Court Opinion

ID: 7843736
Source: CourtListenerOpinion
Date Created: 2022-09-08 17:06:15.508752+00
Date Added: 2024-06-11T16:20:38.665152
License: Public Domain

Borden, J.,
dissenting. The majority concludes that General Statutes (Rev. to 1993) § 36-472 does not allow for implied aider and abettor liability. I conclude, however, that the legislature did intend that § 36-472 encompass aider and abettor liability. I therefore dissent.
I believe that the majority’s analysis is flawed in three principal ways. First, the majority’s reliance on the meaning ascribed to rule 10b-5 of the Securities and Exchange Commission (SEC) at the time the Uniform Securities Act (Uniform Act) was drafted is misplaced and is not persuasive evidence of the meaning accorded the language by our legislature when it enacted § 36-472 in 1977.1 am convinced, moreover, that the language of rule 10b-5 at the time of our enactment of § 36-472 was understood to encompass aider and abettor liability. Second, I am persuaded that the common law tort principles recognizing liability of aiders and abettors, which provided the basis for the long line of cases under federal law that recognized such liability under rule 10b-5, and our statutory provision for criminal accessorial liability, inform our interpretation of § 36-472. Third, in light of this consistent common and statutory law and in the absence of any contrary interpretation by any other state’s courts, the majority’s concern regarding disparate interpretations of the Uniform Act is misplaced.
*341I
I agree with the majority that, because § 36-472 was modeled on § 101 of the Uniform Act, which, in turn, was modeled on rule 10b-5 of the SEC, the interpretation afforded the language of rule 10b-5 is relevant to understanding whether § 36-472 provides for aider and abettor liability. I think, however, that, in its search for the meaning of § 36-472, the majority’s reliance on the interpretation accorded rule 10b-5 when the Uniform Act was drafted in 1956 is misplaced.
The majority concludes that because “the legislative history reveals nothing regarding whether the legislature, when it adopted § 101 of the Uniform Act, intended to include aiders and abettors,” we should be guided by the meaning accorded the language by its drafter in 1956, Professor Louis Loss, which, the majority argues, would be the meaning accorded rule 10b-5 at that time. Implicit in this conclusion is the determination, with which I agree, that the judicial interpretation of rule 10b-5 informs our interpretation of § 36-472.1 am convinced, however, that the intent of the legislature is best served by looking to the meaning accorded the language of rule 10b-5 at the time Connecticut adopted the Uniform Act, rather than at the time the Uniform Act was drafted.
I do not dispute that, in interpreting a provision based on a model or uniform act, it is appropriate to “look for guidance to commentaries on the draft act.” Elliot v. Sears, Roebuck & Co., 229 Conn. 500, 509, 642 A.2d 709 (1994). I find nothing in the commentary to the Uniform Act, however, that convinces me that its drafter intended § 101 to be accorded the meaning of Rule 10b-5 at the moment of its drafting, frozen in time and impervious to the continuing development of rule 10b-5 jurisprudence in the federal courts. The majority con-*342eludes that because the drafter considered rule 10b-5 a “logical model for a uniform state fraud provision . . . because of the substantial body of judicial precedent which has been developed under the federal provisions”; L. Loss, Commentary on the Uniform Securities Act (1976) draftsmen’s commentary to § 101, p. 7; it therefore follows that only the judicial precedent developed to that time informs the meaning of the analogous Uniform Act provision. I disagree with this reasoning, and I find greater guidance in the official comment to § 101, which states: “[SJection 101 is substantially the Securities and Exchange Commission’s Rule[10b-5] . . . .” L. Loss, supra, official comment to § 101, p. 6.
I am convinced that our legislature intended that § 36-472 encompass aider and abettor liability when it enacted the provision in 1977.1 By the time the legislature enacted § 36-472, the federal courts had been, for at least eleven years, interpreting the identical language of rule 10b-5 to encompass liability for aiders and abettors. Moreover, the multitude of federal courts that had considered the issue, including seven Circuit Courts of Appeals, without exception had interpreted rule 10b-5 to encompass aider and abettor liability. See, e.g., Hirsh v. du Pont, 553 F.2d 750, 759 (2d Cir. 1977); Woodward v. Metro Bank of Dallas, 522 F.2d 84, 94 (5th Cir. 1975); Kerbs v. Fall River Industries, Inc., 502 F.2d 731, 740 (10th Cir. 1974); Securities & Exchange *343Commission v. Coffey, 493 F.2d 1304, 1317 (6th Cir. 1974), cert. denied, 420 U.S. 908, 95 S. Ct. 826, 42 L. Ed. 2d 837 (1975); Landy v. Federal Deposit Ins. Corp., 486 F.2d 139, 161 (3d Cir. 1973), cert. denied, 416 U.S. 960, 94 S. Ct. 1979, 40 L. Ed. 2d 312 (1974); Strong v. France, 474 F.2d 747, 752 (9th Cir. 1973); Brennan v. Midwestern United Life Ins. Co., 259 F. Sup. 673, 682 (N.D. Ind. 1966), aff'd, 417 F.2d 147 (7th Cir. 1969), cert. denied, 397 U.S. 989, 90 S. Ct. 1122, 25 L. Ed. 2d 397 (1970); Anderson v. Francis I. du Pont & Co., 291 F. Sup. 705, 709 (D. Minn. 1968); see also Ernst & Ernst v. Hochfelder, 425 U.S. 185,191 n.7, 96 S. Ct. 1375, 47 L. Ed. 2d 668 (1976) (reserving issue).
I agree with the majority that the legislative history is silent on the issue of aider and abettor liability. In the absence of evidence to the contrary, when the legislature adopts language mirroring a federal statute or regulation, the intent of the legislature is ordinarily that such language be accorded its meaning as understood in the federal courts at the time the state provision is adopted.
The majority argues, however, that the intent of the legislature in enacting § 36-472 was to provide a narrower scope of liability than that which was provided by the federal courts to rule 10b-5 in 1977.1 disagree that our legislative silence on the issue leads to the conclusion that the legislature intended the language of § 36-472 to mean something that no federal court had ever read the substantively identical language of rule 10b-5 to mean, simply because no court had yet had occasion to interpret the language prior to the time of the drafting of the Uniform Act. The majority’s conclusion that rule 10b-5 did not encompass aider and abettor liability in 1956 confuses the fact that no court had yet addressed the issue with a conclusion that such liability did not exist. Such a conclusion is misguided, *344for once the issue was placed before the federal courts, they uniformly concluded that rule 10b-5 did encompass aider and abettor liability.
I am also unconvinced that the United States Supreme Court’s recent holding in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 114 S. Ct. 1439, 128 L. Ed. 2d 119 (1994) (Central Bank), sheds light on whether § 36-472 encompasses aider and abettor liability. To the extent that our understanding of § 36-472 is informed by the federal courts’ interpretation of rule 10b-5,1 think the better view is that we can best discern the intent of our legislature in enacting § 36-472 by looking to the meaning generally accorded the language upon which it was based, namely, rule 10b-5, at the time of its enactment, not by looking at its current contemporary interpretation. There are no doubt instances where the legislature has adopted language mirroring a federal provision for which no definitive interpretation had been accorded. In such cases, resort to the understood meaning at the time of enactment of such a provision would be fruitless, and perhaps federal interpretation of the analogous federal provision subsequent to our legislature’s enactment of our state provision would be useful in interpreting our law. That situation, however, is not presented in this case. In my view, it is more likely that the legislature intended § 36-472 to have the meaning that had been accorded the language of rule 10b-5 and § 10 (b) of the Securities Exchange Act of 1934, by all seven of the federal Circuit Courts of Appeals that had addressed the issue, rather than the interpretation that the Supreme Court accorded the provision seventeen years after our enactment, an interpretation, moreover, that reversed twenty-eight years of federal precedent.2
*345II
Moreover, although we have looked to the commentary to uniform laws where they are helpful in interpreting analogous enactments of our legislature, in those cases we have also conducted an independent analysis of our law. See, e.g., Elliot v. Sears, Roebuck & Co., supra, 229 Conn. 510-13; Maloney v. Pac, 183 Conn. 313, 325-26, 439 A.2d 349 (1981). Such an independent reading of § 36-472, apart from the meaning ascribed to rule 10b-5, leads me to conclude that § 36-472 includes liability for aiders and abettors of securities fraud. I reach this conclusion because, in light of our state’s general tort principles and our criminal law, to read § 36-472 to preclude such liability would render it an anomaly, and there is no indication that the legislature so intended.
The fundamental tort principles that underlay the federal courts’ long recognized implied liability for aiding and abetting securities fraud are well grounded in our state law. In what is considered to be the foundational case for aider and abettor liability under rule 10b-5, the United States District Court for the Northern District of Indiana looked to the Restatement of Torts for guidance as to the scope of liability under the rule. Brennan v. Midwestern United Life Ins. Co., supra, 259 F. Sup. 680.
*346Recognizing that “[appropriate general principles of law should continue to guide the development of federal law remedies under Section 10 (b) and Rule 10b-5,” the court in Brennan cited 4 Restatement, Torts § 876 (1939) for the proposition that “[f]or harm resulting to a third person from the tortious conduct of another, a person is liable if he . . .(b) knows that the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself, or (c) gives substantial assistance to the other in accomplishing a tortious result and his own conduct, separately considered, constitutes a breach of duty to the third person.” (Internal quotation marks omitted.) Id. “In the absence of a clear legislative expression to the contrary, the statute must be flexibly applied so as to implement its policies and purposes.” Id., 680-81.
It is true that the United States Supreme Court has now concluded, to the contrary, that “ ‘[t]he ascertainment of congressional intent with respect to the scope of the liability created by a particular section of the Securities Act must rest primarily on the language of that section.’ ” Central Bank, supra, 511 U.S. 175. We, however, are not so constrained. Although it is now “inconsistent with settled methodology in § 10 (b) cases to extend liability beyond the scope of conduct prohibited by the statutory text”; id., 177; it would be inconsistent with our state statutory interpretation methodology, tort principles and criminal law not to do so in this case.
We have frequently stated that in our search for the intent of the legislature, we will look to a statute’s “relationship to existing legislation and common law principles governing the same general subject matter. Dart & Bogue Co. v. Slosberg, 202 Conn. 566, 572, 522 A.2d 763 (1987) .... Texaco Refining & Marketing Co. v. Commissioner, 202 Conn. 583, 589, 522 A.2d 771 *347(1987).” (Internal quotation marks omitted.) Lauer v. Zoning Commission, 220 Conn. 455, 460, 600 A.2d 310 (1991). We do not view a statute in isolation, but in the context of a body of law with which it should be consistent.
We have long recognized the tort principle, embodied in 4 Restatement, Torts § 876 (1939), and 4 Restatement (Second), Torts § 876 (b) (1977), that a person who aids and abets a tortfeasor is himself liable for the resulting harm to a third person. See Slicer v. Quigley, 180 Conn. 252, 259, 429 A.2d 855 (1980); Carney v. DeWees, 136 Conn. 256, 262, 70 A.2d 142 (1949). I disagree with the majority’s rejection of this fundamental element of tort liability. To the extent that it is simply to follow the lead of the federal courts, I do not see why we must follow a method of statutory interpretation more constrained than that which we have applied in the past, nor do I think the constraints on interpretation of federal statutes are applicable in this instance.
It is axiomatic that “[tjhere is no federal general common law”; Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S. Ct. 817, 82 L. Ed. 1188 (1938); and, therefore, courts are constrained from applying such principles when interpreting federal statutes. Such constraints, however, are inapplicable in the interpretation of state statutes, which fit within a system of law comprised of interconnected statutory and common law. “Just as the legislature is presumed to enact legislation that renders the body of the law coherent and consistent, rather than contradictory and inconsistent . . . courts must discharge their responsibility, in case-by-case adjudication, to assure that the body of the law—both common and statutory—remains coherent and consistent.” (Citations omitted.) Fahy v. Fahy, 227 Conn. 505, 513-14, 630 A.2d 1328 (1993).
*348Not only is the majority’s interpretation of § 36-472 unduly narrow in comparison with our common law tort principles, it also may provide for a narrower range of civil liability than criminal liability for violations of the section. Pursuant to General Statutes (Rev. to 1993) § 36-497, a wilful violation of § 36-472 carries potential criminal penalties of a fine of up to $10,000 or imprisonment for up to ten years, or both. General Statutes § 53a-8 (a) provides that a “person, acting with the mental state required for commission of an offense,3 who solicits, requests, commands, importunes or intentionally aids another person to engage in conduct which constitutes an offense shall be criminally liable for such conduct and may be prosecuted and punished as if he were the principal offender.” A person, therefore, who wilfully aids and abets another in a violation of § 36-472 could in all likelihood be prosecuted pursuant to § 36-497 and § 53a-8. Yet, under the majority’s analysis in this case, no defense to a contract action brought by the aider and abettor of fraudulent activity would arise under General Statutes (Rev. to 1993) § 36-498 (h).
In my view, it is an anomaly that an aider and abettor could be convicted of a felony and imprisoned for his actions, yet could, notwithstanding the protections of CUSA, successfully bring an action against the victim of the fraud on a contract entered into as part of the fraudulent scheme. Where the underlying circumstances are so offensive as to warrant criminal culpability, we should read the protection from contract actions accorded the victim of fraud by § 36-498 (h) to apply.
*349The majority also relies on the fact that, unlike its federal counterpart, CUSA includes provisions for some forms of secondary liability. Specifically, the majority notes that § 36-498 (c) provides for liability for “[ejvery person who directly or indirectly controls a person liable under subsections (a) and (b) of this section, every partner, officer, or director of such a person, every person occupying a similar status or performing similar functions, every employee of such a person who materially aids in the act or transaction constituting the violation and every broker-dealer or agent who materially aids in the act or transaction . . . .” Admittedly, this provision provides for secondary liability for a limited class of individuals, namely, control persons, employees and broker-dealers. There is nothing in the legislative history, however, to suggest that the statutory enumeration of secondary liability for these individuals was intended to preclude liability for aiders and abettors who are members of a broader class of persons. “It is true that, in interpreting statutes we have on occasion read specific statutory references to indicate a legislative intent to exclude, by implication, other related potential referents. . . . Furthermore, if in this case either the explicit language or the legislative history of [the section] had indicated such a legislative intent, we would be required to respect that implication, and we would be precluded from reaching a result by way of common law adjudication that was contrary to that intent. Neither the statutory language nor that legislative history, however, indicates such an intent.” (Citation omitted.) Fahy v. Fahy, supra, 227 Conn. 513.
The majority also concludes that it is “confident that [its] interpretation of § 36-472 does not unduly limit the avenues of recourse available to aggrieved investors.” I disagree. Common law fraud supplies a remedy when a person makes false statements, but, absent a request or an occasion or a circumstance that imposes a duty *350to speak, ordinarily there is no remedy for fraud by failing to make material true statements. See Duksa v. Middletown, 173 Conn. 124, 127, 376 A.2d 1099 (1977); Franchey v. Hannes, 152 Conn. 372, 378, 207 A.2d 268 (1965); Egan v. Hudson Nut Products, Inc., 142 Conn. 344, 347,114 A.2d 213 (1955); Ceferatti v. Boisvert, 137 Conn. 280, 283, 77 A.2d 82 (1950). Section 36-498 (c) provides for secondary liability, but not for general aider and abettor liability. To the extent, therefore, that aider and abettor liability was intended by the legislature to be implicit in § 36-472, as I believe it was, the majority’s analysis does “unduly limit the avenues of recourse available to aggrieved investors.”
Ill
The majority concludes that consideration of the meaning accorded rule 10b-5 when our legislature enacted our analogous provision “would undermine the uniformity among states that underlies the very existence of the Uniform Act.” I agree that resort solely to the understood meaning of rule 10b-5 at the time each state enacted Uniform Act § 101 hypothetically, under some circumstances, could result in different interpretations being accorded the provision, depending on the date of enactment in each state. Absent, however, a clear indication that the drafters of the Uniform Act specifically considered and rejected the notion of aider and abettor liability, and absent other persuasive state authority construing the Uniform Act to preclude aider and abettor liability, such a hypothetical concern should not control our reading of § 36-472 to the exclusion of an inquiry regarding the meaning of § 36-472 within the scheme of our common and statutory law. Thus, given the scheme of aider and abettor liability in our common law and statutory criminal law, the same conclusion might well be reached had our legislature enacted the provision in 1956.
*351Moreover, reading § 36-472 to include aider and abettor liability would not put our law at odds with any other state that has enacted Uniform Act § 101. This novel issue of state law has not been decided by the courts of any other state subscribing to the Uniform Act.4 It may come to pass that those states will look to their common law traditions and conclude, as I have, that the reasoning of the long line of cases that interpreted rule 10b-5 prior to Central Bank properly melds their common and statutory law by recognizing liability for aiders and abettors of securities fraud.
Accordingly, because I conclude that aider and abettor liability is implicit in § 36-472, I dissent. I would, therefore, reach the other issues5 raised by the plaintiff in its appeal.

I realize that the General Statutes contained a provision similar to § 36-472, which had been enacted in 1967. See General Statutes (Rev. to 1977) § 36-338. This provision was repealed in 1977 by the same act that codified § 36-472. Had the legislature simply retained § 36-338, analysis of the legislative history and circumstances surrounding its enactment would be relevant to this discussion. Because that provision was expressly repealed with the rest of the then existing Connecticut Securities Act at the same time the legislature adopted the Connecticut Uniform Securities Act (CUSA), however, only the legislative history and circumstances surrounding the enactment of CUSA, and specifically § 36-472, are at issue in this case.

 Moreover, the court in Central Bank did not interpret rule 10b-5. The entire opinion is concerned with the meaning of § 10 (b) of the Securities Exchange Act of 1934. Rule 10b-5 had been promulgated by the SEC pur*345suant to its authority under § 10 (b) and, therefore, because of Central Bank’s holding that § 10 (b) did not encompass aider and abettor liability, a fortiori rule 10b-5 could not prohibit such conduct.
That does not mean, however, that rule 10b-5 was not intended to bring within its prohibition the aiding and abetting of securities fraud, and I do not read Central Bank to suggest that this was the case. Rather, I read Central Bank’s holding, at least so far as rule 10b-5 is concerned, to be that, to the extent that rule 10b-5 does sweep aiding and abetting securities fraud within its prohibitions, it goes beyond the authority granted to the SEC under § 10 (b), and, therefore, enforcement of such a prohibition pursuant the rule would be ultra vires. I am convinced, therefore, that Central Bank did not address the meaning of rule 10b-5, nor does it persuasively inform our reading of § 36-472.

 General Statutes § 53a-24 defines the term offense to include “any crime or violation which constitutes a breach of any law of this state ... for which a sentence to a term of imprisonment or to a fine, or both, may be imposed . . . (Emphasis added.)'

 In Broadview Financial, Inc. v. Entech Management Services Corp., 859 F. Sup. 444, 453 (D. Colo. 1994), cited by the majority, the United States District Court for the District of Colorado dismissed an aiding and abetting claim that had been brought under both federal and Colorado securities law. After concluding that Central Bank, which had recently been decided, disposed of the federal claim, in light of the plaintiffs failure to provide a basis for imposing such liability in state law, the court summarily concluded that no aider and abettor liability existed under the Colorado act. With no analysis or even citation to any provision of the Colorado act, this case cannot be considered a definitive resolution as to whether the provision of the Colorado act that was based on Uniform Act § 101 creates liability for aiders and abettors of securities fraud.

 The plaintiff also raises the following issues, which are predicated on a determination that § 36-472 encompasses aider and abettor liability: (1) whether recklessness satisfies the scienter requirement for aider and abettor liability; (2) whether a finding of “atypical” conduct is sufficient to conclude that the plaintiff was reckless; (3) whether “substantial assistance” in the fraud is established by a finding that the conduct was a “but for” link in the defendants’ decisions to purchase securities; and (4) whether the plaintiff could be held liable for aiding and abetting a securities fraud where the defendants’ losses were not proximately related to the fraud allegedly aided and abetted.