Opinion ID: 425977
Heading Depth: 3
Heading Rank: 1

Heading: introduction

Text: 9 It is well settled that traditional corporate insiders--directors, officers and persons who have access to confidential corporate information 8 -- must preserve the confidentiality of nonpublic information that belongs to and emanates from the corporation. 9 Consistent with this duty, the insider must either disclose nonpublic corporate information or abstain from trading in the securities of that corporation. See SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 848 (2d Cir.1968) (en banc), cert. denied, 404 U.S. 1005, 92 S.Ct. 561, 30 L.Ed.2d 558 (1971); accord Radiation Dynamics, Inc. v. Goldmuntz, 464 F.2d 876, 890 (2d Cir.1972) (The essential purpose of Rule 10b-5 ... is to prevent corporate insiders and their tippees from taking unfair advantage of the uninformed outsiders.). The individual defendants in this case--Courtois, Antoniu and Newman--having acquired confidential information through Warner's investment adviser and having no direct relationship with Deseret, could not be traditional corporate insiders. 10 However, in a number of decisions the Supreme Court has extended the duty of disclosure requirement to nontraditional insiders--persons who have no special access to corporate information but who do have a special relationship of trust and confidentiality with the issuer or seller of the securities. See, e.g., Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972) (bank employees who purchased shares in a tribal trust fund from mixed-blood Ute Indians without disclosing that there was a secondary market for shares at higher prices among non-Indians); SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 84 S.Ct. 275, 11 L.Ed.2d 237 (1963) (investment adviser who purchased stock for his own account just before publishing a recommendation that his clients buy the stock); see also Zweig v. Hearst Corp., 594 F.2d 1261 (9th Cir.1979) (financial columnist); Lewelling v. First California Co., 564 F.2d 1277 (9th Cir.1977); Frigitemp Corp. v. Financial Dynamics Fund, Inc., 524 F.2d 275 (2d Cir.1975); Flynn v. Bass Brothers Enterprises, 456 F.Supp. 484 (E.D.Pa.1978). Moss sought to include the defendants in this category of nontraditional insiders and argued that they necessarily violated section 10(b) and rule 10b-5 by purchasing Deseret stock without publicly disclosing their knowledge of the impending tender offer. After finding that none of the defendants occupied a position of trust with respect to Moss, the district court held that none of the defendants owed him such a duty of disclosure. In light of the Supreme Court's decisions in Chiarella v. United States, 445 U.S. 222, 100 S.Ct. 1108, 63 L.Ed.2d 348 (1980), and Dirks v. SEC, --- U.S. ----, 103 S.Ct. 3255, 77 L.Ed.2d 911 (1983), which recently articulated the standard for analyzing violations of section 10(b) and rule 10b-5, we agree with the district court's dismissal of plaintiff's federal securities law claim.