Court Opinion

ID: 2999402
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:53:44.269249+00
Date Added: 2024-06-11T12:03:39.527484
License: Public Domain

UNPUBLISHED ORDER
                            Not to be cited per Circuit Rule 53

                   United States Court of Appeals
                              For the Seventh Circuit
                              Chicago, Illinois 60604

                                      July 10, 2006

                                         Before

                           Hon. KENNETH F. RIPPLE, Circuit Judge

                           Hon. DIANE P. WOOD, Circuit Judge

                           Hon. DIANE S. SYKES, Circuit Judge

No. 04-1687

MAKOR ISSUES & RIGHTS, LTD., et al.,              Appeal from the United States
              Plaintiffs-Appellants,                District Court for the
                                                    Northern District of Illinois,
      v.                                            Eastern Division.

TELLABS, INC., et al.,                            No. 02 C 04356
                Defendants-Appellees.
                                                  Amy J. St. Eve, Judge.

                   ORDER ON PETITION FOR REHEARING

      Defendants-Appellees filed a petition for rehearing en banc on February 8, 2006.
No judge in active service has requested a vote on the petition for rehearing en banc.
        All members of the original panel have voted to DENY rehearing except to the
extent that the opinion is MODIFIED as follows: the first full paragraph on page 28 of the
slip of the opinion is deleted and replaced with the following:

             The plaintiffs also pleaded a claim against Birck for insider trading.
      A private cause of action exists under § 20A of the Securities Exchange Act
No. 04-1687                                                                            Page 2

      against persons who purchase or sell a security “while in possession of
      material, nonpublic information.” See 15 U.S.C. § 78t-1(a). To create
      potential liability under § 20A, the plaintiffs must prove an independent
      violation of “this chapter or the rules or regulations thereunder.” Id. In
      other words, § 20A claims are “derivative, requiring proof of a separate
      underlying violation of the Exchange Act.” Advanta Corp., 180 F.3d at 541.
      At this point in the litigation, we have affirmed the dismissal of the
      underlying securities fraud claims pleaded directly against Birck. He still
      faces liability, but solely as a control person under § 20(a). Whether § 20(a)
      control-person liability standing alone can serve as the “separate
      underlying violation” required for § 20A insider trading is an open
      question of law and raises an important issue of statutory interpretation
      that should not be decided in a vacuum. No party in this litigation has
      provided more than cursory briefing of this issue, and therefore we take no
      position on its resolution, leaving it for further factual and legal
      development during the course of the litigation.