Court Opinion

ID: 9471263
Source: CourtListenerOpinion
Date Created: 2023-08-05 03:28:15.218632+00
Date Added: 2024-06-11T17:42:19.941213
License: Public Domain

GEE, Circuit Judge,
dissenting:
As the majority observes, the Supreme Court has vacated our judgment in this *729appeal, remanding the cause for further consideration in light of its supervening decision and opinion in Herman & MacLean v. Huddleston,-U.S.-, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983). Having done so with all care and deference, I would adhere to our former decision.
Our former exhaustive consideration and disposition of the many issues in this cause, reported at 682 F.2d 1149, is called in question on remand as to a threshold matter: briefing by Chemetron Corporation, and by the Securities -and Exchange Commission appearing amicus curiae, suggests that we erred in our nullification analysis. These arguments lay stress upon Huddleston’s approbation of cumulative and overlapping remedies in the area of securities regulation, pointing to such language by the Court as that “it is hardly a novel proposition that the Securities Exchange Act and Securities Act ‘prohibit some of the same conduct,’ ” 103 S.Ct. at 688, quoting United States v. Naftalin, 441 U.S. 768, 778, 99 S.Ct. 2077, 2084, 60 L.Ed.2d 624 (1979), and that the existence of “some overlap is neither unusual nor unfortunate,” 103 S.Ct. at 688, quoting ibid., which in turn quoted SEC v. National Securities, Inc., 393 U.S. 453, 468, 89 S.Ct. 564, 572, 21 L.Ed.2d 668 (1969). I cannot gainsay that these arguments have force.
As we pointed out at length in our original opinion, however, this appeal presents the special case where applying Section 10(b) to the specific conduct denounced by Subsection 9(a)(4) would effect a nullification of that express remedy, one enacted by the Congress. 682 F.2d at 1161-3. We concluded:
Rule 10b-5(b) therefore requires no additional proof of facts creating a higher burden of proof when compared to subsection 9(a)(4) and contains no elements that compensate for this change. Lacking a trade-off for this easing of the burden of proof and concomitant enlargement of the plaintiff class, we hold that permitting a judgment for Chemetron under a Rule 10b-5(b) implied action for misrepresentation or nondisclosure of the stock scheme impermissibly nullifies Congress’ deliberate and careful limitations on the express statutory remedy of subsection 9(a)(4). (footnotes omitted.)
Language and reasoning similar to ours is to be found in the Court’s Huddleston opinion:
This conclusion is reinforced by our reasoning in Ernst v. Hochfelder, [425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668] supra, which held that actions under Section 10(b) require proof of scienter and do not encompass negligent conduct. In so holding, we noted that each of the express civil remedies in the 1933 Act allowing recovery for negligent conduct is subject to procedural restrictions not applicable to a Section 10(b) action. 425 U.S., at 208-210 [96 S.Ct. at 1388-1389]. We emphasized that extension of Section 10(b) to negligent conduct would have allowed causes of action for negligence under the express remedies to be brought instead under Section 10(b), “thereby nullifypng] the effectiveness of the carefully drawn procedural restrictions on these express actions.” Id., at 210 [96 S.Ct. at 1389] (footnote omitted). In reasoning that scienter should be required in Section 10(b) actions in order to avoid circumvention of the procedural restrictions surrounding the express remedies, we necessarily assumed that the express remedies were not exclusive. Otherwise there would have been no danger of nullification. Conversely, because the added burden of proving scienter attaches to suits under Section 10(b), invocation of the Section 10(b) remedy will not “nullify” the procedural restrictions that apply to the express remedies. -U.S. at- --, 103 S.Ct. at 688-89, 74 L.Ed.2d at 556-7 (emphasis added, footnotes 18 and 19 omitted).
Here, as we pointed out in the passage from our earlier opinion quoted above, no added burden attaches. Instead, applying 10(b) to the same conduct denounced by 9(a)(4) permits a recovery upon a lesser showing at all points than that specified for recovery for such conduct by the Congress. The result is, not cumulation or overlapping, but substitution and nullification. *730Such an exercise is not for us, and I would decline to undertake it. I therefore respectfully dissent.
ON SUGGESTION FOR REHEARING EN BANC
Before CLARK, Chief Judge, BROWN, GEE, RUBIN, REAVLEY, POLITZ, TATE, JOHNSON, WILLIAMS, GARWOOD, JOLLY and DAVIS, Circuit Judges.
BY THE COURT:
A member of the Court in active service having requested a poll on the application for rehearing en banc and a majority of the judges in active service having voted in favor of granting a rehearing en banc,
IT IS ORDERED that this cause shall be reheard by the Court en banc with oral argument on a date hereafter to be fixed. The Clerk will specify a briefing schedule for the filing of supplemental briefs.