Opinion ID: 514370
Heading Depth: 1
Heading Rank: 2

Heading: Beale v. Architectural Coatings Associates Limited

Text: Partnership 7 Beale appeals from Judge Graham's dismissal of this related but procedurally distinct case. Memorandum and Order, November 25, 1987. He also appeals from the Magistrate's Order, filed November 13, 1987, denying him leave to amend his complaint. 8 The motion to amend would have injected federal claims into a case in which a lack of diversity had become apparent. Beale sought to include new claims under the Securities Exchange Act of 1934, 15 U.S.C. Sec. 78j(b) and unspecified sections of the Securities Act of 1933, 15 U.S.C. Sec. 77a, et seq. The burden of the proposed amendment, as best we can read it, alleges a violation of Rule 10b-5. It is settled that a person who is neither a purchaser nor a seller may not sue for damages under that Rule. Blue Chip Stamps v. Manor Drug Store, 421 U.S. 723 (1975). In the present case, Beale alleges only that the defendants by their acts conspired to dilute the ownership position which he held in Architectural Coatings, and which he had attained by stock acquisitions occurring much earlier. We discern no evidence in the record to supply the deficiency in Beale's pleading. We must conclude, therefore, that the District Court properly concluded that the proposed second amendment failed to state a claim. 9 Once he had denied the motion to amend, then the Magistrate had before him a case which was founded only on state-law claims and in which diversity was subject to a very colorable challenge. The Magistrate, therefore, refused to grant Beale leave to amend his state-law claims. Both refusals fall under the well-established principle that the futility of a proposed amendment is a sound reason for denying it. Foman v. Davis, 371 U.S., at 182. The District Court in its final order quite properly adopted the Magistrate's denial of leave to amend. 10 The District Judge was met, therefore, with a case entirely dependent on diversity for federal jurisdiction. Beale had not rebutted the defendant's affidavit that established the lack of diversity among the parties. There was, therefore, no error in his dismissal of this cause. 11 Accordingly, the judgments of the District Courts in appeals 87-3987 and 87-4114 are affirmed.