Document: 503 U.S. 258 112 S.Ct. 1311 117 L.Ed.2d 532 Robert G. HOLMES, Jr., Petitionerv.SECURITIES INVESTOR PROTECTION CORPORATION et al. No. 90-727. Argued Nov. 13, 1991. Decided March 24, 1992. Syllabus Pursuant to its authority under the Securities Investor Protection Act (SIPA), respondent Corporation (SIPC) sought, and received, judicial decrees protect customers of two member broker-dealers. After trustees were appointed liquidate broker-dealers' businesses, SIPC filed this suit, alleging, among other things, that petitioner Holmes others had conspired in a fraudulent stock-manipulation scheme disabled broker-dealers from meeting obligations customers; conduct triggered SIPC's statutory duty advance funds reimburse conspirators violated Exchange 1934 regulations promulgated thereunder; their acts amounted "pattern racketeering activity" within meaning Racketeer Influenced Corrupt Organizations (RICO), 18 U.S.C. §§ 1962, 1961(1) (5), so as entitle plaintiffs recover treble damages, § 1964(c). The District Court entered summary judgment for on RICO claims, ruling, inter alia, did not meet "purchaser-seller" requirement standing RICO. Appeals held finding no be error and, reasons, reversed remanded. 1 Held: has demonstrated right sue Pp. 265-276. 2 (a) A plaintiff's 1964(c)—which specifies "[a]ny person injured . by reason violation [§ 1962] may therefor threefold damages he sustains ."—requires showing defendant's was proximate cause injury. Section 1964(c) modeled 4 Clayton Act, which itself based 7 Sherman see Associated General Contractors Cal., Inc. v. Carpenters, 459 519, 530, 103 897, 904, 74 723, both antitrust sections been interpreted incorporate common-law principles causation, see, e.g., id., at 533-534, n. 29, 536, 33, S.Ct., 905-906, 907, 33. It must assumed Congress enacted intended words have same courts already given them. Cf. 534, 906. Although 1964(c)'s language can read require only factual, "but for," construction is hardly compelled, very unlikelihood meant allow all factually persuades should get such an expansive reading. 265-268. 3 (b) As used herein, "proximate cause" requires some direct relation between injury asserted injurious alleged. For variety 540-544, 909-912, directness relationship one essential elements causation. 268-270. (c) claim it entitled ground subrogated rights who purchase manipulated securities fails because conspirators' proximately those customers' Even assuming, arguendo, stand shoes customers, link too remote stock manipulation alleged, directly rendering them insolvent, nonpurchasing losses, are purely contingent inability pay claims. facts case demonstrate reasons supporting adoption direct-injury limitation, ibid., apply with equal force suits. First, if allowed sue, district court would first need determine extent collect result alleged conspiracy, opposed to, poor business practices or failures anticipate financial market developments. Second, assuming appropriate assessment factual causation could made out, then find way apportion possible respective recoveries otherwise each full damages. Finally, law shouldering these difficulties despite fact counted bring suit law's vindication, they done persons SIPA trustees. Indeed, insolvency victim adds further concern expressed Contractors, since indirectly attempt circumvent relative priority victim's liquidation proceedings. This analysis deflected congressional admonition liberally construed effectuate remedial purposes, allowing suits open door massive complex litigation, burden courts, but also undermine effectiveness treble-damages Id., 545, 912. Thus, await outcome trustees' share according gives Holmes. 270-275. 5 (d) provision, 15 78eee(d), because, face, section simply qualifies proper party interest any "matter arising proceeding" "shall deemed intervened," independent money Pp.275-276. 6 (e) declines decide whether every plaintiff sues claims fraud predicate offense purchased sold security. In light foregoing, discussion issue unnecessary resolve case. Nor will leaving question unanswered deprive lower much-needed guidance. review courts' conflicting cases shows resolved proximate-causation grounds, none involved litigants like Blue Chip Stamps Manor Drug Stores, 421 95 1917, 44 539, decided forgo transactions reliance misrepresentations. P. 276. 908 F.2d 1461 (CA 9 1990), 8 SOUTER, J., delivered opinion Court, REHNQUIST, C.J., BLACKMUN, KENNEDY, THOMAS, JJ., joined, Part IV WHITE, STEVENS, O'CONNOR, joined. concurring part judgment, WHITE SCALIA, judgment. Jack I. Samet, Los Angeles, petitioner. 10 Blakey, Notre Dame, Ind., respondents. 11 Justice SOUTER Court. 12 Respondent alleges Holmes, thus triggering customers. 84 Stat. 941, amended, 1961-1968 (1988 ed. Supp. I). We hold cannot. 13 * A. 14 1970, 1636, 78aaa-78lll, authorized formation SIPC, private nonprofit corporation, 78ccc(a)(1), most registered 15(b) 1934, 78o(b), required "members." 78ccc(a)(2)(A). Whenever determines "has failed danger failing customers," finds certain conditions satisfied, ask "protective decree" federal court. 78eee(a)(3). Once grounds granting petition, 78eee(b)(1), appoint trustee charged liquidating member's business, 78eee(b)(3). returning specific names, 78fff-2(c)(2); 78fff(a)(1)(A); 78lll (3), pool together cash found accounts divide ratably satisfy 78fff-2(b); 78fff(a)(1)(B).1 To customer property inadequate, up $500,000 per customer2 use satisfying 78fff-3(a).3 B 16 On July 1981, sought decree United States Southern Florida First State (FSSC), broker-dealer member. Three days later, petitioned Central California, seeking Joseph Sebag, (Sebag), Each issued requested trustee, proceeded broker-dealer. 17 Two years brought accusing 75 defendants conspiracy leading demise FSSC Sebag. Insofar relevant here, allegations that, 1964 through six companies making unduly optimistic statements about prospects continually selling small numbers shares create appearance liquid market; bought substantial amounts own funds; market's perception 1981 sent stocks plummeting; decline caused resulting eventual nearly $13 million cover complaint described Holmes' participation alleging false companies, Aero Systems, Inc., officer, director, major shareholder; over extended period Bunnington Corporation, simulate market. said 10(b) 78j(b), SEC Rule 10b-5, CFR 240.10b-5 (1991), mail wire statutes, 1341, 1343 ed., concluded statute, (5) I), five litigation issues,4 ruling "does 'purchaser-seller' requirements assert predicated upon 10b-5," App. Pet. Cert. 45a,5 neither nor satisfied RICO," 39a; 37a. against many remained pending, Fed.Rule Civ.Proc. 54(b) partial immediately appealable. appealed. 19 Ninth Circuit remanded after rejecting Court's grounds. Corp. Vigman, (CA9 1990) (Vigman III ). whereas sale security necessary entitlement implied action recognized 539 (1975), expressly provided imposes limiting standing. Vigman III, supra, 1465-1467. appeals error, mistaken focus causal alone; responsible his co-conspirators, explained, looked conspirators. 1467-1469.6 20 ensuing petition certiorari presented issues, RICO,7 actions co-conspirators. granted former alone, 499 ----, 111 1618, 113 716 now reverse.8 II RICO's provision civil reads 21 1962 chapter shall cost including reasonable attorney's fee." 22 course mean "by of" violation, therefore recover, defendant 1962,9 injured, for" 529, 903, 723 (1983). however, recover10 us reading.11 Not even seriously argues otherwise.12 23 key better interpretation lies history. repeatedly observed, Agency Holding Malley-Duff & Associates, 483 143, 150-151, 107 2759, 2764-2765, 97 121 (1987); Shearson/American Express McMahon, 482 220, 241, 2332, 2345, 96 185 Sedima, S.P.R.L. Imrex Co., 473 479, 489, 105 3275, 3281, 87 346 (1985), civil-action laws, 24 "any anything forbidden laws him sustained, 15. 25 we discussed how 1914 borrowed passed earlier.13 Before 1914, U.S., 29 (citing Loeb Eastman Kodak 183 F. 704 (CA3 1910); Ames American Telephone Telegraph 166 820 (CC 1909)), reasoned, before us, 33 cases),14 presumably carried intention adopt "the gloss avoided simple literal interpretation," injury, well. 26 reasoning applies just readily fairly credit 91st Congress, RICO, knowing earlier Congresses later Act's 4. See Cannon University Chicago, 441 677, 696-698, 99 1946, 1957-1958, 60 560 (1979). words, assume See, Oscar Mayer Co. Evans, 750, 756, 2066, 2071, 609 (1979); Northcross Memphis Board Education, 412 427, 428, 93 2201, 2202, 37 48 (1973). Proximate required. 27 Here label generically tools limit person's responsibility consequences acts. At bottom, notion reflects "ideas what justice demands, administratively convenient." W. Keeton, D. Dobbs, R. Owen, Prosser Keeton Law Torts 41, p. 264 (5th 1984). Accordingly, shapes concept took common law, 532-533, demand complained harm flowing merely misfortunes visited third generally distance recover. J. Sutherland, Damages 55-56 (1882). 28 sole causation,15 central elements, 540, 909, reasons. less is, more difficult becomes ascertain amount attributable distinct other, independent, factors. 542-543, 910-911. quite apart problems proving recognizing complicated rules apportioning removed different levels violative acts, obviate risk multiple recoveries. 543-544, 911-912; McCready, 457 473-475, 102 2545-2546; Hawaii Standard Oil Calif., 405 251, 264, 92 885, 892, 31 184 (1972). And, finally, grapple unjustified general deterring conduct, victims vindicate attorneys general, without attendant remotely. 541-542, point out III-A below instant show 30 understand argument, first, securities, second, sue. second relied threshold matter, theory subrogation fraught questions. suing does rest claimed SIPA. Brief 38, 181. assumes provides broker-dealers, 78fff-3(a), 78fff-4(c); 78fff-2(c)(1)(C); Mishkin Peat, Marwick, Mitchell 744 F.Supp. 531, 556-557 (S.D.N.Y.1990), parties him, relies rather "common subrogation" describes "its paid parties." 38 (footnote omitted). oral argument narrowed never securities. Tr. Oral Arg. 29.16 But stops there, guess nature tell derive state or, latter, State.17 explain why securities.18 32 questions, stymie claim, harm, being suffered That allegedly insofar left wherewithal senior (in recourse "customer property") creditors, 78fff-2(c)(1), causes injuries same: cannot bills, intervening connects losses creditors. said, quoting " 'The tendency regard least, go beyond step.' 906 (quoting Pacific Darnell-Taenzer Lumber 245 533, 186, 62 L.Ed. 451 (1918)),19 supported conforming present facts, underscoring obvious limitation 1964(c).20 If manipulate, say, developments markets. Assuming vindication. noted above, sued case, account insolvency.21 expressed, Mid-State Fertilizer National Bank 877 1333, 1336 (CA7 1989). 34 considerations history policy, "liberally purposes," 904(a), 947, deflect our analysis. There nothing illiberal construction: serve wrongs, stead, plaintiffs. fear purposes probably hobbled than helped version liberal Allowing "massive litigation[, would] burde[n] undermin[e] suits." 35 sum, conspiracy's secondary does, should, run afoul standards, wait suit. claim. 78fff-2(c). 36 pursue advanced administering 30. Its here apparently subrogation, statute makes reference connection obligation make advances. 78fff-3(b)(2).22 instead, 37, 180, provision: "SIPC participation—SIPC matters proceeding, heard matters, intervened respect effect purpose court." 78eee(d). inapposite however. intervened." By extending "matter" pending parties, says recovery plaintiff. How read, either alone 1964(c), give eludes us. 39 Petitioner urges security, Circuits appear divided.23 do so. Given Parts resolution think inopportune today. V 40 manipulate claimed, record fail reverse remand proceedings consistent opinion. 41 ordered. 42 whom STEVENS join, 43 I agree provisions element, persuaded proximate-cause "fairly included" certiorari. Ante, 266, 12. my view, deciding petitioner's activities, consider below, briefed argued clearly articulated resolving question, purchaser seller violations (1934 Act) unlawful use, "in security," "manipulative deceptive device contrivance" contravention Commission (SEC) prescribe. 78j(b). 10(b), adopted prohibits manipulative security." (1991). 1971, ratified "established" view 10b-5 created action. Superintendent Insurance Bankers Life Cas. 404 6, 9, 165, 169, 128. Four confirmed "longstanding acceptance"1 rule actually order 733, 1924. 45 lacked 10b-5. 45a. Stamps' purchaser/seller Investment 1990). An examination text comparison situation confronted Stamps, me Appeals' determination correct. Because decision today leaves intact division suits,2 affirm portion though injuries. 46 Our starting sued. engaged invest, maintain interest, participate enterprise interstate foreign commerce. 1962. "[R]acketeering defined include number offenses, act indictable 1341 (mail fraud) (wire fraud), involving punishable States." 1961(1). authorizes 1962" 47 considered requirement. sweeps broadly, authorizing person" "[P]erson" individual entity capable holding legal beneficial property." 1961(3) (emphasis added). "Insofar 'any' encompasses 'all'," Mobil Exploration Producing Southeast, Distribution Cos., 498 615, 623, 636 reasonably purchasers sellers explained previous efforts narrow scope RICO: "If engages pattern activity manner 1962's] provisions, activities injure property, room additional requirement." 495, 3284, (1985). Of course, "only if, [reason of] constituting violation." 496, 3285. remarked one's "business property" limits availability remedies injury-in-fact. 497, 3285 Haroco, Trust 747 384, 398 1984)). Today, sensibly holds operate, confine truly meaningful sense. Requiring preclude nonpurchaser nonseller bringing "injury [one's] categorically exclude nonpurchasers nonsellers universe 49 sweeping incorporates focuses "injur[y]" "person," act. determined allege predicates constitute definition activity. great majority listed criminal offenses Federal Government accept envisions overlay government entities. 50 contention normally exception "fraud securities" well established careful reading reveals flaw argument. embracing "offense States" plainly signify prosecution. Trane O'Connor Securities, 718 26, (CA2 1983); Dan River, Icahn, 701 278, 291 (CA4 1983). violates infra, 6-7, itself, 32(a) 78ff(a), sanctions willfully thereunder. previously clear, import prosecutions willful provisions. Naftalin, 768, 774, 2077, 2082, 624 393 453, 467, 89 564, 572, 668 (1969). subsume here. 51 lack requirement, still lurks 1961(1)'s catalog acts; i.e., actual sale. defines "racketeering Unfortunately, term defined. "[A]ny means refer tort fraud. Unlike 1961(1), there cross-reference Code. resort legislative helpful clarifying kinds contemplated covered. Bridges, Private Litigation Based Upon "Fraud Sale Securities," Ga.L.Rev. 43, 58-59 (1983) (discussing paucity history); Note, Fraud: Workable Limitation, 83 Colum.L.Rev. 1513, 1536-1539 (reviewing testimony Senate Judiciary Committee). 52 Which any, generated much ink little agreement courts3 commentators,4 definitively unmistakably fraud, sufficiently time, am Congress' word "sale" defining necessarily dictate executed 53 list actions. Obviously prosecution securities." embodies distinction tenable, pressure 'private general' serious national problem public prosecutorial resources [were] inadequate." Assocs., 151, 2764, (1987). everyone qualify "private attorney general," prerequisites role articulated, act, 1964(c)—a "injur[y] violation. 54 Construing tension Stamps. admitted "able divine express 'intent contours 10b-5." 737, 1926. stem phrase Rather, rests 733-736, 1924-1925, practical absence transaction, 737-749, 1926-1931, context. 55 Arguably, 10(b)'s insufficient class sellers, "in" performs narrowing function. occasion reservations validity distinction. (1979), reinstated conviction professional investor "short selling" placing orders brokers sell falsely represented owned. agreed Naftalin guilty "offer" 17(a)(1) 1933, 77q(a)(1), perpetrated brokers, purchasing clients. noted: 56 "[Naftalin] contends 'in' offer connotes narrower range 'in with,' 10(b). with.' Both H.R.Rep. 85, 73d Cong., 1st Sess., (1933), [92 168, 128] (1971), terms interchangeably. connote group indicate sense insisted Naftalin." 773, 4, 2081, 57 So today's difference choice with," decision, confining excluding tangentially "connect[ed] with" it. 58 prudential avoiding proof when traded nuisance potential vexatious litigation. 738-739, 1926-1927. access judicially implied. acknowledged "if legislated Judicial Branch administer enacted; circumscribe conferred disagreement might wisdom creating liability." 748, 1931. sure, identified exacerbated addition threat faces stigma labeled "racketeer." Nonetheless, Specifically, Despite real specter speculative power stated "That restrict application statute." Turkette, 452 576, 587, 101 2524, 2530, 69 246 (1981). 59 split cited 1, supra. recognize decisions appropriately cast element change governing precedent several applicability fully addressed sustain issue. join except IV. 61 O'CONNOR ought reach avoid her answer question: purchaser-seller My conclusion, somewhat hers. ultimate standing: so-called nexus (mandatory legalese "connection") complains sort support Sedima 3285, One usual causality. similar turn which, time passed, requirement; rather, think, always practice (and systems) condition recovery, unless legislature specifically prescribes otherwise, offending conduct. short human consequences; "for want nail, kingdom lost" commentary fate, statement blacksmith. 63 Yet another compliance call "zone interests" test, seeks whether, benefitted issue.1 inference zone-of-interests background legislates. Block Community Nutrition Institute, 467 340, 345-348, 104 2450, 2453-2455, 81 270 (1984). Sometimes considerable limitations zone interests set forth explicitly rarely, ever, complete others. If, example, "all purchasers, owners fraud," doubt stockholder heart attack earnings report medical expenses. clear extend respect—but includes respect. Just normal cause, interests. 64 seems test applied various uniform, vary based. degree causality sports bribery, 224, transporting stolen 2314-2315. And applicable test: underlying (Where consist them.) 65 exists, particular provision. principally differ O'CONNOR's analysis, ante, 280 (opinion judgment). equitable relief, coming statutes identical. Hence relevance (1975). 10b-5; sellers. "injured congressionally action, 66 What prevents proposition determinative involve specification "implied" (i.e., created) itself—a happily abandoned, Touche Ross Redington, 442 560, 568-571, 575-576, 2479, 2485-2486, 2488-2489, 82 policies (namely, difficulty assessing truth others' 743-747, 1929-1931, high "strike" 740-741, 1927-1928) perhaps factors properly taken into determining covered surely enough contains hint limitation. approved essentially interpretive one. Franklin Gwinnett County Public Schools, 1028, --- ---- (1992) (SCALIA, goes customary leeway texts. 67 therefore, correctly rejected assertion question. applied, met. concur Such property," (4), become debtor's estate until paid. 78fff-2(c)(1). creditor (say, landlord), subordinated SIPC. With customer's deposit broker-dealer, obligated $100,000 customer. 78fff-3(a)(1). advances, establishment Fund. 78ddd(a)(1). replenish fund levying assessments, 78ddd(c)(2), members legally pay, 78jjj(a). 803 1513 1986) ); 764 1309 1985) earlier, dismissed non-RICO rendered failure Birnbaum (1975); Newport Steel Corp., 193 461 (CA2), cert. denied, 343 956, 72 1051, 1356 (1952). II, permitted proceed Sebag unauthorized assets buy had. 1519-1520. remand, discovery, ruled genuine material existed 27a. appealed ruling. phrased follows: "Whether thereunder, free presenting ("RICO")." i. contest alone. lists "prohibited activities." invokes subsections (d). 15, 58. Subsection "unlawful associated enterprise's affairs ." subsection conspire violate (c). "requir[ing] least last occurred ten commission prior activity." 1961(5). 1961(1)(B) (D) define (relating [or] "In philosophical sense, forward eternity, event back dawn events, beyond. impose basis infinite liability wrongful 'set society edge fill endless litigation.' 1984) North Johnson, Minn. 242, N.W. 1012 (1894)). put context, "An expected ripples flow Nation's economy; broad wording [of 15,] wrongdoer liable." Shield Virginia 465, 476-477, 2540, 2546-2547, 73 149 (1982) (internal quotation marks citation overwhelmingly mere proximate, Pelletier Zweifel, 921 1465, 1499-1500 (CA11 1991), 502 167, 116 131 (1991); Ocean Energy Alexander Alexander, 868 740, (CA5 1989); Brandenburg Seidel, 859 1179, 1189 1988); Sperber Boesky, 849 1984), aff'd, 606, 3291, 437 (1985) (per curiam F.2d, 1468. say must, may, standard 3, 34, 38-39. However, 14.1(a). restatement reads: "Was correct 'purchaser seller' 'any person' 'injury property' 'by of' States,' 1962?" i (ellipses original). restating (as do, 24.2), enquiry carries more, issue, 34-36, 38-39, announced it, 31. When part: "Any corporation declared 210 (1890). These sometimes "antitrust injury" component enquiry. 538, 908, (1983); 481-484, 2549-2551, (1982). discuss analogue setting. 495-497, 3284-3285, reason, merit inappropriate litigant contend body context—setting strict questions 'standing sue' 'proximate cause.' 115 Cong.Rec. 6995 (1969) (ABA comments S. 2048). rightly understood 3284-3285. 1189, 1988). Besides, means, noise drowned language. allegation omissions state-law parties. Redington 592 617, 1978), rev'd tries foundering creditors affecting debtors' solvency arguing owned themselves 39, Ashland Oil, Arnett, 875 1271, 1280 Energy, 744-747; Rhoades, 1096, 1100-1101 1988), 490 1007, 109 1643, 158 (1989)). While true, gains point. note late May Lugo, officer conspirators, parked actively participated parking transaction account. Statement Background Facts, 223-225. Lugo "sold" price, "bought" price plus interest. Under regulations, discount account, 240.15c3-1(c)(2)(iv)(F)(1)(vi) sham discount. transactions, capital sooner; shut down regulators; dragged demise. 231. lesser extent. 229, engaging committed securities," offenses. Taffet 930 847, 856-857 1991); Suffolk Long Island Lighting 907 1295, 1311-1312 However be, brief merits places exclusive theory, completely silent scheme. arise virtually impossible announce black-letter case." "direct" informed concerns text. have, intimate results reached. 15; id. 522, 900 (Marshall, dissenting); Pelletier, 1499-1500; likely forced hands. SIPA, bankruptcy liquidations statute. 78fff(b); 78fff-1(b) (to duties Chapter Bankruptcy Code); 78eee(b)(2)(A)(iii) supervising powers court). can, petitioning effect, compel institute party. re Automated Business Sys., 642 200, 201 (CA6 1981). unlikely order, influence 78eee(b)(3) (court "such perso[n] discretion, specifies," circumstances itself); 78eee(b)(5)(C) (SIPC's recommendation trustee's compensation "considerable reliance" binding). unexplained remark 29-30, advances came late. looks vain brief. Compare 1461, 1465-1467 (no RICO); Warner Grant 828 1528, 1530 1987) (same) International Data Bank, Ltd. Zepkin, 812 149, 151-154 (RICO relying seller); Brannan Eisenstein, 804 1041, 1046 (CA8 (same). acceptance universal. E.g., Eason Motors Acceptance 654, 659 1973) (holding protection extends who, capacity investors, suffer significant consequence security") (Stevens, J.). (purchaser/seller securities); (same), (standing limited Bancorp, Bro, 847 542, 546 1988) (violations 13(d) 14(e) embraces sale" security); Par Pharmaceutical, Litigation, 733 (S.D.N.Y.1990) (violation offense) Catanella E.F. Hutton 583 1388, 1425, (E.D.Pa.1984) (reach 10b "both purchases sales"); Lou Belzberg, 728 1010, 1026 Hart-Scott-Rodino reporting relates act); Spencer Cos. Rent-A-Car, 1981-1982 CCH Fed.Sec.L.Rep. ¶ 98,361, 92,215 (Mass.1981) "[t]he encompass seller"). ("fraud antifraud anti-manipulation counterfeit long Predators Rights: Multiple Remedies Wall Street Sharks Laws J.Corp.L. 39-40 (1984) (allegations definition); Long, Treble Violations Laws: Suggested Analysis Application Civil Cause Action, 85 Dick.L.Rev. 201, 225-226 (1981) (any "housekeeping" measures suffices securities"); MacIntosh, Act: Powerful New Tool Defrauded Plaintiff, Kan.L.Rev. 7, 30-37 broader laws); Mathews, Shifting Burden Losses Markets: Role Dame L.Rev. 896, 944-947 (1990) (securities occurs Tyson August, Williams Has Balance Tipped Favor Incumbent Management?, Hastings L.J. 53, 79-80 (criminal activity, (RICO) Violations, 411, 430-431 securities). terminology entirely orthodox. ordinarily used, Wyoming Oklahoma, 789, 810, dissenting), usage leave bereft aspects "violation-injury connection" aspect

Category: 8