gary-m
Timestamp: 2020-01-28 11:11:33
Document Index: 617220933

Matched Legal Cases: ['§ 10', '§ 4', '§ 77', '§ 77', '§ 4', '§ 2', '§ 77', '§ 4', '§ 77', '§ 4', '§ 230', '§ 2', '§ 2']

norman-j-ackerberg-v-clark-e-johnson-jr-roger-g-lindquist-gary-m, Eighth Circuit, US Court of Appeals Cases, Federal Courts, COURT CASE
We begin with the order holding that Ackerberg's 1933 Act claims were not arbitrable under Wilko v. Swan, 346 U.S. 427, 74 S. Ct. 182, 98 L. Ed. 168 (1953). The PJH defendants argued to the district court that Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107 S. Ct. 2332, 96 L. Ed. 2d 185 (1987), which held that claims arising under the Act of 1934 are arbitrable, should also apply to claims arising under the 1933 Act. Defendants argued that McMahon effectively overruled Wilko, since the Court's rationale could be applied to 1933 Act claims as well as to 1934 Act claims. Indeed, after McMahon, many courts did find that 1933 Act claims were arbitrable for that reason. See Rodriguez De Quijas v. Shearson/American Express, Inc., --- U.S. ----, 109 S. Ct. 1917, 1923 n. 1, 104 L. Ed. 2d 526 (1989) (Stevens, J., dissenting). See also McMahon, 482 U.S. at 243, 107 S.Ct. at 2346 (Blackmun, J., dissenting) ("In today's decision, however, the Court effectively overrules Wilko by accepting the Securities and Exchange Commission's newly adopted position that arbitration procedures in the securities industry and the Commission's oversight of the self-regulatory organizations (SROs) have improved greatly since Wilko was decided."). The district court in this case, however, agreed with the Second Circuit that "the [Supreme] Court ... did not overrule [Wilko ] and it continues to govern us." Order, Civ. No. 4-87-159, Aug. 23, 1988, at 7 (quoting Chang v. Lin, 824 F.2d 219, 222 (2d Cir.1987)). Thus, the district court refused to compel arbitration of the 1933 Act claims.
Nevertheless, Ackerberg makes two arguments in support of the proposition that the district court's refusal to compel arbitration should not be reversed: (1) that the district court relied not only on Wilko, but also found in the alternative that the PJH defendants had waived their right to arbitration of the 1933 Act claims; and (2) that Volt Information Sciences, Inc. v. Board of Trustees, --- U.S. ----, 109 S. Ct. 1248, 103 L. Ed. 2d 488 (1989) holds that an agreement specifying that state law governs the arbitrability of claims must be given effect, that the arbitration agreement between Ackerberg and Johnson provides that Minnesota law should govern arbitration, and that in this case, Minnesota law provides that 1933 Act claims are not arbitrable. We find neither argument persuasive.
Federal policy clearly favors arbitration. The Supreme Court has made it clear that "[t]he Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S. Ct. 927, 941-42, 74 L. Ed. 2d 765 (1983). See also Nesslage v. York Securities, Inc., 823 F.2d 231, 234 (8th Cir.1987). This circuit has uniformly affirmed district court decisions which have found, under similar circumstances, no waiver of a right to arbitration. See Nesslage, 823 F.2d 231; Fogarty v. Piper, 781 F.2d 662 (8th Cir.1986); Phillips v. Merrill Lynch, Pierce, Fenner & Smith, 795 F.2d 1393 (8th Cir.1986). These three cases establish that, especially in cases in which any delay in making a motion to compel arbitration is based on unfavorable or uncertain law, waiver should not be found.
In Nesslage, defendants waited almost two years before filing a motion to compel arbitration, and meanwhile actively participated in discovery. Nesslage, 823 F.2d at 234. The district court found no waiver, and in affirming, we found it significant that at the time of the motion, claims arising under § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities Exchange Commission were not clearly arbitrable. Following the decision in Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 105 S. Ct. 1238, 84 L. Ed. 2d 158 (1985), which held that district courts must compel arbitration of pendent arbitrable claims, defendants made a motion to compel arbitration based on this change in the law. We found that since the motion "was filed soon after the Supreme Court's decision in [Byrd ]," it was "not untimely filed." Nesslage, 823 F.2d at 234.
Similarly, in Fogarty, the motion to compel arbitration was not made until over one and one-half years after the litigation began. Fogarty v. Piper, 767 F.2d 513, 514 (8th Cir.1985). Defendants argued that the delay in filing the motion was due to a change in the law. At the time litigation began, Kiehne v. Purdy, 309 N.W.2d 60 (Minn.1981) provided that Minnesota Securities Act claims were not arbitrable. During litigation, however, the Supreme Court held in Southland Corp. v. Keating, 465 U.S. 1, 104 S. Ct. 852, 79 L. Ed. 2d 1 (1984) that states cannot invalidate arbitration clauses which are otherwise valid under the Federal Arbitration Act. Fogarty, 767 F.2d at 515. Thus, defendants filed a motion to compel arbitration, and this circuit agreed with the district court that defendants had not waived their right to arbitration. Fogarty, 781 F.2d at 663.
We now consider Ackerberg's second argument, made for the first time at oral argument, in support of the district court's order refusing to compel arbitration of the 1933 Act claims. Ackerberg contends that even if we find no waiver, we cannot compel arbitration of the 1933 Act claims because Minnesota law does not allow arbitration of 1933 Act claims, and because Volt Information Sciences, Inc. v. Board of Trustees, --- U.S. ----, 109 S. Ct. 1248, 103 L. Ed. 2d 488 (1989) requires that we determine arbitrability according to Minnesota law. We disagree with Ackerberg's reading of both Volt and Minnesota law.
Johnson argues that he is entitled to an exemption under § 4(1) of the 1933 Act, which provides that the registration requirements of the 1933 Act, found in 15 U.S.C. § 77e, shall not apply to "transactions by any person other than an issuer, underwriter, or dealer."6 15 U.S.C. § 77d(1) (1988). We agree with the district court that the burden of proving entitlement to an exemption is on the party claiming entitlement. See SEC v. Ralston Purina Co., 346 U.S. 119, 126, 73 S. Ct. 981, 985, 97 L. Ed. 1494 (1953); G. Eugene England Found. v. First Fed. Corp., 663 F.2d 988, 989 (10th Cir.1973). We disagree, however, that Johnson has failed to meet his burden. In the absence of any finding that this transaction involved a distribution, Johnson has shown that he is not an issuer, underwriter or dealer within the meaning of § 4(1) of the 1933 Act.
The statutory definition of "underwriter" is found in § 2(11), 15 U.S.C. § 77b(11) (1988). "The term 'underwriter' means any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security." The congressional intent in defining "underwriter" was to cover all persons who might operate as conduits for the transfer of securities to the public. T. Hazen, The Law of Securities Regulation § 4.24, at 141 (1985) (quoting H.R.Rep. No. 85, 73d Cong., 1st Sess. 13-14 (1933)). Thus, "underwriter" is generally defined in close connection with the definition and meaning of "distribution." See Eugene England, 663 F.2d at 989 ("An underwriter is one who has purchased stock from the issuer with an intent to resell to the public."); Ingenito v. Bermec Corp., 441 F. Supp. 525, 535 (S.D.N.Y.1977) ("It is apparent that to be an underwriter within the meaning of the '33 Act, one must participate, in some manner, in the distribution of the securities to the public.") The term "underwriter" thus focuses on "distribution." Given the statutory definition of "underwriter," the exemption should be available if: (1) the acquisition of the securities was not made "with a view to" distribution; or (2) the sale was not made "for an issuer in connection with" a distribution. See 15 U.S.C. § 77b(11) (1988); ABA Report, The Section "4(1 1/2)" Phenomenon: Private Resales of "Restricted" Securities, 34 Bus.Law 1961, 1975 (July 1979); Hazen, The Law of Securities Regulation at § 4.23, at 138. Relevant to both inquiries are whether the securities have come to rest in the hands of the security holder and whether the sale involves a public offering.
We begin by considering whether the securities were acquired by Johnson with a view to their distribution. The inquiry depends on the distinction between a distribution and mere trading; so long as Johnson initially acquired his shares from the issuer with an investment purpose and not for the purpose of reselling them, the acquisition was not made "with a view to" distribution. While this determination would at first seem to be a fact-specific inquiry into the security holder's subjective intent at the time of acquisition, the courts have considered the more objective criterion of whether the securities have come to rest. That is, the courts look to whether the security holder has held the securities long enough to negate any inference that his intention at the time of acquisition was to distribute them to the public. Many courts have accepted a two-year rule of thumb to determine whether the securities have come to rest. See United States v. Sherwood, 175 F. Supp. 480, 483 (S.D.N.Y.1959) ("The passage of two years before the commencement of distribution of any of these shares is an insuperable obstacle to my finding that Sherwood took these shares with a view to distribution thereof."). This two-year rule has been incorporated by the SEC into Rule 144, which provides a safe harbor for persons selling restricted securities acquired in a private placement. 17 C.F.R. § 230.144 (1989). Professor Loss has also noted that a three-year holding period is "well nigh conclusive" that securities were acquired without a view to distribution. L. Loss & J. Seligman, 2 Securities Regulation at 672.
To determine whether the sale was made "in connection with" a distribution, however, requires that we consider directly the meaning of "distribution," and thus whether the resale involved a public offering. The definition of "distribution" as used in § 2(11) is generally considered to be synonymous with a public offering. In Gilligan, Will & Co. v. SEC, 267 F.2d 461 (2d Cir.), cert. denied, 361 U.S. 896, 80 S. Ct. 200, 4 L. Ed. 2d 152 (1959), the court explained the connection between "underwriter," "distribution," and "public offering." "Since § 2(11) ... defines an 'underwriter' as 'any person who has purchased from an issuer with a view to * * * the distribution of any security' and since a 'distribution' requires a 'public offering,' ... the question is whether there was a 'public offering.' " Id. at 466 (quoting H.R.Rep. No. 1838, 73d Cong., 2d Sess. (1934)). See also L. Loss & J. Seligman, 2 Securities Regulation at 1109 n. 567 (to find an underwriter, the sale must involve a contemplated distribution, "a term which the Commission regards as more or less synonymous with 'a public offering' as used in section 4(2)"); ABA Report, 34 Bus.Law. at 1962 (a distribution "is generally considered to be functionally equivalent to a 'public offering' as used in section 4(2)").
The case law is equally clear that a public offering is defined not in quantitative terms, but in terms of whether the offerees are in need of the protection which the Securities Act affords through registration. Thus, the Supreme Court held in SEC v. Ralston Purina, 346 U.S. 119, 73 S. Ct. 981, 97 L. Ed. 1494 (1953) that the proper focus is on the need of the offerees for information.
DocketNumber： 89-5093
Citation Numbers： 892 F.2d 1328
Gilligan, Will & Co., a Partnership, and James Gilligan and ... , 267 F.2d 461 ( 1959 )
Fed. Sec. L. Rep. P 95,837 G. Eugene England Foundation, a ... , 663 F.2d 988 ( 1973 )
Fed. Sec. L. Rep. P 98,747 Ronald G. Sorrell v. Securities ... , 679 F.2d 1323 ( 1982 )
Fed. Sec. L. Rep. P 99,000 Securities and Exchange ... , 694 F.2d 130 ( 1982 )
blue-sky-l-rep-p-72350-kristie-a-fogarty-v-richard-d-piper-and , 781 F.2d 662 ( 1986 )
Louis L. Phillips and L.L. Phillips Charities, Inc. v. ... , 795 F.2d 1393 ( 1986 )
harold-g-nesslage-and-vernetta-m-nesslage-appelleescross-appellants-v , 823 F.2d 231 ( 1987 )
Geiger, Gene C. v. SEC , 363 F.3d 481 ( 2004 )
Zacharias v. SEC , 584 F.3d 1073 ( 2009 )
Appalachian Regional Healthcare Inc. v. Beyt, Rish, Robbins ... , 963 F.2d 373 ( 1992 )
paul-ari-charles-joseph-dumont-yolanda-jane-campbell-jacqueline-theresa , 258 F.3d 880 ( 2001 )
Southeastern Stud & Comp. v. American Eagle Design , 588 F.3d 963 ( 2009 )
Ussec v. Sierra Brokerage Services Inc. , 608 F. Supp. 2d 923 ( 2009 )
Hedden v. Marinelli , 796 F. Supp. 432 ( 1992 )
In Re Moltech Corp. , 358 B.R. 435 ( 2006 )
Matter of Homestead Partners, Ltd. , 197 B.R. 706 ( 1996 )
General Mills, Inc. v. Hunt-Wesson, Inc. , 889 F. Supp. 1119 ( 1995 )
Merrill Lynch, Pierce, Fenner & Smith v. Shaddock , 822 F. Supp. 125 ( 1993 )
Wheaten v. Matthews Holmquist & Associates, Inc. , 858 F. Supp. 753 ( 1994 )
Bakas v. Ameriprise Financial Services, Inc. , 651 F. Supp. 2d 997 ( 2009 )
SEC v. Lybrand , 200 F. Supp. 2d 384 ( 2002 )