Court Opinion

ID: 6924480
Source: CourtListenerOpinion
Date Created: 2022-07-23 23:14:23.532692+00
Date Added: 2024-06-11T16:06:53.713611
License: Public Domain

WILLIAM F. SMITH, Circuit Judge
(dissenting).
This action is essentially one for unfair competition governed by common law principles. The majority holds that “the district court had federal question jurisdiction over the cause of action as*482serted under section 35(d) of the Investment Company Act of 1940, and pendent jurisdiction to determine whether the conduct in suit constituted common-law unfair competition.” This holding is based on the view that the cited section creates an implied right enforceable in a private civil action in the district court. I disagree.
We are in accord with the majority view that in the proper case “a breach of statutory duty which causes injury to one of the class that the statute serves to protect affords by implication a sufficient basis for a private civil suit by the injured party.” The principle is well established; however, in our opinion the express language of section 35(d), supra, precludes its application in the instant case.
The pertinent provisions of the cited section read as follows:
“It shall be unlawful for any registered investment company hereafter to adopt as a part of the name or title of such company, or of any security of which it is the issuer, any word or words Which the Commission Finds and by Order Declares to Be Deceptive or Misleading. The Commission is authorized to bring an action in the proper district court of the United States * * * alleging that the name or title of any registered investment company, or of any security which it has issued, is materially deceptive or misleading. If the court finds that the Commission’s allegations in this respect, taking into consideration the history of the investment company and the length of time which it may have used any such name or title, are established, the court shall enjoin such investment company from continuing to use any such name or title.” (Emphasis supplied).
The statutory prohibition is cast in specific terms which may not be disregarded. The section prohibits only the adoption of “any word or words which The Commission Finds and by Order Declares to be deceptive or misleading.” (Emphasis supplied). This is a clear expression of Congressional intent that illegality will attach to the conduct of a registered investment company only after such a finding and declaration by the Commission. The authority to enforce the prohibition by appropriate civil action is vested in the Commission.
We are of the opinion that the quoted provision cannot be construed as creating an implied right enforceable in a private civil action. Wilder Mfg. Co. v. Corn Products Co., 236 U.S. 165, 174, 35 S.Ct. 398, 401, 59 L.Ed. 520 (1915). The principle announced in the cited case is applicable here. “It is true that there are no words of express exclusion of the right of individuals to act in the enforcement of the statute or of courts generally to entertain complaints on that subject. But it is evident that such exclusion must be implied for a two-fold reason: First, because of the familiar doctrine that ‘where a statute creates a new offense and denounces the penalty, or gives a new right and declares the remedy, the punishment or the remedy can be only that which the statute prescribes.’ ” Ibid. See also Nashville Milk Co. v. Carnation Co., 355 U.S. 373, 378 and 379, 78 S.Ct. 352, 355, 2 L.Ed.2d 340 (1958). We are of the view that the federal question is not substantial and that under the cases cited in the majority opinion there is no basis for pendent jurisdiction.