Opinion ID: 21695
Heading Depth: 3
Heading Rank: 2

Heading: Federal Securities Fraud

Text: 33 Jordan failed to explicitly plead a federal securities law claim in its complaint. Although the district court denied Jordan an opportunity to file an amended complaint properly including the federal securities law claim, the district judge considered the claim anyway because the court was presented with facts sufficient to allege a federal securities law violation,despite its not being specifically pleaded. 3 Jordan now contends that since the sole basis for jurisdiction was the federal securities law claim, the district court's failure to grant leave to amend the complaint deprived the court of subject-matter jurisdiction over the case because there was no federal question. 28 U.S.C. 1331. However, because the district court in fact considered Jordan's securities fraud claim, which arose under federal law, jurisdiction was proper. 28 U.S.C. 1331. 34 It is unlawful to make a false statement of material fact or to participate in any acts that operate as a fraud upon any person, in connection with the purchase or sale of any security. 17 C.F.R. 240.10b-5. The elements of [a Rule 10b-5 claim] are well-settled: The plaintiff must prove 1) a misstatement or omission 2) of material fact 3) occurring in connection with the purchase or sale of a security, that 4) was made with scienter 5) upon which the plaintiff justifiably relied, 6) and that proximately caused injury to the plaintiff. Rubinstein v. Collins, 20 F.3d 160, 166 (5th Cir. 1994). A purchase consists of a contract to buy, purchase, or otherwise acquire stock. 15 U.S.C. 78c(a)(13). 35 The district court granted summary judgment to Kimmons on the federal securities fraud claim because the evidence produced failed to show that there was a genuine dispute as to any material issue of fact which, if resolved Jordan's favor, would entitle him to recover. We agree with the district court's analysis of the evidence in the record. There is no evidence that Jordan was misled as to the performance it was expected to render in order to acquire stock as provided in the Consulting Agreement. Assuming that prior to the December 24, 1996 written contract Kimmons represented that it would enter into two separate contracts in which stock would be transferred to Jordan, Kimmons is still entitled to summary judgment as Jordan has not introduced evidence from which it reasonably could be inferred that Kimmons did not intend to enter into a second contract when it made those representations to Jordan. Thus, Jordan did not establish a submissible case with respect to the element of scienter required under Rule 10b-5. We therefore affirm the district court's grant of summary judgment on the federal securities fraud claim.