Legal Document

439 U.S. 551 99 Supreme Court Reporter 790 58 United States Reports Lawyer’s Edition 2d Series KF101.8 U54 808 INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN AND HELPERS AMERICA, Petitioner,v.John DANIEL. LOCAL 705, et al., Petitioners, versus John Nos. 77-753, 77-754. Argued Oct. 31, 1978. Decided Jan. 16, 1979. Syllabus A pension plan entered into under a collective-bargaining agreement between petitioner local labor union and employer trucking firms required all employees to participate in the but not pay anything it. All contributions were be made by employers at specified amount per week for each man-week of covered employment. To eligible pension, an employee was have 20 years continuous service. Respondent employee, who had over years' service, denied upon retirement because break He then brought suit Federal District Court, alleging, inter alia, that trustee fund misrepresented omitted state material facts with respect value employee's interest plan, such misstatements omissions constituted fraud connection sale security violation § 10(b) Securities Exchange Act 1934 Commission's Rule 10b-5, also violated 17(a) 1933. Denying petitioners' motion dismiss, held respondent's "security" within meaning 2(1) 3(a)(10) created "investment contract," there been "sale" this respondent 2(3) 3(a)(14) Act. The Appeals affirmed. Held: do apply noncontributory, compulsory plan. Pp. 558-570. (a) determine whether particular financial relationship constitutes investment contract, "[t]he test is scheme involves money common enterprise profits come solely from efforts others." SEC W. Judge Howey Co., 328 293, 301, 66 1100, 1104, 90 L.Ed. 1244. Looking separately element test, it apparent participation as one question here does comport commonly understanding contract. With investment-of-money element, purported relatively insignificant part total indivisible compensation package who, standpoint economic realities, selling his obtain livelihood, making future. And expectation-of-profits while depends some extent on earnings its assets, possibility participating asset too insubstantial bring entire transaction Acts. 558-562. (b) There no evidence Congress any time thought noncontributory plans subject federal regulation securities. Nor until instant litigation arose ever considered applicable plans. Accordingly, justification deference SEC's present interpretation. 563-569. (c) Employee Retirement Income Security 1974, which comprehensively governs use terms plans, severely undercuts argument extending whatever benefits might derive effect these latter Acts are now provided more definite form through ERISA. 569-570. 7 Cir., 561 Reporter, 2nd 1223, reversed. Sherman Carmell, Chicago, Ill., Number Sidney Dickstein, Washington, D. C., 77-753. Jacob or Haw. Hawai‘i KFH45 A2 Stillman, Commission, amicus curiae, special leave Court. Lawrence Walner Peter Barack, both cases. Mr. Justice POWELL delivered opinion 1 This case presents 1933 (Securities Acts). 2 * In 1954 multiemployer collective bargaining Local 705 International Brotherhood Teamsters, Chauffeurs, Warehousemen, Helpers America Chicago produced represented Local. noncontributory. Employees choice did option demanding employer's contribution paid directly them substitute eligibility. nothing themselves.1 3 initially set Pension Trust Fund $2 employment.2 Board Trustees Fund, body composed equal number representatives, given sole authority level control contributions. Initially, received $75 month retirement. Subsequent agreements called greater contributions, turn led higher benefit payments retirees. At suit, contributed $21.50 ranged $425 $525 depending age retirement.3 order receive including worked before start 4 "continuous service" center dispute. began working truckdriver area 1950, joined following year. When first went effect, automatically 5 credit toward 20-year service requirement earlier work experience. retired 1973 applied plan's administrator pension. determined ineligible December 1960 July 1961.4 appealed decision trustees, asked trustees waive continuous-service rule him. After refused rule, court against Union (Teamsters), (Local), Louis Peick, Fund. Respondent's complaint alleged Local, Peick Count & N Dec. Immigration Nationality Decisions charged 1934, 48 Statutes-at-Large 891, 15 Code KF62 78j(b), 17 Regulations 240.10b-5 (1978). II same conduct amounted 1933, 84, amended, 77q. Other counts violations various law common-law duties.5 sought proceed behalf prospective beneficiaries Teamsters funds.6 6 petitioners moved dismiss two ground cause action motion. 410 F.Supp. 541 (ND Ill.1976). It Act, 77b(1), 78c(a)(10),7 contract" term interpreted 1244 (1946). 77b(3), 78c(a)(14).8 believed voluntarily gave he voted chose instead other wages benefits. denying certified appeal pursuant 28 1292(b), Seventh Circuit 1223 (1977). Relying perception realities actions ruled "security." According court, took place either when ratified embodying accepted retained employment seeking work.9 believe subsequent enactment 1974 (ERISA), 88 829, 29 1001 seq., affected application requirements purposes ERISA perceived different those Acts.10 We granted certiorari, 434 1061, 98 1232, 55 761 (1978), reverse. 8 "The starting point every involving construction statute language itself." Blue Chip Stamps Manor Drug Stores, 421 723, 756, 95 1917, 1935, 44 539 (1975) (POWELL, J., concurring); see Ernst Hochfelder, 425 185, 197, 199, 96 1375, 1382, 1383, 47 668, n. 19 (1976). spite substantial they enacted, neither nor defines considerable detail numerous examples, refers type. Acknowledging omission statutes, contends instrument included statutory definitions security.11 9 Howey, U.S., S.Ct., 1104. light "the substance—the rather than names may employed parties." Housing Foundation, Incorporated Forman, 837, 851-852, 2051, 2060, 621 (1975). Accord, Tcherepnin Knight, 389 332, 336, 548, 553, 564 (1967); supra, 298, 1102. Cf. Variable Annuity Life insurance 359 65, 80, 79 618, 626, 640 (1959) (BRENNAN, concurring) ("[O]ne must . ."). Teamsters' Atlantic Investment Money 10 An participates definition makes payment fund. only accepts employment, conditions eligibility possible contends, however, has "invested" permitting take deferred benefit. By allowing contributing return payments, asserts kind intended regulate. 11 invested accepting remaining necessary look obtained chance recognizing presence Acts, person found investor give up specific consideration separable characteristics security. See Tcherepnin, supra (money bank capital stock); Benefit 387 202, 87 1557, 18 673 (1967) (portion premium variable component mixed variable- fixed-annuity contract); (premium variable-annuity purchase, maintenance, harvesting orange grove); C. M. Joiner Leasing Corp., 320 344, 64 120, (1943) land oil exploration). Even cases where acquired intermingled nonsecurity aspects, "to very degree elements contracts ." 91, 632 concurring). purchaser tangible definable substantially 12 one, contrast, package. No portion potential security, yet noninvestment interests cannot segregated Only most abstract sense said "exchanges" benefits.12 surrenders whole, receives devoid aspects resembling His accept retain attenuated relationship, if any, possibilities future seems clear primarily investment. 13 argues But inaccurate describe having "on behalf" employee. trust used man-weeks convenient way measure overall obligation means measuring Indeed, fixed "defined benefits," Local's, tie qualifying worked. 3, supra. One engaged will 40, even though twice long induced larger contribution.13 Again, ignores equate 14 baron Expectation Profits From Common Enterprise As we observed "touchstone" "is venture premised reasonable expectation derived entrepreneurial managerial 852, 2060. Daniel's profit Fund's successful management assets. exceeded depended contained element. 16 parts analysis, below focusing less important exclusion significant elements. true like holders large fund, far income comes source dependent managers. example, earned $31 million assets February 1955 January 1977. During period totaled $153 million.14 Not share ordinarily new unlike entrepreneurs manage people's money, usually can count increased itself control, cover shortfalls earnings.15 importance relation diminished further fact preconditions vesting, principal barrier individual realization health Rather, own ability meet fund's requirements. Thus, proper "profit" returned hypothetical would depend vesting requirements, success.16 viewed benefits, becomes speculative Acts," 856, 2062. III compelled resemblance contract regard reaching conclusion, great weight explanation events, repeats here. Our review record leads us reliance interpretation legislative administrative justified. Actions curiae brief several close instance, reveals certain kinds radically issue here, came coverage similar cited rejection amendment exempted stock Act's registration requirements.17 passed Senate eliminated conference. history defeated proposal indicates their funds account realized. H.R.Conf.Rep.No.1838, 73d Cong., Sess., 41 (1934); Hearings House Committee Interstate Foreign Commerce Proposed Amendments 77th 1st pt. 1, Pages 895-896 (1941). rejecting amendment, revealed concern excluded protection simply investors realized indicate themselves 21 relies 1970 extended 3's exemption include "any single maintained issued bonus, profit-sharing meets qualification section 401 Title 26, 3(a)(2) 84 1434, 1498, 77c(a)(2). creating exemption, manifested Congress' otherwise Acts.18 interprets "interest plan" referring beneficiary's measure's central purpose, relieve banks companies obligations. recognized "an participation" held, bank-maintained itself.19 Interpretation 22 believed, argued us, almost inception regarded falling scope defer what seen longstanding statutes agency responsible administration. limits, grounded language, statute, how properly go interpretative role. Although limits always easy discern, position arguably outer interpret Acts.20 23 demonstrated above, type bears designed Further, flatly contradicted past actions. Until arose, public 1941, articulated voluntary, contributory rendered "securities" time, involve statutes. Opinions Assistant General Counsel, [1941-1944 Transfer Binder] Clearing Fed.Sec.L.Serv. ¶ 75,195 (1941); 895, 896-897 (1941) (testimony Commissioner Purcell).21 24 attempt reconcile interpretations stand, augments additional propositions. First, argued, involved. Second, previous concession meant reporting Acts; antifraud provisions, proposition, observe none opinions, reports, testimony address question. second, unambiguously contrary.22 Both 1941 statements repeatedly since then, declared "no sale" whole. opinions 75,195, Page 75,387 Commerce, 888, 896-897; Institutional Investor Study Report H.R.Doc.No.92-64, 996 (1971) ("[T]he ."); Subcommittee Welfare Funds Labor Public Plans Investigation, 84th 943-946 (1955). acted proceeded develop legislation became See, e. g., Interim Activities Private Plan Study, 1971, S.Rep.No.92-634, (1972) ("Pension exempt unless voluntary invests securities company employer") (emphasis added). aware, intimate provisions nevertheless IV 25 If needed demonstrate involved put matter rest. Unlike deals expressly requires disclose information manner, §§ 1021-1030, contrast indefinite uncertain disclosure obligations imposed Santa Fe Industries, Green, 430 462, 474-477, 97 1292, 1301-1303, 51 480 (1977); TSC Northway, Inc., 426 438, 2126, 757 regulates substantive setting standards funding meet. For underlying case—whether served enough pension—§ 203(a) ERISA, 1053(a), sets minimum after accruing 203(b), 1053(b), 1053 him least partial hand, purport transactions. 26 existence comprehensive governing arguments filling regulatory void enacted belief actively encouraged. extension unsupported serves general purpose. Califano Sanders, 99, 104-107, 980, 983-985, 192 Boys Markets, Retail Clerk's, 398 235, 250, 1583, 1592, 199 (1970). Whatever V 27 hold Because provide grounds relief should them. judgment therefore Reversed. STEVENS 30 Chief BURGER, concurring. 31 join except discussion need deal, case, presented decision. 32 Commission applies infers understood evaluate correct, support conclusion draws. 33 inference concerning tenuous. covers variety interests, clearly defined likely view without considering never required. 34 draftsman concerned exempting 1970, "security," little, bearing case. 1934. 35 briefs suggest problematic. real someone case—but so action. reserve expression views time. examples Allied Structural Steel Spannaus, 438 234, 236-237, 2716, 2718-2719, 57 727 (1978); Malone White Motor 435 497, 500-501, 1185, 1188, 443 Alabama Power Davis, 431 581, 590, 2002, 2008, 52 595 Contributions tied performed. weeks absence, disabled, fraction week. Conversely, increase overtime holiday. Agreement, Article App. 62a. qualified age, establishing attributable benefit." 1002(35); 593 18, 2009. laid off April 1961. addition, 1961, embezzlement bookkeeper. 7-month could preserved himself, failed so. violating duty fair representation 9(a) National Relations 159(a), (later amended VI) 302(c)(5) Management 186(c)(5). accused defendants deceit. class-certification issues. Section note, stock, treasury bond, debenture, indebtedness, certificate agreement, collateral-trust certificate, preorganization subscription, transferable share, voting-trust deposit fractional undivided oil, gas, mineral rights, or, general, known 'security,' in, temporary interim for, receipt guarantee of, warrant right subscribe foregoing." virtually identical and, same. 847 12, 2058, (1975); 342, 556, (1967). provides, pertinent part, 'sale' 'sell' shall disposition value." states sell dispose of." refer value, decide impliedly incorporated definition, cf. 7, our provides private parties implied damages. express issue. itself, retired. "certificate agreement." consider claim, seriously pressed unnecessary 1230 (CA7 1977). Similarly, contend agreement" broader contract." "embodies essential attributes run Court's decisions defining security." say person's "investment," cash only, goods services. 852 Under Local's five created, during period. $7,500,000 small merged years. Note, Application Antifraud Provisions Laws Compulsory, Noncontributory Daniel Va.L.Rev. 305, 315 Interest Securities: 78 Colum.L.Rev. 184, 201 added 4(1) Act: "As paragraph, 'public offering' deemed offering issuer affiliates bona fide extra exclusive employees." Cong.Rec. 8708 (1934). 17(c) 77q(c), 78j(b) (when read (12) Act), respective continue exemptions 3(a)(12) S.Rep.No.91-184, (1969), U.S.Code Cong. Admin.News 4897; Banking Currency Mutual Legislation 1967, 90th 1341-1342 Mundheim Henderson, Applicability Profit-Sharing Plans, L. Contemp.Probs. 795, 819-837 (1964); Saxon Miller, Funds, 53 Geo.L.J. 994 (1965). addition "single or" "common fund" indicated intent funds. history, change eliminate negative suggested unrevised register administered provision whole dealt bank, revision affect status 116 33287 consistent provision. Hearings, 1326. another excepting "under excess allocated purchase indirectly controlling, controlled employer" appears safeguard confirm require register. H.R.Conf.Rep.No.91-1631, (1970), 4897. commonplace jurisprudence agency's consistent, operates entitled weight. Assn. Dealers, 422 694, 719, 2427, 2442, 45 486 Saxbe Bustos, 419 74, 272, 278, 42 231 (1974); Company Institute Camp, 617, 626-627, 91 1091, 1097, 367 (1971); Udall Tallman, 380 85 792, 801, 616 product awareness practical expertise normally develops, willingness accord flexibility encounters unforeseen problems constrained honor history. On occasions recent reject Sloan, 436 103, 117-119, 1702, 1711-1712, 56 148 Piper Chris-Craft 27, 926, 949, 124 212-214, 1390-1391, 668 (1976); 858 25, 2063; 759 4, 1936, Reliance Electric Emerson 404 418, 425-427, 92 596, 600-602, 575 (1972). regulate contributory, employees' 19, continued disavow letter Director, Division Corporate Finance, May 1953, [1978] Fed.Sec.L.Rep. 2105.51; Aug. 1962, 2105.52; Currency, 1326; Loss, Regulation 510-511 (2d ed. 1961); id., 2553-2554 1969); Hyde, Stock W.Res.L.Rev. 75, 86 809-811; Securities, U.Pa.L.Rev. 549, 549-551 (1948). occasion contended phrase "unless context requires" Acts' definitions, permissible 524-528 2562-2565 1969). noted contention 393 453, 465-466, 89 564, 571-572, (1969). taken position: 1943 submitted Ninth arguing none, begin rely "regulatory context" theory 1951. Brief Supply Leland Stanford Junior University, 134 689 (CA9 1943); 524 211; Cohen, 133 Record N.Y.C.B.A. 162, 164-165 (1959). note that, mergers, originally developed bifurcated sale, abandoned finds mergers. 230.145 correct resolution divergent

Classification Label: 7