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Timestamp: 2020-04-05 21:37:56
Document Index: 445523343

Matched Legal Cases: ['§ 80', '§ 209', '§ 215', '§ 215', '§ 206', '§ 215', '§ 215', '§ 215', '§ 1525', '§ 881', '§ 206', '§ 215', '§ 206', '§ 214', '§ 40', '§ 40', '§ 214', '§ 213', '§ 214', '§ 1331', '§ 206', '§ 215', '§ 206', '§ 215', '§ 206', '§ 215', '§ 206', '§ 206', '§ 206', '§ 214', '§ 80', '§ 214', '§ 208', '§ 214', '§ 214', '§ 214', '§ 214', '§ 214', '§ 1331']

TRANSAMERICA MTG. ADVISORS, INC. V. LEWIS, 444 U. S. 11 - Volume 444 - 1979 - Full Text - US Supreme Court Center - USSC Cases - Nolo
US Supreme Court Center > Volume 444 > TRANSAMERICA MTG. ADVISORS, INC. V. LEWIS, 444 U. S. 11 (1979) > Full Text
or to engage in specified transactions with clients without making required disclosures -- does not, however, create a private cause of action
STEWART, J., delivered the opinion of the Court, in which BURGER, C.J., and BLACKMUN, POWELL, and REHNQUIST, JJ., joined. POWELL, J., filed a concurring statement, post, p. 444 U. S. 25. WHITE, J., filed a dissenting opinion, in which BRENNAN, MARSHALL, and STEVENS, JJ., joined, post, p. 444 U. S. 25.
The Investment Advisers Act of 1940, 15 U.S.C. § 80b-1 et seq., was enacted to deal with abuses that Congress had
The respondent's complaint alleged that the petitioners, in the course of advising or managing the Trust, had been guilty of various frauds and breaches of fiduciary duty. The complaint set out three causes of action, each said to arise under the Investment Advisers Act of 1940. [Footnote 2] The first alleged that the advisory contract between TAMA and the Trust was unlawful because TAMA and Transamerica were not registered under the Act and because the contract had provided for grossly excessive compensation. The second alleged that the petitioners breached their fiduciary duty to the Trust by causing it to purchase securities of inferior quality from Land Capital. The third alleged that the petitioners had misappropriated profitable investment opportunities for the benefit
The Investment Advisers Act nowhere expressly provides for a private cause of action. The only provision of the Act that authorizes any suits to enforce the duties or obligations created by it is § 209, which permits the Securities and Exchange Commission (Commission) to bring suit in a federal district court to enjoin violations of the Act or the rules promulgated under it. [Footnote 5] The argument is made, however, that the
clients of investment advisers were the intended beneficiaries of the Act and that courts should therefore imply a private cause of action in their favor. See Cannon v. University of Chicago, 441 U. S. 677, 441 U. S. 689; Cort v. Ash, 422 U. S. 66, 422 U. S. 78; J. I. Case Co. v. Borak, 377 U. S. 426, 377 U. S. 432. The question whether a statute creates a cause of action, either expressly or by implication, is basically a matter of statutory construction. Touche Ross & Co. v. Redington, 442 U. S. 560, 442 U. S. 568; Cannon v. University of Chicago, supra at 441 U. S. 688; see National Railroad Passenger Corp. v. National Association of Railroad Passengers, 414 U. S. 453, 414 U. S. 458 (Amtrak). While some opinions of the Court have placed considerable emphasis upon the desirability of implying private rights of action in order to provide remedies thought to effectuate the purposes of a given statute, e.g., J. I. Case Co. v. Borak, supra, what must ultimately be determined is whether Congress intended to create the private remedy
or to engage in specified transactions with clients without making required disclosures. [Footnote 6] The second is § 215, which provides that contracts whose formation or performance would
It is apparent that the two sections were intended to benefit the clients of investment advisers, and, in the case of § 215, the parties to advisory contracts as well. As we have previously recognized, § 206 establishes "federal fiduciary standards" to govern the conduct of investment advisers, Santa Fe Industries, Inc. v. Green, supra, at 430 U. S. 471, n. 11; Burks v. Lasker, 441 U. S. 471, 441 U. S. 481-482, n. 10; SEC v. Capital Gains Research Bureau, Inc., 375 U. S. 180, 375 U. S. 191-192. Indeed, the Act's legislative history leaves no doubt that Congress intended to impose enforceable fiduciary obligations. See H.R.Rep. No. 2639, 76th Cong., 3d Sess., 28 (1940); S.Rep. No. 1775, 76th
In the case of § 215, we conclude that the statutory language itself fairly implies a right to specific and limited relief in a federal court. By declaring certain contracts void, § 215, by its terms, necessarily contemplates that the issue of voidness under its criteria may be litigated somewhere. At the very least, Congress must have assumed that § 215 could be raised defensively in private litigation to preclude the enforcement of an investment advisers contract. But the legal consequences of voidness are typically not so limited. A person with the power to avoid a contract ordinarily may resort to a court to have the contract rescinded and to obtain restitution of consideration paid. See Deckert v. Independence Corp., 311 U. S. 282, 311 U. S. 289; S. Williston, Contracts § 1525 (3d ed.1970); J. Pomeroy, Equity Jurisprudence §§ 881 and 1092 (4th ed.1918). And this Court has previously recognized that a comparable
We view quite differently, however, the respondent's claims for damages and other monetary relief under § 206. Unlike § 215, § 206 simply proscribes certain conduct, and does not, in terms, create or alter any civil liabilities. If monetary liability to a private plaintiff is to be found, it must be read into the Act. Yet it is an elemental canon of statutory construction that, where a statute expressly provides a particular remedy or remedies, a court must be chary of reading others into it.
Even settled rules of statutory construction could yield, of course, to persuasive evidence of a contrary legislative intent. Securities Investor Protection Corp. v. Barbour, supra at 421 U. S. 419; Amtrak, supra at 414 U. S. 458. But what evidence of intent exists in this case, circumstantial though it be, weighs against the implication of a private right of action for a monetary award in a case such as this. Under each of the securities laws that preceded the Act here in question, and under the Investment Company Act of 1940, which was enacted as companion legislation, Congress expressly authorized private suits for damages in prescribed circumstances. [Footnote 10] For example, Congress
The omission of any such potential remedy from the Act's substantive provisions was paralleled in the jurisdictional section, § 214. [Footnote 11] Early drafts of the bill had simply incorporated
by reference a provision of the Public Utility Holding Company Act of 1935, which gave the federal courts jurisdiction "of all suits in equity and actions at law brought to enforce any liability or duty created by" the statute (emphasis added). See S. 3580, 76th Cong., 3d Sess., §§ 40(a), 203 (introduced by Sen. Wagner, Mar. 14, 1940); H. . 8935, 76th Cong., 3d Sess., §§ 40(a), 203 (introduced by Rep. Lea, Mar. 14, 1940). After hearings on the bill in the Senate, representatives of the investment advisers industry and the staff of the Commission met to discuss the bill, and certain changes were made. The language that was enacted as § 214 first appeared in this compromise version of the bill. See Confidential Committee Print, S. 3580, 76th Cong., 3d Sess., § 213 (1940). That version, and the version finally enacted into law, S. 4108, 76th Cong., 3d Sess., § 214 (1940), both omitted any references to "actions at law" or to "liability." [Footnote 12] The unexplained deletion of a single phrase from a jurisdictional provision is, of course, not determinative of whether a private remedy exists. But it is one more piece of evidence that Congress did not intend to authorize a cause of action for anything beyond limited equitable relief. [Footnote 13]
For the reasons stated in this opinion, we hold that there exists a limited private remedy under the Investment Advisers Act of 1940 to void an investment advisers contract, but that the Act confers no other private causes of action, legal or equitable. [Footnote 14] Accordingly, the judgment of the Court of Appeals is affirmed in part and reversed in part, and the
The District Court was of the view that it was without subject matter jurisdiction of the respondent's suit. The Court of Appeals recharacterized the District Court's order dismissing the suit as properly based upon the respondent's failure to state a claim upon which relief can be granted, Fed.Rule Civ.Proc. 12(b)(6), noting that the respondent's suit was apparently within the District Court's general federal question jurisdiction under 28 U.S.C. § 1331. 575 F.2d at 239, n. 2.
The Court today holds that private rights of action under the Investment Advisers Act of 1940 (Act) are limited to actions for rescission of investment advisers contracts. In reaching this decision, the Court departs from established principles governing the implication of private rights of action by confusing the inquiry into the existence of a right of action with the question of available relief. By holding that damages are unavailable to victims of violations of the Act, the Court rejects the conclusion of every United States Court of Appeals that has considered the question. Abrahamson v. Fleschner, 568 F.2d 862 (CA2 1977); Wilson v. First Houston Investment Corp., 566 F.2d 1235 (CA5 1978); Lewis v. Transamerica Corp., 575 F.2d 237 (CA9 1978). The Court's decision cannot be reconciled with our decisions recognizing implied private actions for damages under securities laws with substantially the same language as the Act. [Footnote 2/1] By resurrecting
This Court has long recognized that private rights of action do not require express statutory authorization. Texas & Pacific R. Co. v. Rigsby, 241 U. S. 33 (1916); Tunstall v. Locomotive Firemen & Enginemen, 323 U. S. 210 (1944). [Footnote 2/2] The preferred approach for determining whether a private right of action should be implied from a federal statute was outlined in Cort v. Ash, 422 U. S. 66, 422 U. S. 78 (1975). See Cannon v. University of Chicago, 441 U. S. 677 (1979). Four factors were thought relevant. [Footnote 2/3] and although subsequent
The Court concedes that the language and legislative history of § 206 leave no doubt that it was "intended to benefit the clients of investment advisers," ante at 444 U. S. 17, as we have previously recognized. SEC v. Capital Gains Research Bureau, Inc., 375 U. S. 180, 375 U. S. 191-192 (1963); Santa Fe Industries, Inc. v. Green, 430 U. S. 462, 430 U. S. 471, n. 11 (1977). [Footnote 2/4] Because
I find no such intent to foreclose private actions. Indeed, the statutory language evinces an intent to create such actions. [Footnote 2/5] In 215(b) of the Act, Congress provided that contracts
The Court's conclusion that § 215, but not § 206, creates an implied private right of action ignores the relationship of § 215 to the substantive provisions of the Act contained in § 206. Like the jurisdictional provisions of a statute, § 215 "creates no cause of action of its own force and effect; it imposes no liabilities." Touche Ross & Co. v. Redington, supra at 442 U. S. 577. Section 215 merely specifies one consequence of a violation of the substantive prohibitions of § 206. The practical necessity of a private action to enforce this particular consequence of a § 206 violation suggests that Congress contemplated the use of private actions to redress violations of § 206. It also indicates that Congress did not intend the powers given to the SEC to be the exclusive means for enforcement of the Act. [Footnote 2/6]
Thus, in the absence of any contrary indication by Congress, courts may provide private litigants exercising implied rights of action whatever relief is consistent with the congressional purpose. J. I. Case Co. v. Borak, 377 U. S. 426 (1964); Securities Investor Protection Corp. v. Barbour, 421 U. S. 412, 421 U. S. 424 (1975); cf. Texas & Pacific R. Co. v. Rigsby, 241 U.S. at 241 U. S. 39. The very decisions cited by the Court to support implication of an equitable right of action from contract voidance provisions of a statute indicate that the relief available in such an action need not be restricted to equitable relief. Deckert v. Independence Shares Corp., 311 U. S. 282, 311 U. S. 287-288 (1940); Mills v. Electric Auto-Lite Co., 396 U. S. 375, 396 U. S. 388 (1970) ("Monetary relief will, of course, also be a possibility"); Kardon v. National Gypsum Co., supra at 514 ("[S]uch suits would include not only actions for rescission, but also for money damages"). As the Court recognized in Porter v. Warner Holding Co., 328 U.S.
Page 444 U. S. 31
395, 328 U. S. 399 (1946),
The Court concludes that the omission of the words "actions at law" from the jurisdictional provisions of § 214 of the Act and the failure of the Act to authorize expressly any private actions for damages reflect congressional intent to deny private actions for damages. Section 214 provides that federal district courts "shall have jurisdiction of violations of [the Act] " and "of all suits in equity to enjoin any violation of" the Act. 15 U.S.C. § 80b-14. Although other federal securities Acts have provisions expressly granting federal court jurisdiction over "actions at law," the significance of this omission is Delphic, at best. While a previous draft of the bill that became the Act incorporated by reference the jurisdictional provisions of the Investment Company Act and the Public Utility Holding Company Act, there is no indication in the legislative history as to why this draft was replaced with the language that became § 214. [Footnote 2/7] The only reference to the jurisdictional provisions of the Act is the statement in the House Committee Report that §§ 208-221 "contain provisions comparable to those in [the Investment Company Act]." H.R.Rep. No. 2639, 76th Cong., 3d Sess., 30 (1940). As the Second Circuit concluded in Abrahamson v. Fleschner, 568 F.2d at 875:
See Wilson v. First Houston Investment Corp., 566 F.2d at 1242. The Court recognizes that the more plausible explanation for the failure of § 214 expressly to include a reference to actions at law is that, unlike other federal securities Acts, the Act did not include other provisions expressly authorizing private civil actions for damages. See Abrahamson v. Fleschner, supra, at 874; Boler v. Laventhol, Krekstein, Horwath & Horwath, 381 F.Supp. 260, 264 265 (SDNY 1974). But, as our cases indicate, this silence of the Act is not an automatic bar to private actions. [Footnote 2/8]
The fundamental problem with the Court's focus on § 214 is that it attempts to discern congressional intent to deny a private cause of action from a jurisdictional, rather than a substantive, provision of the Act. Because § 214 is only a jurisdictional provision, "[i]t creates no cause of action of its own force and effect; it imposes no liabilities." Touche Ross & Co. v. Redington, 442 U.S. at 442 U. S. 577. Since the source of implied rights of action must be found "in the substantive provisions of [the Act] which they seek to enforce, not in the jurisdictional provision," ibid., § 214's failure to refer to "actions at law" does not indicate that private actions for damages are unavailable under the Act. The subject matter jurisdiction of the federal courts over respondent's action is unquestioned,
regardless of how § 214 is interpreted, because jurisdiction is provided by the "arising under" clause of 28 U.S.C. § 1331. Cf. Abrahamson v. Fleschner, supra at 880, n. 5 (Gurfein, J., concurring and dissenting). Where federal courts have jurisdiction over actions to redress violations of federal statutory rights, relief cannot be denied simply because Congress did not expressly provide for independent jurisdiction under the statute creating the federal rights. [Footnote 2/9]
Implication of a private right of action for damages unquestionably would be not only consistent with the legislative goal of preventing fraudulent practices by investment advisers, but also essential to its achievement. While the Act empowers the SEC to take action to seek equitable relief to prevent offending investment advisers from engaging in future violations, [Footnote 2/11]
The final consideration under the Cort analysis is whether the subject matter of the cause of action has been so traditionally relegated to state law as to make it inappropriate to infer a federal cause of action. Regulation of the activities of investment advisers has not been a traditional state concern. During the Senate hearings preceding enactment of the Act,
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