Court Opinion

ID: 8916994
Source: CourtListenerOpinion
Date Created: 2022-11-27 05:29:24.825089+00
Date Added: 2024-06-11T17:09:04.948149
License: Public Domain

GARTH, Circuit Judge,
concurring in the judgment, with whom
SLOVITER, Circuit Judge, joins:
I.
In Pittsburgh Terminal Corp. v. Baltimore & O. R.R., 680 F.2d 933 (3d Cir.), cert. denied, - U.S. -, 103 S.Ct. 475-76, 74 L.Ed.2d 621 (1982), a panel of this court held that Rule 10b-17,17 C.F.R. § 240.10b-17 (1982), required notice to holders of convertible debentures of a dividend declared by B & O on December 13,1977.1 However, the panel was divided in its vote on Lowry, argued and considered by the panel with Pittsburgh, to the extent that no judgment could be entered. This in turn led to a recommendation that the full court sitting in banc entertain Lowry’s appeal. The primary issues that divided the Lowry panel were: (1) whether federal law or state law controlled; and (2) if federal law controlled, what was the content of that law. In order to focus the parties’ attentions on the concerns of the court, supplemental briefs were sought with respect to the following issues:
1. Upon the sale on the New York Stock Exchange of convertible debentures of the Baltimore and Ohio Railroad Company, does federal or state law govern whether accrued causes of action arising under the federal securities laws are automatically assigned to the subsequent purchasers of those debentures?
*7242. If federal law applies, what is the content of that law?
3. If state law applies, which state’s law governs, and what is the content of that law?
4. What law governs the assignability of any accrued common law or state statutory causes of action pleaded in the complaint?
5. If a different law of assignability applies to causes of action arising under federal and state law, what persons will be covered by the stipulation in Pittsburgh Terminal Corp. v. Baltimore & Ohio R.R. Co., 680 F.2d 933 (3 Cir.1982), that convertible debenture holders who are not parties will receive any benefits ultimately decided to be due to the individual plaintiffs in that case?
6. If it is concluded that the plaintiffs have no federal cause of action, what disposition should be made of the remainder of the complaint?
The supplemental briefs filed by both of the parties agreed that federal law controlled. Lowry argued that federal law would recognize automatic assignability, while the B & 0 argued otherwise. At oral argument before this court, in addition to the arguments found in their briefs, B & 0 argued for the first time that N.Y.Jud. Law § 489 (McKinney 1968)2 would, in any event, prohibit the Lowry plaintiffs from obtaining an assignment of their transferors’ causes of action. B & 0 raised this section 489 argument ostensibly to counteract the reliance by Lowry on Phelan v. Middle States Oil Corp., 154 F.2d 978 (2d Cir.1946), and N.Y.Gen.Oblig. Law § 13-107 (McKinney 1978),3 which Lowry claims permits causes of action to be assigned without an express assignment.4
The per curiam opinion, which is entitled “Opinion of the Court,” curiously makes no mention of the significant issue which divided the panel: i.e. whether federal or state law dictates the assignability of the Pittsburgh cause of action. Indeed, the per curiam opinion, without reference to whether federal or state law controls, reports that two members of the court do not reach the issue of assignability; that three members of the court would only recognize assignability if there were an express assignment — which there was not — and that the remaining three members of the court (two judges were recused) would hold that the Pittsburgh Terminal cause of action was automatically assigned to the Lowry plaintiffs as purchasers. Because I believe the issue of whether federal or state law controls is at the core of the Lowry litigation, and because, according to the tabulation recited in the per curiam opinion, a majority of the court has not expressed itself on the assignability issue, I am forced to write separately.
*725II.
Lucile Lowry and Lowry-Zweig Corporation appeal from a summary judgment dismissing their class action complaint against the Baltimore and Ohio Railroad Company (B & 0), the Chesapeake & Ohio Railway Company, and Chessie System, Inc. The complaint alleges that the defendants violated section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (1976), Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5 (1982), and the common law when the B & 0 declared a dividend in the stock of Mid-Allegheny Corporation (MAC), a B & 0 subsidiary, on December 13, 1977, without giving notice to holders of B & 0 convertible debentures.
Details of the transaction are set forth in our recent opinions in Pittsburgh Terminal Corp. v. Baltimore & Ohio R.R., 680 F.2d 993 (3d Cir.), cert. denied, - U.S. -, 103 S.Ct. 475-76, 74 L.Ed.2d 621 (1982), and will not be repeated here, other than to set forth those facts necessary to focus on the issues which this case presents. Essentially, however, the circumstances in which these actions arose were as follows.
The B & O had sought to restructure its operations by transferring its non-rail assets to MAC and then distributing MAC stock to the B & O shareholders in the form of a dividend. One consequence of this arrangement was that the B & O convertible debentures, which previously could have been converted into B & O stock representing both B & O’s rail and non-rail assets, became convertible into B & O stock which now represented only B & O’s rail assets. The Lowry plaintiffs claimed that the value of the conversion option, and hence of the convertible debentures, would thus be reduced, unless the debentureholders could convert in time to qualify for the MAC dividend. The plaintiffs in the Pittsburgh Terminal action alleged that by deliberately not giving the B & 0 convertible debenture-holders advance notice of the MAC dividend, the defendants unlawfully deprived them of the opportunity to convert before the record date, December 13,1977. This in turn deprived the convertible debenture-holders of the right to participate in the dividend. A panel of the court held in Pittsburgh Terminal, supra, the companion case to this action, that the failure to notify convertible debentureholders who held debentures on that date violated Rule 10b-5.
While in Pittsburgh Terminal, the plaintiffs were holders of B & O convertible debentures who acquired those securities prior to December 13, 1977, and held them on that date, the plaintiffs in the instant case acquired their debentures after December 13,1977, and after the public disclosure that B & O had on that date declared a dividend in MAC stock.5 The district court certified the plaintiffs as representatives of a class of persons who purchased their debentures on or after December 13, 1977, or who have converted or will convert their debentures into B & O stock on or after December 13, 1977. The plaintiffs contend that the class was too narrowly structured by the district court in that it did not include any holders of the convertible debentures who acquired them prior to December 13,1977 and did not convert. The plaintiffs also assert that summary judgment should not have been entered against them.
III.
In their complaint, the plaintiffs sought to represent a class consisting of “[hjolders *726of Debentures as of the time that final judgment is rendered, and .. . [hjolders of Debentures who have or will have converted them into stock of B & 0 on or after December 13, 1977 and before final judgment is rendered.” Cplt. H 27, App. at 8-9. In granting the plaintiffs’ motion for class certification, the district court defined the class to consist of “persons who purchased their debentures on or after December 13, 1977, or who have or will convert their debentures into B & 0 stock on or after December 13,1977.” App. at 90. By doing so, it excluded debenture holders at the time of judgment who had acquired their debentures before December 13, 1977 and had not converted them. The plaintiffs assert that it was illogical for the district court to include persons in their class who purchased debentures before December 13, 1977 and subsequently converted them, but to exclude persons who purchased debentures before December 13, 1977 and retained them.
As the defendants note, there was no need for the court to include in the class any of the debentureholders who purchased debentures prior to the declaration of the MAC dividend, since the defendants had agreed in the Pittsburgh Terminal action to give such persons any benefits ultimately decided to be due to the individual plaintiffs in that case.6 See Pittsburgh Terminal App. at 493a. Thus, to the extent that any debentureholders were excluded from the Lowry class, they suffered no prejudice. As this court stated in Carter v. Butz, 479 F.2d 1084, 1089 (3d Cir.1973), “[wjhile we might well have decided otherwise we conclude that the class action determination was within the range of discretion permitted by [Federal] Rule [of Civil Procedure] 23.”
IV.
I turn now to the question whether the plaintiffs, having acquired their convertible debentures after December 13, 1977, the date when the MAC dividend was declared, are in the same position as the Pittsburgh Terminal plaintiffs insofar as maintaining an action against the defendants for securities fraud under Rule 10b-5. The plaintiffs concede that since they purchased their debentures after the MAC dividend declaration on December 13, 1977, it was not they, but their predecessors in ownership, who were allegedly defrauded. Nevertheless, the plaintiffs maintain that the Rule 10b-5 claims associated with the dividend declaration run with the debentures by operation of law, and that they therefore have standing to sue the defendants even without having obtained any express assignment of the cause of action from the former debenture owners.7
A.
The first consideration to be addressed is whether this court should look to federal or state law in addressing the plaintiffs’ con*727tentions. There appears to be little authority on this point, probably because it has generally been assumed that questions of standing under the federal securities laws must be governed by federal law. All the parties to this action at the panel level apparently found this proposition to be self-evident, and thus did not even address this issue. In their in banc briefs, both parties agreed that federal law controlled.
I agree with the parties’ original assumption, and their later statements, that questions regarding rights under the federal securities laws must be decided on the basis of federal, and not state, law. Congress enacted the securities laws to vindicate a federal policy of protecting investors. See Ernst & Ernst v. Hochfelder, 425 U.S. 185, 195, 96 S.Ct. 1375, 1382, 47 L.Ed.2d 668 (1976); H.R.Rep. No. 1383, 73d Cong., 2d Sess. 1-5 (1934). It established certain standards of conduct in the securities industry, standards that were to be uniform throughout the nation. In doing so, it supplemented a regulatory regime that had, until then, consisted principally of an assortment of varying state laws. A necessary corollary of this unitary scheme of regulation is that remedies for the breach of duties imposed by the federal laws should be uniform across the nation. I am satisfied, therefore, that we should look to principles of federal law in the furtherance of these federal policies, rather than importing state law principles which vary according to the particular state involved and which are designed to further state goals that may differ from those embodied in the federal acts.8
The vast majority of securities transactions today are conducted on regional and national exchanges, often through the facilities of national brokerage firms. These transactions are entered into against a background of pervasive federal regulation. Under these circumstances, it would undoubtedly come as a surprise to many investors if their right to sue for federal securities fraud were to depend upon the law of a state whose role in the transaction had been completely incidental and never even contemplated.
Even if securityholders’ rights under the federal securities acts came to be recognized as depending in part on state law, confusion and uncertainty would still reign because the determination of which state’s law governed would turn on the fortuity of where the action was filed and on the choice-of-law principles applied by the forum. The question of assignability conceivably could be governed by the laws of various states, among others: the law of the state where the issuer of the securities was incorporated; the state where the stock exchange on which the securities were traded was located; the state where the purchased security was delivered or paid for; or the state in which the broker who arranged the transaction operated. For example, if a citizen of Ohio sold debentures issued by a Delaware corporation with its principal place of business in Illinois, through a stockbroker in Indiana, who executed the sale on the New York Stock Exchange, to a Kentucky broker on behalf of a purchaser in Tennessee, which state’s, law would apply? If this Tennessee purchaser brought a class action on behalf of all debenture purchasers, as the plaintiffs in this case have done, would his right to recover differ from other members of the class whose debentures were purchased, for instance, on the Pacific Stock Exchange in Los Angeles?
The Supreme Court has recognized that the doctrine of [Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)] is inapplicable to those areas of judicial decision within which the policy of the law is so dominated by the sweep of federal statutes that legal relations which they affect must be deemed gov*728erned by federal law having its source in those statutes, rather than by local law.... When a federal statute condemns an act as unlawful, the extent and nature of the legal consequences of the condemnation, though left by the statute to judicial determination, are nevertheless federal questions, the answers to which are to be derived from the statute and the federal policy which it has adopted. To the federal statute and policy, conflicting state law and policy must yield.
Sola Elec. Co. v. Jefferson Elec. Co., 317 U.S. 173, 176, 63 S.Ct. 172, 173, 87 L.Ed. 165 (1942) (citations omitted). In a case analogous to this one, involving a promissory note given to a bank by one of its directors in violation of the National Bank Act, the Court held that federal law, not state law, governed the validity of defenses to payment of the note. Deitrick v. Greaney, 309 U.S. 190, 200-01, 60 S.Ct. 480, 484-485, 84 L.Ed. 694 (1940).
In the area of securities regulation, Judge Friendly noted nearly two decades ago that
significant steps toward the development of a federal common law of corporate responsibility have already been taken by implying causes of action from and filling interstices in' laws administered by the SEC.... When conduct by an “insider” in the sale or purchase of a listed security is challenged under the general language of Section 10(b) of the Securities Exchange Act or Rule X-10b-5 of the SEC, interstitial supplementation is a matter of federal law. Although in these cases the emphasis was on higher standards of conduct, development of federal law can also protect against extreme or unrealistic requirements imposed by a state.... [F]or corporations whose business is of national concern, federal law will insure standards that are high but not too high....
Friendly, In Praise of Erie — And of the New Federal Common Law, 39 N.Y.U.L. Rev. 383, 413-14 (1964).
The authority that does exist with respect to the issue presented in this case holds that federal common law, not state statutes or decisional law, governs whether causes of action under the federal securities laws run with the affected securities and hence are automatically assigned to subsequent purchasers of those securities. 3 L. Loss, Securities Regulation 1817 (2d ed. 1961). See Western Auto Supply Co. v. Gamble-Skogmo, Inc., 348 F.2d 736, 739-41 (8th Cir.1965) (“federal and general common law” governs question of survivability of § 16(b) action; state statutes provide “added support” for court’s interpretation of federal common law), cert. denied, 382 U.S. 987, 86 S.Ct. 556, 15 L.Ed.2d 475 (1966); Mills v. Sarjem Corp., 133 F.Supp. 753, 761 (D.N.J.1955) (“In the absence of statutory pronouncement in this regard the federal common law will be applied.”); cf. In re Fine Paper Litigation, 632 F.2d 1081, 1090 (3d Cir.1980) (status of assignments under the antitrust laws is a matter of federal law). But cf. Fund of Funds, Ltd. v. King, [1976-1977] Fed.Sec.L.Rep. (CCH) 1(95,640 (S.D.N.Y. June 29, 1976) (referring to state law in deciding whether assignment of cause of action was effected).9
B.
Having concluded that federal law governs the question whether federal securities law claims run with convertible debentures upon their sale, the content of that federal law must now be determined because the Securities Exchange Act is silent on this issue. Nor has any other federal statute *729which addresses this question been called to our attention. I suggest that we must therefore look to the federal common law of securities regulation for the answer.
As the plaintiffs acknowledge, there is only meager support in the cases for their theory that defrauded debentureholders automatically assign their causes of action under federal securities law when they sell their debentures. In my opinion, the better view is that the availability of such Rule 10b-5 actions should be limited to those investors who themselves have been defrauded, or who are express assignees of defrauded parties. Such an approach is necessary to ensure that compensation for fraudulent securities dealings inures to those persons who were injured by the fraud, rather than to corporate bounty hunters.
When the B & 0 refused to notify its convertible debentureholders of the MAC dividend on December 13, 1977, it was the persons holding convertible debentures on that date — not subsequent purchasers of those debentures — who were deprived of the opportunity to obtain the MAC dividend. As a consequence of the dividend declaration, the conversion option of the debentures was diluted, since the debentures, which previously had been convertible into stock representing both rail and non-rail assets, were now convertible into stock representing only rail assets. Thus, in a market in which traders deem the conversion option to be more significant than the income feature of the debentures, it would be expected that after December 13, 1977, the value of the debentures would decline to reflect the dilution of that option. Any sale by the debentureholders under such circumstances could not pass the loss onto a subsequent purchaser as the loss would already have been realized by the original debentureholder when less was received from the sale of the debenture than would have been received in the absence of the MAC dividend declaration. Completing this hypothesis, any subsequent purchasers who knew of the MAC dividend — as these plaintiffs concededly did, see note 5 supra — and thus of the lessened value of the debentures, presumably paid for the debentures they bought only their post-dividend worth.10 In so doing, they could have sustained no loss and thus no injury.
In this light, absent any express assignment of a cause of action to the subsequent purchasers, it would be unjust and inconsistent with the remedial purposes of the securities laws to strip the right to recover from the convertible debentureholders who were actually injured, and grant it instead to subsequent purchasers who sustained no injury or loss from the Rule 10b-5 violation. Chief Judge Lord’s discussion of this very point is persuasive:
While a security is of course transferred by its sale, the causes of action belonging to a prior holder do not pass with the transfer of the security. The provisions of the securities acts relied upon here create rights of action on the part of investors who have been harmed by the misconduct of others. Those rights belong to the persons who have suffered injury. They do not attach for all eternity to the security itself, to pass forever from the person who has been harmed to be asserted by others who have not. To adopt plaintiffs’ extraordinary theory would be to deprive injured persons of their rights and give their causes of action to one who has suffered no injury *730himself but who simply has been shrewd or lucky enough to have put his hands on a security that once belonged to a person who was defrauded.
Independent Investor Protective League v. Saunders, 64 F.R.D. 564, 572 (E.D.Pa.1974).11
Although Phelan v. Middle States Oil Corp., 154 F.2d 978, 999-1002 (2d Cir.1946), appears to take a different view, that opinion is on balance less convincing than that in Saunders. Phelan did not involve an action under the federal securities laws, but instead was a receivership case. The court based its decision that the claim there asserted ran with the bonds on the belief that a wrongdoing trustee should not be relieved of liability if a bondholder, unaware of the trustee’s malfeasance, sells his bonds. However Phelan may be read, in the context of this case, there is no reason why an opportunistic subsequent purchaser, rather than the original injured investor, should serve the role of policing improper corporate conduct.
Since I would hold that under federal law, the Rule 10b-5 action did not run with the debentures, the plaintiffs, as subsequent purchasers, in my view lack standing to assert their claims of federal securities fraud associated with the dividend declaration. Accordingly, I would affirm the district court’s order which entered summary judgment for the defendants on the plaintiffs’ section 10(b) and Rule 10b-5 claims.12
C.
In their complaint, in addition to jurisdiction alleged under section 27 of the Securities Exchange Act, 15 U.S.C. § 78aa (1976), the plaintiffs also alleged that the district court had diversity jurisdiction over their state law claims against the defendants.13 Thus, although I have concluded that the plaintiffs lack standing to assert federal securities law claims because under federal common law, those claims were not automatically assigned to them upon their purchase of the debentures, I cannot overlook the state law claims asserted in their complaint which have yet to be resolved, and which they may have standing to pursue under whatever state law is found to be appropriate considering Pennsylvania choice-of-law rules.14 See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). As to these state law claims, I recognize that among other outstanding issues are the issues of standing under state law, choice of law, and jurisdiction15 which have not been *731presented on this appeal and which have not been decided by the district court. Under these circumstances, it is inappropriate for us to address them. Moreover, defendants raise for the first time before this court the impact of N.YJud. Law § 489 (McKinney 1968). This issue is also inappropriate for our determination. I would therefore leave such questions to be determined by the district court in the event the plaintiffs persist in pressing these claims on remand.16
V.
Accordingly, I would affirm the order of the district court certifying the plaintiff class. I would also affirm the order of May 15, 1981 which granted summary judgment for the defendants, but only insofar as that order pertains to the plaintiffs’ federal securities law claims. I would reverse so much of the May 15, 1981 order granting summary judgment to the defendants as pertains to the plaintiffs’ state law claims and remand for the further proceedings which I have indicated.17

. Although Judge Gibbons predicated the B & O’s duty to disclose on other grounds as well, I concurred only as to Rule 1 Ob-17, which constitutes the holding of the case. See Pittsburgh Terminal Corp. v. Baltimore & O. R.R., 680 F.2d 933, 943 — 46 (3d Cir.) (Garth, J., concurring in part and concurring in the judgment), cert. denied, - U.S. -, 103 S.Ct. 475-76, 74 L.Ed.2d 621 (1982). Because the court denied a petition for rehearing in Pittsburgh, this court was on record at the time of our in banc consideration of Lowry as having held that a federal cause of action inured to the benefit of convertible bondholders who held those bonds on December 13, 1977. Here, of course, the plaintiffs acquired their debentures after that date and after public disclosure of B & O’s dividend declaration.

. N.Y.Jud.Law § 489 (McKinney 1968) provides in pertinent part:
No person or co-partnership, engaged directly or indirectly in the business of collection and adjustment of claims, and no corporation or association, directly or indirectly, itself or by or through its officers, agents or employees, shall solicit, buy or take an assignment of, or be in any manner interested in buying or taking an assignment of a bond, promissory note, bill of exchange, book debt, or other thing in action, or any claim or demand, with the intent and for the purpose of bringing an action or proceeding thereon;
Any corporation or association violating the provisions of this section shall be subject to a fine of not more than five thousand dollars; any person or co-partnership, violating the provisions of this section, and any officer, trustee, director, agent or employee of any person, co-partnership, corporation or association violating this section who, directIy or indirectly, engages or assists in such violation, is guilty of a misdemeanor.

. N.Y.Gen.Oblig.Law § 13-107 (McKinney 1978) provides:
1. Unless expressly reserved in writing, a transfer of any bond shall vest in the transferee all claims or demands of the transferrer, whether or not such claims or demands are known to exist.. ..
2. As used in this section, “bond” shall mean and include any and all shares and interests in an issue of bonds, notes, debentures or other evidences or indebtedness of individuals, partnerships, associations, or corporations, whether or not secured.
3. [Defining term “indenture.”]

. Because the § 489 and § 13-107 claims should be presented to the district court in the first instance, I do not address them in this opinion. See Part IV C infra.

. Ezra Lowry, president of plaintiff Lowry-Zweig Corp. and husband of plaintiff Lucile Lowry, testified at his deposition that he had his wife purchase approximately $15,000 worth of B & O convertible debentures in late December, 1977, about a week after learning from his stockbroker that the B & O had declared a dividend in MAC stock on December 13, 1977. He stated that he had his wife purchase the debentures, even though he knew the record date for the MAC dividend had already passed, because he believed that “there was a very good chance that if we bought those debentures, we would have the probability of collecting the value of that dividend declaration.” App. at 43. Mr. Lowry testified that he had his wife acquire additional debentures in April, 1978, on the basis of a conversation he had with his stockbroker about the Pittsburgh Terminal lawsuit. Id at 46-47. Yet more debentures were purchased in July and September of 1978 in anticipation of a favorable settlement of the Pittsburgh Terminal litigation. Id at 49-50.

. In his dissent, Judge Gibbons assumes I would hold that “the exercise of the conversion privilege as a matter of federal law destroyed the previously held section 10(b) claim” of class members who purchased debentures before December 13, 1977, and converted them after that date. At 737. That assumption is incorrect. On the contrary, although such persons may not properly be represented by the Lowrys (who had purchased their debentures after December 13, 1977), they will not be prejudiced by the judgment in this case because they will share in any benefits due the Pittsburgh Terminal plaintiffs by reason of the defendants’ agreement. See Opinion of Seitz, C.J., concurring and dissenting, at 744 n. 1.

. Although express assignments of causes of action under the federal securities laws are effective, see Western Auto Supply Co. v. Gamble-Skogmo, Inc., 348 F.2d 736, 739-11 (8th Cir.1965), cert. denied, 382 U.S. 987, 86 S.Ct. 556, 15 L.Ed.2d 475 (1966); International Ladies’ Garment Workers’ Union v. Shields & Co., 209 F.Supp. 145, 149-50 (S.D.N.Y.1962); Mills v. Sarjem Corp., 133 F.Supp. 753, 761 (D.N.J. 1955); 3 L. Loss, Securities Regulation 1817-19 (2d ed. 1961); 6 id. 3937-38 (Supp.1969), when the plaintiffs (and presumably other class members) acquired their debentures with knowledge that the record date for participation in the MAC distribution had already passed, they did not obtain any express assignment of any causes of action which might have accrued to the sellers as a result of B & O’s December 13, 1977 actions.

. This is not to say that state law principles have no role to play in the area of securities regulation. The federal securities laws preserve a parallel system of state regulation and remedies which litigants can invoke in addition to any rights they may (or may not) have under federal law. See, e.g., § 28(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78bb(a) (1976). The fact that a parallel system of state remedies exists underscores the propriety of applying federal law principles to actions invoking federal statutory remedies.

. Because federal law, not state law, governs whether claims under the federal securities laws run with a convertible debenture upon its sale, the provisions of N.Y.Gen.Oblig.Law § 13-107 (McKinney 1978), vesting in the transferee of a bond all claims of the transfer- or, are not dispositive of the plaintiffs’ standing to assert their federal claims. Moreover, N.Y. Jud.Law § 489 (McKinney 1968), see note 2 supra (prohibiting assignments by corporations, and persons “engaged directly or indirectly in the business of collection and adjustment of claims,” “with the intent and for the purpose of bringing an action or proceeding thereon”) appears to dilute the plaintiffs’ reliance on N.Y.Gen.Oblig.Law § 13-107 (McKinney 1978). That issue, however, has yet to be resolved.

. I recognize that many market factors influence the price of a convertible debenture other than the value of its conversion option. Thus, the record in this case, which reveals that little change took place in the market price of the B & O debentures after December 13, 1977, see Pittsburgh Terminal App. at 316a, does not invalidate this analysis, which depends on the significance in general of the value of the conversion option — a significance not lost on the plaintiffs, who brought this suit precisely because of their claim to their full conversion rights. The plaintiffs asserted in their complaint: “Had proper notice been given of the declaration of the [MAC] dividend, Debenture holders would have realized the value thereof, either by converting their Debentures on or prior to the record date so as to obtain the dividend as shareholders of B & O or else by selling their Debentures for an enhanced price reflective of the dividend obtainable by conversion.” Cplt. ][ 21, App. at 8.

. As the court stated in International Ladies’ Garment Workers' Union v. Shields & Co., supra, 209 F.Supp. at 149:
Of course by a mere assignment of securities the assignee does not acquire any and all rights of action that the assignor may have had against the person from whom he bought. One who has been defrauded by the sale of goods to him of a value less than they would have had if as represented retains the right of action for the amount of his damage unaffected by his parting with the goods.

. The foregoing analysis of the plaintiffs’ standing would also apply to any cause of action the plaintiffs might assert under § 6 of the Securities Exchange Act, 15 U.S.C.' § 78f (1976), based on the B & O’s alleged violation of its listing agreement with the New York Stock Exchange (NYSE). We thus need not decide whether an implied private right of action exists under § 6.

. The complaint asserts that the defendants violated provisions of the indenture governing the debentures, the B & O’s listing agreement with the NYSE, the NYSE Company Manual, and various NYSE rules and instructions. Cplt. HI) 15-20, App. at 6-7.

. See, e.g., note 8 supra.

. Although this court dismisses the Lowrys’ federal claims, those claims were not so insubstantial as to divest the district court of the power to exercise pendent jurisdiction over the state claims. See Hagans v. Lavine, 415 U.S. 528, 545-50, 94 S.Ct. 1372, 1383-1385, 39 L.Ed.2d 577 (1974); Gagliardi v. Flint, 564 F.2d 112, 114 (3d Cir.1977), cert. denied, 438 U.S. 904, 98 S.Ct. 3122, 57 L.Ed.2d 1147 (1978). Whether the district court should entertain these pendent state claims is a matter for the court’s discretion. See Lentino v. Fringe Employment Plans, Inc., 611 F.2d 474, 478-80 (3d Cir.1979). Because the district court has jurisdiction over the state claims of those diverse parties satisfying the requisite $10,000 jurisdictional amount, I would find it somewhat anomalous for the district court to refuse jurisdiction over the pendent claims, all of which arise from a common nucleus of fact. However, that deci*731sion is one for the district court to make and I would remit that issue to the district court’s discretion in the first instance.
In their briefs before the in banc court, the Lowrys argued that those diverse parties with claims of less than $10,000 could aggregate these claims to satisfy the jurisdictional amount, reasoning that the claims are “to enforce a single title or right in which they have a common and undivided interest.” See Snyder v. Harris, 394 U.S. 332, 335, 89 S.Ct. 1053, 1056, 22 L.Ed.2d 319 (1969); Broenen v. Beaunit Corp., 305 F.Supp. 688, 691-92 (E.D.Wis.1969). Obviously, the district court need not reach this question unless it declines to exercise pendent jurisdiction over those diverse parties with claims of less than $10,000. I intimate no view with respect to this argument.
Judge Sloviter does not join in this footnote. Instead, she joins in Part V of Chief Judge Seitz’ separate concurring and dissenting opinion and would remand appellants’ state law claims as pendent claims without directing the district court to consider whether appellants may maintain those claims in diversity.

. The plaintiffs argue that if federal securities law claims still remain with the original debentureholders (since those claims do not run with the debentures), and fraud claims under state law are possessed by the plaintiffs as subsequent purchasers (since such claims, it is alleged, are automatically transferred with the security), the defendants may be subject to double liability: to the original debentureholders under federal law, and to the subsequent purchasers under state law. I do not decide here how such a situation, were it to arise, should be resolved, noting only that “[tjhere is no absolute rule of [securities] law precluding double liability.” 3 L. Loss, supra, at 1474. See McCandless v. Furland, 296 U.S. 140, 167, 56 S.Ct. 41, 50, 80 L.Ed. 121 (1935).

. Therefore, I join in the per curiam Opinion of the Court, but only to the extent that the judgment which it announces is consistent with the views I have expressed in this opinion.