Opinion ID: 406453
Heading Depth: 1
Heading Rank: 2

Heading: purchases and sales, purchasers and sellers:

Text: 14 In this appeal, we are concerned with two distinct elements of the 10b-5 cause of action: the purchase or sale requirement and the purchaser-seller standing rule.
15 In order to set forth a valid 10b-5 cause of action, a plaintiff must allege that there has been wrongdoing in connection with the purchase or sale of a security. 11 Brown v. Ivie, 661 F.2d 62, 65 (5th Cir. 1981); Alley v. Miramon, 614 F.2d 1372, 1380 (5th Cir. 1980); Herpich v. Wallace, 430 F.2d 792, 805-806 (5th Cir. 1970). 16 Section 10(b) and Rule 10b-5 do not proscribe all fraudulent schemes concocted to take undue advantage of investors, but only those fraudulent schemes that are employed in connection with the purchase or sale of any security. 17 Herpich v. Wallace, supra at 805-806. 18 Thus, a valid 10b-5 complaint must allege facts which could support a finding that any alleged wrongdoing has been in connection with the purchase or sale of securities.
19 In order to bring a private damage action under Rule 10b-5 12 a plaintiff must allege that he himself was an actual purchaser or seller of securities. 13 Blue Chip Stamp v. Manor Drug Stores, 421 U.S. 723 (1975). Thus, even if it can be established that there has been wrongdoing in connection with the purchase or sale of a security, a private party does not have standing to recover under Rule 10b-5 unless the plaintiff can allege and ultimately establish that he himself was a purchaser or seller.
20 Plaintiff-appellant Rathborne has advanced two theories in support of his contention that the transactions here in question entailed a purchase or sale of securities and that he himself was a purchaser who has standing to assert a 10b-5 claim. First; Rathborne argues that the RLC-RPI asset-for-stock exchange constituted a purchase or sale of securities and that as a recipient of the newly issued RPI stock, he was a purchaser with standing to assert a 10b-5 claim. Second; Rathborne contends that the pro rata distribution of RPI stock to RLC shareholders was itself a sale of securities and that as a recipient of these securities, he was a purchaser. 21 Thus, we are asked to decide whether the transactions challenged by the appellant involved a purchase or sale of securities and whether the appellant himself can be considered a purchaser with standing to assert a 10b-5 claim. In treating these issues, we will assume all of the plaintiff's factual allegations to be true and then decide whether these facts can be construed as giving rise to a valid 10b-5 cause of action. 14