Court Opinion

ID: 8909852
Source: CourtListenerOpinion
Date Created: 2022-11-27 02:32:07.616718+00
Date Added: 2024-06-11T17:08:26.342548
License: Public Domain

TIMBERS, Circuit Judge,
concurring in part and dissenting in part:
Judge Van Graafeiland has written his usual thoughtful, perceptive majority opinion. I agree with it in part and disagree with it in part.
With respect to the federal securities laws claims, I agree with the majority’s reversal of the district court’s dismissal of these claims. I also agree with the majority’s remand of these claims to the district court for trial. But I would reverse and remand — not on the ground urged by the majority, that appellants should be permitted to prove investor intent and knowledge — but on the ground that appellants’ complaint sufficiently states claims for relief under Section 12 of the Securities Act of 1933, 15 U.S.C. § 771 (1976), Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (1976), and Rule 10b-5 under *1119the Exchange Act, 17 C.F.R. § 240.10b-5 (1978).
With respect to the federal banking law claims, I agree with the majority’s affirmance of the district court’s dismissal of appellants’ claims under Section ll(m) of the Federal Reserve Act, 12 U.S.C. § 248(m) (1976), since there is neither an express nor an implied private right of action for violation of that section of the statute. I respectfully dissent, however, from the majority’s reversal of the district court’s dismissal of appellants’ claims under Sections 22(f) and 22(g)(4) of the Federal Reserve Act, 12 U.S.C. §§ 503 and 375a(4) (1976), since I believe that some causal connection between the loss sustained and the asserted violation must be alleged clearly in the complaint; there not only is no such allegation of causal connection here, but by the very nature of the transaction there could have been no causal connection.
I.
Accepting all of appellants’ allegations as true for purposes of evaluating the complaint, they claim nothing more than the typical garden-variety type of fraud. The scheme in which appellants became enmeshed during the period from January to September 1976 was a product of Graiver’s attempt to rescue the American Bank & Trust Co. (“ABT”) from financial ruin in the face of directives from the Superintendent of Banks of the State of New York. On instructions from Graiver, the Mexican agents of ABT embarked upon a campaign of aggressive solicitation of time deposits. In the course of their solicitations, these agents represented that ABT was in sound financial condition, never disclosing the irregularities for which the bank had been criticized by the regulatory authorities.1
Induced by these representations, appellants entrusted their funds to agents of ABT upon the understanding that these funds would be placed in time deposits in the bank. Contrary to their understanding, however, the funds were diverted by ABT into various other unregistered, and far riskier, securities, without the prior knowledge or authorization of appellants. Although form-letter “confirmations” of their “investments”2 subsequently were mailed *1120to appellants, these confirmations contained no information about the performance of the companies in which the funds had been invested or any other information generally considered to be material to a reasonable investor.3 Moreover, since the confirmations were written in English and many appellants were Mexican nationals who could not read English, the confirmations triggered little response. Those who did inquire about the confirmations were misled by ABT’s Mexican agents, who assured them that the investments were ABT deposit obligations.
When ABT and the entire Graiver empire collapsed in September 1976, the FDIC informed appellants that, since their funds had been placed in investments other than time deposits, their funds were not insured. Appellants thereupon commenced the instant action in the Southern District of New York on October 5, 1976, alleging, inter alia, various violations of the federal securities and banking laws. From the judgment of the district court, entered on the court’s opinion of November 23, 1977, dismissing these claims in their entirety, and pursuant to a Rule 54(b) certificate, the instant appeal has been taken.
II.
Turning first to the issues raised by the district court’s dismissal of appellants’ securities laws claims, the court recognized, under the settled law of this Circuit, that in certain instances investors who are “forced” buyers or sellers fall within the class of persons which the securities laws were designed to protect. E.g., Zeller v. Bogue Electric Manufacturing Corp., 476 F.2d 795, 800 (2 Cir.) (Friendly, J.), rev’g 346 F.Supp. 651 (S.D.N.Y.1972), cert. denied, 414 U.S. 908 (1973); Vine v. Beneficial Finance Co., 374 F.2d 627, 633-37 (2 Cir.) (Feinberg, J.), cert. denied, 389 U.S. 970 (1967). Nevertheless, the court dismissed appellants’ claims under Section 12 of the 1933 Act4 and Section 10(b) of the 1934 Act,5 holding *1121that these sections were not intended to protect “persons who had no intent to be, or knowledge that they were, investors.” Adato v. Kagan, [1977-1978 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶96,241 at 92,623 (S.D.N.Y.1977).
The majority opinion avoids holding squarely whether this ground upon which the district court dismissed the securities law claims is warranted by the language or purposes of the statutes. The majority simply reverses and remands for trial on the issue of whether appellants had investor knowledge and intent. While I agree with my colleagues in reversing the dismissal of appellants’ securities laws claims and in remanding for trial, I would go further and hold that, as a matter of law, appellants are indeed “purchasers” entitled to the protection of the securities laws.
It is common ground that one who sues under either Section 12 or Section 10(b) in some fashion must have purchased or sold the security in question. Wolf v. Frank, 477 F.2d 467, 479 (5 Cir.), cert. denied, 414 U.S. 975 (1973); Schoenbaum v. Firstbrook, 268 F.Supp. 385, 396 (S.D.N.Y.1967), aff’d, 405 F.2d 200 (2 Cir.), rev’d en banc on other grounds, 405 F.2d 215 (2 Cir. 1968), cert. denied, 395 U.S. 906 (1969) (purchase required for action under Section 12). Accord, Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975) (purchase or sale required for action under Section_ 10(b)). The purpose behind this express requirement of Section 12 is to prevent the impetus for enforcing a private right of action from exposing defendants to vast and often unjustified liability. See American Bank & Trust Co. v. Barad Shaff Securities Corp., 335 F.Supp. 1276, 1280 (S.D.N.Y.1972). A similar purpose underlies the judicially implied purchaser-seller requirement of Section 10(b) and Rule 10b-5. Blue Chip Stamps v. Manor Drug Stores, supra, 421 U.S. at 739-43.
In this case, however, that purpose would not be served by expanding the purchaser-seller requirement to add a further requirement of an “intent to invest” on the part of the plaintiff-purchasers. While the Supreme Court has required a showing of scienter on the part of defendants in an action under Rule 10b-5, Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976), there is no corresponding requirement that a plaintiff have a particular state of mind when he acquired his “purchase”. Indeed, no decision of the Supreme Court or of this Court supports the district court’s holding that investment intent is required for standing under these sections of the securities laws.6 In A. T. Brod & Co. v. Perlow, 375 F.2d 393, 396-97 (2 Cir. 1967) (Kaufman, J.), we held:
“Neither § 10(b) nor Rule 10b-5, it appears, speaks in terms of limiting the nature of the violation to one involving fraud of ‘investors’; nor is there any jus*1122tification for reading such an additional requirement into the Act. . .We cannot understand, therefore, any rationale which would restrict or inhibit appropriate private rights of action to enforce the Rule to those brought by ‘investors.’ See Hooper v. Mountain States Securities Corp., 282 F.2d 195 (5th Cir. 1960), cert. denied, 365 U.S. 814, 81 S.Ct. 695, 5 L.Ed.2d 693 (1961). . . .
. We believe that § 10(b) and Rule 10b-5 prohibit all fraudulent schemes in connection with the purchase or sale of securities, whether the artifices employed involve a garden type variety of fraud, or present a unique form of deception. Novel or atypical methods should not provide immunity from the securities laws.” (emphasis in original).
The decision in Blue Chip Stamps, limiting claimants to those who actually have purchased or sold securities, contains no hint of such a requirement of investment intent. Contrary to appellees’ assertions, appellants do not fall within one of the specific categories which the Supreme Court held to be beyond coverage by the federal securities laws.
The test for determining the class of persons who satisfy the purchaser-seller requirement has been applied flexibly, see generally, Tcherepnin v. Knight, 389 U.S. 332 (1967), and has not been restricted to those who fall within the classic mold of an “investor”. See, e. g., Jefferies & Co. v. Arkus-Duntov, 357 F.Supp. 1206, 1213 (S.D.N.Y.1973). Recovery often has been permitted even when the sale involved novel or atypical securities, see, e. g., SEC v. W. J. Howey Co., 328 U.S. 293 (1946), or where the plaintiffs, like appellants here, had no intention of investing in the specific security which they purchased or sold. See, e. g., A. T. Brod & Co. v. Perlow, supra; Weitzman v. Stein, 436 F.Supp. 895, 901-02 (S.D. N.Y.1977); American Bank & Trust Co. v. Barad Shaft Securities Corp., supra, 335 F.Supp. at 1280. Moreover, the requirement of a showing of investment intent has been specifically rejected in cases involving concealment of looting or mismanagement of a public corporation when the purchase or sale of a security actually is shown. Hooper v. Mountain States Securities Corp., 282 F.2d 195, 202 (5 Cir. 1960), cert. denied, 365 U.S. 814 (1961).
Appellants here clearly have satisfied the purchaser-seller requirement of Blue Chip Stamps. The securities in question were purchased in appellants’ names with appellants’ funds. Appellants incurred the investment risk and sustained the losses resulting from defendants’ fraudulent scheme. To require a further showing that appellants must have “intended to invest” in these securities would produce anomalous results. Here, for example, precisely because defendants were so successful in concealing from appellants the most fundamental aspect of their investment, the latter as purchasers would be stripped of their opportunity to recover. Nothing could have been further from the Congressional intent.
For these reasons, in reversing the district court’s dismissal of the federal securities laws claims, I would hold that the complaint sufficiently states claims for relief under both Section 12 and Section 10(b)7 and would remand for trial on the merits accordingly.
III.
Turning next to the issues raised by the district court’s dismissal of appellants’ federal banking law claims, I concur with the majority’s refusal to imply a private right of action under Section ll(m) of the Federal Reserve Act, 12 U.S.C. § 248(m) (1976), *1123and I concur with its affirmance of the district court’s dismissal of appellants’ claims under that section. To the extent, however, that the majority reverses the district court’s dismissal of appellants’ claims under Sections 22(f) and 22(g)(4) of the Federal Reserve Act, I respectfully dissent.
Section 22(g)(4) prohibits a member bank of the Federal Reserve System from extending credit to any of its executive officers in excess of an aggregate amount of $5,000 outstanding at any one time.8 Section 22(f) expressly provides for a private right of action against those directors or officers of a member bank “participating in or assenting to” violations of certain sections of the Act, including Section 22(g).9 Such private action permits recovery “for all damages . . sustained in consequence of such violation.”10
The district court correctly held that appellants’ complaint failed to allege all of the essential elements of a cause of action under Section 22(f); in particular, the complaint failed to allege a causal relationship between the asserted violations and the losses appellants claimed to have sustained. Although no court, so far as we know, has passed on what sort of causation is required under this section, the language “in consequence of such violation” clearly requires a showing of some causal connection.
Section 93 of the National Bank Act, 12 U.S.C. § 93 (1976), which provides for a private right of action for violations of Chapter 2 of Title 12 and contains language similar to Section 22(f),11 has been construed to require a showing of some causal connection. Section 93 provides in relevant part:
“If the directors of any national banking association shall knowingly violate, or knowingly permit any of the officers, agents, or servants of the association to violate any of the provisions of this chapter, all the rights, privileges, and franchises of the association shall be thereby forfeited. . . And in cases of such violation, every director who participated in or assented to the same shall be held liable in his personal and individual capacity for all damages which the association, its shareholders, or any other person, shall have sustained in consequence of such violation." (emphasis added).
In cases arising under Section 93, courts uniformly have required proof of a causal relationship between a director’s alleged violation and the damage that a plaintiff asserts. In some instances, courts have required that the plaintiffs allege that they “relied upon reports . . . falsely indicating compliance with [the section violated] to their injury.” Harmsen v. Smith, 542 F.2d 496, 502 (9 Cir. 1976); Michelsen v. Penney, 10 F.Supp. 537, 540 (S.D.N.Y.1934). Cf. Chesbrough v. Woodworth, 244 U.S. 72, 77 (1917) (showing of reliance on statement of bank’s condition required for Section 93 suit). Alternatively, plaintiffs have been required to show that the illegal loan was the primary factor resulting in the diminution of the value or the demise of their *1124investment. Holman v. Cross, supra 75 F.2d at 911-12. Compare Corsicana National Bank v. Johnson, 251 U.S. 68, 87-88 (1919), with First National Bank of Lincolnwood v. Keller, 318 F.Supp. 339, 346-47 (N.D.Ill.1970). In the absence of allegations that the director’s wrongd'ping was the primary cause of the plaintiff’s loss, no recovery has been permitted under Section 93.
Applying this analysis to the present case, the complaint clearly is insufficient. Appellants do not allege detrimental reliance on any misrepresentations with respect to compliance with Section 22(g)(4),12 nor do they allege that the loans led to the failure of their investments.13 Instead, they attempt to avoid the causation requirement by suggesting that executive officers also are liable for a failure to disclose violations actionable under Section 22(f). Since reliance on material omissions has been held unnecessary in other related contexts, see, e. g., Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972), appellants argue that it likewise should not be required here.
Appellants’ reliance on Affiliated Ute and its progeny is misplaced. Those cases involved Section 10(b) of the Exchange Act, an antifraud provision intended to encourage disclosure of information material to investors; it does not prescribe any substantive standards apart from disclosure. See Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 476-77 (1977). The rationale behind the elimination of the causation element in Affiliated Ute was that, because it is so difficult to prove reliance on a nondisclosure or a material omission, private enforcement of an action under Section 10(b) would have been intolerably encumbered in cases involving omissions. The Supreme Court accordingly thought it desirable to eliminate the reliance requirement14 in order to foster the principal purpose of the statute — disclosure. 406 U.S. at 152-54.
The harm that Section 22(f) of the Reserve Act guards against is quite different and calls for a different approach to private enforcement. Section 22(f) permits private claims to enforce certain enumerated provisions of the Act and thereby promote their objectives. None of these enumerated provisions demands disclosure. Rather they prescribe adherence to certain well defined substantive requirements. It is not nearly as difficult to show the causal relationship required by Section 22(f) as it is to show that one would have acted differently had certain information been disclosed. Thus, requiring a causal relationship between the violation and the loss will not frustrate the purposes for which Section 22(f) was enacted.
I therefore would hold that a party bringing suit under Sections 22(f) and 22(g)(4) of the Federal Reserve Act must allege a causal connection between the asserted illegal loan and the loss sustained. Since appellants failed to allege such a causal connection, their complaint was properly dismissed.15
*1125IV.
Finally, I am constrained to comment on the propriety of the remand in this case— particularly the failure of the majority to rule on certain legal issues for the guidance of the district court and counsel on remand.
Indeed, the difference between the majority and myself may well be one less of substance than of policy in determining when a legal issue is ripe for determination.
Our difference boils down essentially to the correctness of the district court’s rulings on two issues: (1) that an essential element of appellants’ securities laws claims is an allegation and proof that appellants had investor intent and knowledge — for lack of which those claims were dismissed; and (2) that an essential element of appellants’ banking law claims is an allegation of causal connection between the loss sustained and the asserted violation — for lack of which those claims were dismissed. I agree with the district court’s ruling on issue (2), but I disagree with its ruling on issue (1). On both issues, the majority avoids ruling squarely on the legal questions presented; it simply remands for the taking of evidence on each issue, deferring ruling on the legal questions until another day. It is the propriety of this type of remand that I question.
In the first place, each of the legal questions referred to above was squarely presented for our review by the district court’s dismissal of the claims upon Rule 12(b)(6) motions by defendants, i. e. motions which squarely raised the issues by asserting “failure to state a claim upon which relief can be granted”. This of course is the traditional method of raising legal issues for determination by the district court and for appellate review. Particularly in cases arising under the federal securities laws, many of the leading cases in the Supreme Court and in our Court have been the result of Rule 12(b)(6) motions.
Secondly, experience on the district court has taught that the one thing above all else that is most appreciated when a case is remanded is clear guidance to the district court as to precisely what it is expected to do on remand. In the instant case, Judge Metzner first filed a clear, concise opinion on November 23, 1977 ruling squarely on the legal questions presented by defendants’ Rule 12(b)(6) motions. Then in his supplemental opinion of December 9, 1977 granting plaintiff’s motion for a Rule 54(b) certificate, Judge Metzner stated, “If this court is in error in its view of the law, a tremendous duplication of time, effort and legal expense will be avoided if that error is corrected promptly.”
With deference, I do not believe that the majority’s remand, after declining to rule on the two critical legal questions presented, provides the guidance to which the district court is entitled — guidance which Judge Metzner specifically invited in granting the Rule 54(b) certificate. On the contrary, I fear that our remand may be an invitation to counsel “to flail around and raise a considerable amount of dust, with the inevitable' risk that some may settle . . . . ”, United States v. Katz, 425 F.2d 928, 930 (2 Cir. 1970) (Friendly, J.), and then to return to us about two years hence for rulings on the legal questions that we should be deciding today.
Accordingly, I concur in part and dissent in part, as stated at the outset of this opinion.

. Specifically, ABT had been criticized for a large proportion of high risk loans relative to its total loans and adjusted capital, for an atypically high concentration of extensions of credit to individuals or closely related entities, and for deficient supervision by its directors and senior management.

. The ABT confirmation of BAS investments read as follows:
“Re: Brussels Time Deposit Reference No.
Dear Client(s)
This will confirm our investment for you as marked above in your name(s):
Principal : $
Date of Issue/Renewal :
Date of Maturity :
Rate :
Number of Days :
Interest Earned of Previous Time Deposit
( ) The funds were drawn from your ( ) Checking Account ( ) Savings Account ( ) proceeds of your C/P/CD/TD.
( ) Interest earned was credited to your ( ) Checking Account ( ) Savings Account ( ) Paid by Check No. ( ) Principal plus interest renewed as shown above.
( ) Please advise us shortly before maturity as to what disposition should be made of the funds when they become due.
( ) Unless we are advised to the contrary at maturity the principal plus interest will be automatically renewed for a further period of_days at the rate of interest then prevailing and permitted.”
The ABT confirmation of New Loring investments read as follows:
“Dear Clients:
As per instruction received from you, we are pleased to confirm that we have invested the sum of $_ in New Loring, Inc. As evidenced by a photocopy of Certificate No._, your investment will continue for_days and mature on_earning interest at the rate of —% per annum which interest will be paid to you on a_basis by__
The original of the enclosed certificate in your name will be held with us for safekeeping in your name at no charge.
The abovementioned investment will be payable at maturity at the counters of American Bank and Trust Company therefore, please advise us shortly before maturity of the disposition you wish to make of the funds at maturity.
*1120On behalf of New Loring, Inc., please accept our thanks for your confidence in placing this investment.”
The ABT confirmation of Holding Company investments read as follows:
“Re: ( ) Commercial Paper
( ) Certificate of Deposit
( ) Geneva/London Time Account
Dear Client(s):
This will confirm our investment for you as marked above in your names.
Principal : $
Date of Issue/Renewal :
Date of Maturity :
Rate :
Number of Days :
Interest Earned of Previous C/P/CD/TD :
( ) The funds were drawn from your ( ) Checking Account ( ) Savings Account ( ) proceeds of your TD/TID/LTA/TD. ( ) Principal plus interest were renewed as shown above.
( ) Principal plus interest earned were credited to your ( ) Checking Account ( ) Savings Account ( ) Paid by Check No. ( ) Please advise us shortly before maturity as to what disposition should be made of the funds when they become due.
( ) Unless we are advised to the contrary at maturity, the principal plus interest will be automatically renewed for a further period of_days at the rate of interest then prevailing and permitted.”

. See TSC Industries, Inc. v. Northway Inc., 426 U.S. 438, 448-49 (1976).

. Section 12 of the 1933 Act, 15 U.S.C. § 771 (1976), provides in relevant part:
“Any person who—
(1) offers or sells a security in violation of section 77e of this title, or
(2) offers or sells a security ... by the use of any means or instruments of transportation or communication in interstate commerce or of the mails, by means of a prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, . . . not misleading
shall be liable to the person purchasing such security from him, who may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security.” (emphasis added).

. Section 10(b) of the 1934 Act, 15 U.S.C. § 78j(b) (1976), provides in relevant part:
“It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of *1121the mails, or of any facility of any national securities exchange—
* # *
(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors."
Rule 10b-5 under the 1934 Act, 17 C.F.R. § 240.10b-5 (1977), provides in relevant part:
“It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.”

. Subsequent to our decision in the instant case, the Supreme Court held in the context of a criminal prosecution that the government need not prove some impact of a fraudulent scheme on an investor under § 17(a)(1). United States v. Naftalin, - U.S. -, 99 S.Ct. 2077, 60 L.Ed.2d 624 (1979).

. As an alternative ground for reversing the district court’s dismissal of appellants’ securities laws claims, appellants and the SEC in its amicus brief urge us to hold that time deposits of ABT are “securities” within the meaning of Section 2(1) of the 1933 Act and Section 3(a)(10) of the 1934 Act. The FDIC in its amicus brief urges to the contrary. I agree with the majority, in view of our remand of the securities laws claims for trial, that we need not reach this question today; nor is it necessary to determine the extent to which the protections afforded domestic time deposits in the Federal Deposit Insurance Act, 12 U.S.C. § 1811 et seq. (1970), may supplant the protections provided by the securities laws.

. Section 22(g)(4) of the Reserve Act, 12 U.S.C. § 375a(4) (1976), provides:
“(4) General limitation on amount of credit
A member bank may make extensions of credit not otherwise specifically authorized under this section to any executive officer of the bank, not exceeding the aggregate amount of $5,000 outstanding at any one time.”

. Section 22(f) of the Reserve Act, 12 U.S.C. § 503 (1976), provides:
“If the directors or officers of any member bank shall knowingly violate or permit any of the agents, officers, or directors of any member bank to violate any of the provisions of sections 375, 375a [Reserve Act § 22(g)], and 376 of this title or regulations of the board made under authority thereof, or any of the provisions of sections 217, 218, 219, 220, 655, 1005, 1014, 1906, or 1909 of title 18, every director and officer participating in or assenting to such violation shall be held liable in his personal and individual capacity for all damages which the member bank, its shareholders, or any other persons shall have sustained in consequence of such violation.” (emphasis added).

. Id.

. The similarity of the manner in which these two provisions condition the personal civil liability of directors for violations has been recognized by the Sixth Circuit in Holman v. Cross, 75 F.2d 909, 911 (6 Cir. 1935).

. Appellants do allege that in March of 1976, Juan Graiver submitted an affidavit to the Superintendent of Banks, in which he represented that he would not borrow from ABT to finance his pending purchase of Holding Company stock. Appellants, however, do not allege that they relied on this misrepresentation.

. Indeed, since the extensions of credit were made to BAS, New Loring and Holding Company — the very entities in which appellants’ funds were invested — it would seem that the illegal loans buttressed their investments rather than undermining them.

. While this difficulty of proof relieves the plaintiff of the burden of establishing causation, in order to protect against windfalls to such litigants the courts have not foreclosed defendants from presenting direct evidence of nonreliance in order to rebut the presumption and thereby disprove causation. See Chris-Craft Industries, Inc. v. Piper Aircraft Corp., 480 F.2d 341, 375 (2 Cir.), cert. denied, 414 U.S. 910 (1973). Accord, Chelsea Associates v. Rapanos, 527 F.2d 1266, 1272 (6 Cir. 1975); Thomas v. Duralite Co., 524 F.2d 577, 585-86 (3 Cir. 1975); Carras v. Burns, 516 F.2d 251, 257 (4 Cir. 1975).

. By the very nature of the transaction under attack, it is highly doubtful that there could have been any causal connection between the loss sustained and the asserted violation. As Judge Metzner pointed out, after noting that *1125plaintiffs do not allege any causal relationship between the loan to ABT’s board chairman and any injury sustained by plaintiffs:
“Any injury resulting from the transaction would have been to the bank. Plaintiffs’ alleged injury flowed from the failure of the defendants to create deposits in ABT in the names of the plaintiffs. Plaintiffs never became depositors in the bank, nor do they claim that their money was involved in the loan transaction.” Adato v. Kagan, supra, at 92,622.
This undoubtedly is the reason plaintiffs not only did not allege any causal connection between the loss sustained and the asserted violation, but also never sought leave to amend their complaint to make the necessary allegation.