Court Opinion

ID: 8916997
Source: CourtListenerOpinion
Date Created: 2022-11-27 05:29:24.832536+00
Date Added: 2024-06-11T17:09:04.959695
License: Public Domain

GIBBONS, Circuit Judge,
dissenting.
I dissent from the court’s judgment for two independent reasons. First, the method by which the court arrived at a judgment is fundamentally inconsistent with sound appellate practice in the courts of appeals and will bring this court into disrepute. Second, even if the announced judgment had been arrived at properly, it is legally wrong.
I.
A. Why We Have In Banc Hearings
In March of 1940 this court by rule adopted a procedure for hearing cases in banc.1 The court was prompted to do so by the *735disedifying spectacle of the Supreme Court having to resolve intra-circuit conflicts among panels of judges in the Court of Appeals of the Fifth Circuit.2 Prior to the adoption of our local rule, the view had been expressed that such intra-circuit conflicts were the necessary consequence of the fact that in some circuits there were more than three circuit judges, while under the governing statute the court was composed of three of them.3 Judge Biggs wrote:
A court, as distinguished from the quorum of its members whom it may authorize to act in its name, cannot consist of less than the whole number of its members .... To hold otherwise is not merely to affirm a plain contradiction in terms, but is also to destroy the authority of the court as a court and to open the way to possible confusion and conflict among its personnel and in its procedure and decisions.
117 F.2d at 70 (emphasis supplied). Thus from the outset this court, which first made use of the in banc device, did so for the purpose of preventing the erosion of judicial authority which would inevitably result when separate groups of judges in the same court decide that they were free to do their own thing. This court’s view prevailed in the Supreme Court, which observed:
Certainly, the result reached makes for more effective judicial administration. Conflicts within a circuit will be avoided. Finality of decisions in the circuit courts of appeal will be promoted. Those considerations are especially important in view of the fact that in our federal judicial system these courts are the courts of last resort in the run of ordinary cases.
Textile Mills Corp. v. Commissioner of Internal Revenue, 314 U.S. 326, 334-35, 62 S.Ct. 272, 277-278, 86 L.Ed. 249 (1941) (footnote omitted).
In the 1948 Judicial Code the Textile Mills holding was ratified by Congress. 28 U.S.C. § 46(c) (1976 & Supp. V 1981). The statute was not received enthusiastically in one court, which held that a panel majority could decide not to permit rehearing.4 The Supreme Court reversed with directions that the court of appeals establish a procedure governing the exercise of the full court’s power to consider suggestions for in banc consideration. Western Pacific Railroad Corp. v. Western Pacific Railroad Co., 345 U.S. 247, 261, 73 S.Ct. 656, 663, 97 L.Ed. 986 (1953). In response to the Western Pacific case the present Fed.R.App. P. 35 was prepared. Like the statute, which codified the Court’s holding in Textile Mills, the rule is directed at Judge Biggs’ original concern that anarchy among the judges of a single court would destroy the authority of the court. We have enshrined that purpose in Chapter VIII(C) of our Internal Operating Procedures, which provides:
It is the tradition of this court that reported panel opinions are binding on subsequent panels. Thus, no subsequent panel overrules a published opinion of a previous panel. Court in banc consideration is required to overrule a published opinion of this court.
We order in banc consideration in cases “where consideration by the full court is necessary to secure or maintain uniformity of . .. decisions.... ” Third Circuit Internal Operating Procedures, ch. VIII B(l) (revised Sept. 1, 1978).
B. This Case
The judgment of the court in banc in this case is entirely inconsistent with the fundamental policy behind 28 U.S.C. § 46(c) and Federal Rule of Appellate Procedure 35. Instead of securing or maintaining the integrity of circuit doctrine, the in banc device has in this instance been used in a *736manner so inconsistent with that purpose that Judge Biggs must be turning in his grave.
1. Prior Proceedings
Lucile Lowry and Lowry-Zweig Corp. (the Lowrys) are before us on appeal from a summary judgment dismissing their class action complaint against the Baltimore and Ohio Railroad Company (B & 0), the Chesapeake & Ohio Railway Company (C & 0), and Chessie System, Inc. (Chessie). The suit complains of the action of B & 0 in declaring a dividend in the stock of Mid-Allegheny Corporation (MAC), a B & 0 subsidiary, on December 13, 1977, without giving notice to holders of B & 0 convertible debentures. It was filed on October 22, 1979. On that date a prior suit, Pittsburgh Terminal Corp. v. Baltimore & Ohio R.R. Co., was already on file challenging the same stock dividend.
In the Pittsburgh Terminal case the plaintiffs, holders of B & 0 convertible debentures, sought class action certification, which was denied as a result of an agreement between B & 0 and the Indenture Trustee that should plaintiffs prevail all debenture holders similarly situated would be accorded the treatment required by any judgment in plaintiffs’ favor.5 The Lowry complaint was referred to the same trial judge. In the Lowry case, however, on April 7, 1980, he entered a Rule 23 class action order designating the Lowry plaintiffs as representatives of two separate classes: (1) persons who purchased B & 0 convertible debentures on or after December 13, 1977, and (2) persons who converted their debentures into B & 0 stock on or after December 13, 1977. The record before us in Lowry does not disclose the precise terms of the agreement between the Indenture Trustees and B & 0. Thus we cannot tell whether either class represented by the Lowrys is within its terms. What we can tell, however, is that the Lowry plaintiffs represent a class including debenture holders who acquired their debentures after December 13, 1977, and debenture holders who acquired them before that date but converted them later. Motions to modify the class and to consolidate the Lowry case with the Pittsburgh Terminal case for trial were denied on June 16, 1980.
Pittsburgh Terminal went to trial. It resulted in a judgment in favor of the defendants on all counts. On appeal this court reversed, holding that, on the facts found in the district court with respect to the December 13, 1977 transaction, that transaction was a violation of section 10(b) of the Securities Act of 1934, 15 U.S.C. § 78j(b) (1976). We remanded to the district court for a determination of appropriate relief. Pittsburgh Terminal Corporation v. Baltimore and Ohio R.R. Co., 680 F.2d 933, 943 (3d Cir.1982). On June 22, 1982 this court denied a petition for rehearing in Pittsburgh Terminal, and on November 29, 1982, the Supreme Court denied a petition for certiorari. B & O R.R. Co. v. Pittsburgh Terminal Corp., — U.S. —, 103 S.Ct. 476, 74 L.Ed.2d 621 (1982). Thus the Pittsburgh Terminal case has now been returned to the district court for determination of appropriate relief, which will of necessity require a determination of which class members are to receive the benefit of the agreement between the Indenture Trustee and B & 0.
After the Pittsburgh Terminal case was tried and dismissed the defendants moved for summary judgment in the Lowry case. That motion was granted for the same reasons relied upon by the trial court in dismissing the Pittsburgh Terminal complaint. The Lowry plaintiffs appealed on their own behalf and on behalf of the two classes they represent. They represent one class of purchasers whose bonds were acquired after the December 13, 1977 transaction was a matter of public information. They represent another class — bondholders who converted after that date. The latter class includes purchasers who acquired their bonds before December 13, 1977 and converted after that date, as well as bondholders who both acquired and converted after that date. Moreover their complaint relies *737not only on section 10(b) but also on certain state law claims asserted both pendent to the section 10(b) claim and on the basis of diversity of citizenship. At least one Lowry appellant satisfies the jurisdictional amount requirement of 28 U.S.C. § 1332 (1976). That diversity claimant is an adequate class representative of all class members satisfying jurisdictional amount who could derive benefit from a decree based on state law, including class members who are not diverse. Supreme Tribe of Ben-Hur v. Cauble, 255 U.S. 356, 41 S.Ct. 338, 65 L.Ed. 673 (1921). A decision against the Lowry plaintiffs on the section 10(b) claims will bind all class members of the two classes defined in the April 7, 1981 order. Thus the Lowry appeal presents a number of discrete legal issues including:
1. whether assignees of a section 10(b) claim may assert it;
2. whether such claims are assigned by operation of law upon sale of a security;
3. whether assignees of state law claims may assert those claims;
4. whether such claims are assigned by operation of law upon sale of a security;
5. whether holders of debentures who are owners of section 10(b) claims and state law claims lose that status when, with knowledge of those claims, they exercise a conversion privilege.
Those issues are entirely apart from the grounds upon which summary judgment was entered.
2. The In Banc Ruling
The panel to which the Lowry appeal was assigned was unable to agree on a judgment. That necessitated action by the full court, which, because of recusals, is in this instance comprised of eight members. Three of the eight disagree with the judgment in Pittsburgh Terminal, which is now final. Five of the eight conclude that the Pittsburgh Terminal case was correctly decided. Two of those five and one of the three conclude that federal law requires an express assignment of a section 10(b) claim, and would affirm on that ground the dismissal of the Lowry class action, even though one class includes persons who acquired their securities prior to December 13, 1977 and converted thereafter. Implicitly, but without discussion, those three judges must assume, therefore, that the exercise of the conversion privilege as a matter of federal law destroyed the previously-held section 10(b) claim. Three of the five judges who agree with the Pittsburgh Terminal ruling also agree that an express assignment of a section 10(b) claim is unnecessary, and that conversion of debentures did not destroy that claim. Two of the three judges who disagree with the Pittsburgh Terminal holding refuse to vote on the assignment and conversion issues. Thus, the opinion announcing the judgment of the court rests upon separate minority positions: two votes against the Pittsburgh Termina1 holding and three votes on assignment and conversion. By withholding their votes on assignment and conversion two judges who disagree with Pittsburgh Terminal purport to achieve the result that a judgment can be entered resting upon separate minority viewpoints upon the governing law. It is true, of course, that there is no clear majority with respect to the assignment and conversion issues. The litigants, however, will certainly be left with the reasonable suspicion that the two judges who have withheld their votes on those issues do not agree that they would support an affirmance.
3. The Judgment is Legally Unsupportable
There are two independent reasons why the two judges who disagree with the Pittsburgh Terminal holding may not in this case attempt to support a judgment based upon that disagreement, and thus why the judgment based on concurrent minority views may not stand.6
*738The first reason is that the judgment against the defendants in the Pittsburgh Terminal case on liability for a section 10(b) violation is final. That was not the case when the case was argued to the full court on November 8, 1982, since, although we had already denied a petition for rehearing, there was a petition for certiorari pending. When that petition was denied on November 30, 1982, before the entry of our judgment, however, the Pittsburgh Terminal liability judgment against the defendants became final for all purposes. With that final judgment extant the defendants are collaterally estopped from contending in this court or any other forum that they are not liable for a section 10(b) violation. All class members, whoever they may be, are protected against relitigation of the issues determined in the Pittsburgh Terminal case, even though not formally parties to that case. Allen v. McCurry, 449 U.S. 90, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980); Parklane Hosiery Co. v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1978); Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971); Katz v. Carte Blanche Corporation, 496 F.2d 747, 759 (3d Cir.1974); Bruszewski v. United States, 181 F.2d 419 (3d Cir.), cert. denied, 340 U.S. 865, 71 S.Ct. 87, 95 L.Ed. 632 (1950); Pentland v. Dravo Corp., 152 F.2d 851, 856 (3d Cir.1945). The three judges who disagree with the Pittsburgh Terminal holding are simply not free to act on that disagreement in support of a judgment in favor of the defendants, because that ground of appeal is no longer available to the defendants.
The second reason is that even if the defendants were not collaterally estopped, the Pittsburgh Terminal opinion is a binding precedent which the three judges who disagree must follow until a majority of a court in banc chooses to overrule it. Judge Aldisert contends that because this case is before the court in banc each judge is free to disregard prior precedent. I agree that the court in banc is free to reconsider a prior precedent. But a court in banc can only act by majority vote. Taking the position that each member of a court in banc is free to do his or her own thing disregards the very purpose of the in banc rule. It reintroduces the very anarchical principle that Judge Biggs recognized when our original rule was drafted. The anarchism is compounded in this instance by the totally unwarranted practice of withholding votes on the dispositive issues in the case so that a combination of minority positions can achieve a result. Judge Aldisert justifies this practice on the ground that “going off on an alternate ground might dilute the expression of [his] firmly held conviction that the December 13,1977 debenture holders had no federal cause of action to assign.” Maj. op. at 734. That is the very willful disregard of precedent that concerned Judge Biggs when the in banc rule was first adopted by this court, and its exercise in an in banc court is even more likely, in his words, to destroy the authority of the court.
The unseemliness of the position taken by the judges willing to announce a judgment resting on two legal propositions, neither of which commands a majority, can be fully appreciated by considering the dilemma which the district court will face on remand in Pittsburgh Terminal. As noted above, there is an agreement with the Indenture Trustee that all bondholders similarly situated with the Pittsburgh Terminal plaintiffs will receive the benefit of the judgment. Inevitably the district court will be required to determine who are the beneficiaries of that agreement. The irresponsibility of this court in the instant case will make that task a nightmare. Looking at our decision, the district court will know that since only three judges take a stand against automatic assignment of section 10(b) claims, members of the class of post-December 13, 1977 bond purchasers cannot be collaterally estopped from claiming to be protected by the agreement. At the same time, since only three judges take a stand in favor of automatic assignment on sale, the court will be left in the unenviable position of guessing what the law of the circuit is. Were the question to be presented to me, the best I could do would be to guess that the silent brothers probably agree that as*739signment was automatic, or else they would have relied on that ground in order to affirm. The district court’s dilemma is even more acute with respect to class members who bought bonds before December 13, 1977 and exercised a conversion privilege thereafter, for with respect to them only three judges have actually announced a position. Does the silence of five mean that those class members are collaterally es-topped?
The difficulties which the district court will face on remand in Pittsburgh Terminal make it certain that the issues which divide the court in this in banc proceeding will be back before a panel of the court in the not too distant future. When that happens, if I am a member of the panel I will take the position that this decision has no binding effect as a precedent because it decides nothing, and that it has no collateral estoppel effect, even against the class members represented by the Lowrys, because the basis of the judgment is wholly indeterminate. Indeed, I would regard any effort to apply res judicata effect to a class action judgment predicated upon the concurrence of two legal propositions, neither of which commands a majority in the court which announced the judgment, to be a violation of due process of law. Thus in my view the district court will be free, in fashioning relief on remand in Pittsburgh Terminal, to disregard the non-decision in this case, and make an independent determination as to who should benefit from the agreement with the Indenture Trustee.
The one thing the district court may not do, however, two judges of this court to the contrary notwithstanding, is disregard Pittsburgh Terminal either as a judgment establishing defendants’ liability or as a binding precedent. Both the district courts in this circuit and future panels of this court are bound by that precedent. Even if the two judges who chose to vote against the Pittsburgh Terminal holding today were to comprise a majority of a panel to which the issue were presented tomorrow, they would be bound by it. Thus this court’s willingness to enter a judgment based on two propositions neither of which cornmands a majority has accomplished nothing except to bring its appellate process into disrepute.
II.
The unfortunate inconclusive judgment in this case rests in part upon the view of three judges that as a matter of federal law an express assignment is required for the transfer of a section 10(b) claim. That issue involves not one question but two.
The first question is whether section 10(b) claims are assignable at all. It has been held repeatedly that they are. E.g., Western Auto Supply Co. v. Gamble-Skogmo, Inc., 348 F.2d 736, 739-41 (8th Cir.1965), cert. denied, 382 U.S. 987, 86 S.Ct. 556, 15 L.Ed.2d 475 (1966); International Ladies Garment Workers Union v. Shields & Co., 209 F.Supp. 145, 149-50 (S.D.N.Y.1962); Mills v. Sarjem Corp., 133 F.Supp. 753, 761 (D.N.J.1955). In the Mills case Judge For-man rejected the contention that actions for damages under the federal securities law were penal, and for that reason should not be considered assignable. The question whether a section 10(b) claim, or indeed any interest created by federal law, is assignable is in my view undoubtedly a federal law question. Obviously, it would be intolerable to permit the states to determine the transferability, and thus the value, of interests created by federal law. Moreover those cases holding that section 10(b) claims are freely transferable announce the proper federal rule. Any other rule would be inconsistent with the underlying policy behind that federal statute: the protection of security holders from manipulative or deceptive acts or practices. When such acts or practices have occurred litigation seeking a remedy is often protracted and expensive. Not all victims are so positioned that they can stand either the delay or the expense. Thus they should be able to sell their securities, and the cause of action, in the marketplace at a price which reflects the market’s consideration of the value of the claim. Any other rule would compound the injury to the victim by requiring that he await the *740outcome of a lawsuit before realizing something of what has been taken by the wrongdoer.
The second question is whether or not an assignment has occurred. This in turn involves three sub-issues. The first is whether state or federal law decides the fact of assignment. The second is whether, assuming federal law applies, in the absence of a statute the federal common law demands a single uniform rule or looks in each instance to the law of the state where the transaction occurred. The third is whether, assuming a federal uniform rule is required, the court should examine the laws of the states to determine what the national consensus is. Each of these issues requires a separate analysis.
There is certainly no clear consensus that federal law decides the fact of assignment of interests created by federal law. Indeed the general rule has long been assumed to be otherwise. E.g., Miree v. DeKalb County, 433 U.S. 25, 97 S.Ct. 2490, 53 L.Ed.2d 557 (1977) (state law determines standing as third party beneficiary of federal contract); Wallis v. Pan American Petroleum Corp., 384 U.S. 63, 86 S.Ct. 1301, 16 L.Ed.2d 369 (1966) (validity of transfer of federal oil and gas lease determined by state law although federal statute made lease assignable); Bank of America National Trust & Savings Association v. Parnell, 352 U.S. 29, 77 S.Ct. 119, 1 L.Ed.2d 93 (1956) (state law determines rights on transfer among private parties of commercial paper of the United States); DeSylva v. Ballentine, 351 U.S. 570, 76 S.Ct. 974, 100 L.Ed. 1415 (1950) (ownership of copyright on death of author determined by state law); Becher v. Contoure Laboratories, 279 U.S. 388, 49 S.Ct. 356, 73 L.Ed. 752 (1929) (constructive trust of patent for invention determined by state law); New Marshall Engine Company v. Marshall Engine Company, 223 U.S. 473, 32 S.Ct. 238, 56 L.Ed. 513 (1912) (assignment of patent for invention decided by state law); Joy v. St. Louis, 201 U.S. 332, 26 S.Ct. 478, 50 L.Ed. 776 (1906) (assignment of federal land patent decided by state law); Shoshone Mining Company v. Rutter, 177 U.S. 505, 20 S.Ct. 726, 44 L.Ed. 864 (1900) (assignment of federal mineral patent decided by state law); Blackburn v. Portland Gold Mining Company, 175 U.S. 571, 20 S.Ct. 222, 44 L.Ed. 276 (1900) (claim to mining patent determined by laws of mining district in which land situated). These decisions reflect the patent reality that so long as an interest created by federal law is in fact transferable the national government no longer has any obvious interest in who owns it or what formalities were involved in its transfer. Transferability of property, no matter what law creates the property interest, is a matter of traditional state law of contract. Before the general rule that state law determines the transferability of interests created by federal law may be displaced, some palpable federal interest in doing so must be identified. There is nothing about a section 10(b) claim that distinguishes it in this respect from federal commercial paper, patents, copyrights, or land grants.
Assuming arguendo, however, that the fact of assignment should be recognized as one of federal common law, one must pass next to the question whether that common-law rule should not adopt the law of the place where the transaction occurred, so long as it does not impede the underlying federal policy. Early post-Erie efforts of the Supreme Court to develop federal common law rules were tellingly criticized for passing too quickly from the first to the second question. See Friendly, “In Praise of Erie — And of the New Federal Common Law,” 39 N.Y.U.L.Rev. 383, 410 (1964) (Clearfield Trust compressed consideration of issue of need for federal common-law rule and issue of choice of such a rule). Sensitive, perhaps, to that criticism, the Court now requires a more thorough examination of the choice of law problem. United States v. Kimbell Foods, Inc., 440 U.S. 715, 99 S.Ct. 1448, 59 L.Ed.2d 711 (1979). In the Kimbell Foods case the issue was priority of liens stemming from federal lending programs managed by the Small Business Administration and the Federal Housing Administration. Pointing to Clearfield Trust v. United States, 318 U.S. *741363, 63 S.Ct. 573, 87 L.Ed. 838 (1943), the Court held that because those agencies derive their authority to effect the loans in question from federal statutes, their rights are derived from federal law. 440 U.S. at 726, 99 S.Ct. at 1457. But that did not require resort to uniform federal rules, for
[w]hether to adopt state law or to fashion a nation-wide federal rule is a matter of judicial policy “dependent upon a variety of considerations always relevant to the nature of the specific governmental interests and to the effect upon them of applying state law.” United States v. Standard Oil Co., 332 U.S. 301, 310, 67 S.Ct. 1604, 1609, 91 L.Ed. 2067 (1947).
Undoubtedly, federal programs that “by their nature are and must be uniform in character throughout the Nation” necessitate formulation of controlling federal rules.... Conversely, when there is little need for a nationally uniform body of law, state law may be incorporated as the federal rule of decision. Apart from considerations of uniformity, we must also determine whether application of state law would frustrate specific objectives of the federal programs. If so, we must fashion special rules solicitous of those federal interests. Finally, our choice-of-law inquiry must consider the extent to which application of a federal rule would disrupt commercial relationships predicated on state law.
Id. at 728-29, 99 S.Ct. at 1458-1459 (footnotes and citations omitted). Making this fairly complex interest analysis, the Court in Kimbell Foods unanimously held that the relative priority of private liens and consensual liens arising from government lending programs would be determined under nondiscriminatory state laws. If an interest analysis with respect to incorporation of federal law is required even when the government’s own property interests are involved, a fortiori such an analysis is required before we reject state law respecting the assignability of privately-owned claims.
Addressing the question whether application of state law would frustrate the specific objectives of the federal program requires an identification of those objectives. With respect to section 10(b), the objective is to protect the interstate market in securities from manipulative and deceitful practices which once were tolerated under some state law. That objective is achieved so long as (1) someone owns the section 10(b) cause of action, and (2) the victim can freely transfer it to a party who can afford to await the results of a lawsuit. That exhausts the federal government’s interests, so long as information about the claim is equally available to the victim and the assignee. Section 10(b) presumes a market in which traders have equal access to information, and no special duty of disclosure can be implied from it or any other provision of federal law which would require an outsider assignee to volunteer information.
Turning to the question whether a federal rule would disrupt commercial relationships, we must start with the proposition that the overwhelming mass of securities transfers takes place in the two great securities exchanges in New York City, and in that city’s over-the-counter market. Buyers and sellers almost never see each other. Thus, imposing a requirement that there be an express assignment of a section 10(b) claim for all practical purposes makes such claims unassignable. The effect of making them for practical purposes unassignable will be that the marketplace cannot take into account any incremental market value which might have resulted from public information about the existence of the claim. It is true that the seller will retain the claim and can proceed with his own suit or await the outcome of a class action brought by someone else. That will be cold comfort, however, to a holder of a security who wants, and perhaps even needs, to sell it. Some investors can afford to speculate on the incremental market value which may be added to a security as a result of litigation, and can even afford to finance such litigation. The depositions on file disclose that this is precisely what the Lowrys did. For others in more necessitous circumstances the only practical alternative will be to realize in the marketplace what the security will bring here and now. A rule requiring *742an express assignment of a section 10(b) or any other federally based claim connected with it, practically impossible of accomplishment in the real world of the securities markets, would have the inevitable effect that the seller cannot realize any increment in the market based on public knowledge of its existence. Once the sale has occurred the seller will have almost no incentive to pursue the claim. An express assignment requirement, therefore, will inure primarily to the benefit of the wrongdoer.
In New York State, where the vast majority of securities transfers takes place, the state has expressly rejected the requirement of an express assignment, in a statute providing:
Unless expressly reserved in writing, a transfer of any bond shall vest in the transferee all claims or demands of the transferrer, whether or not such claims or demands are known to exist, (a) for damages or rescission against the obligor on such bond, ...
N.Y. [General Obligations Law] § 13-107 (McKinney 1978). That provision, a part of the title on transfer of obligations and rights of the New York General Obligations Law, was recommended by the New York Law Revision Commission to change the rule of Smith v. Continental Bank & Trust Co., 292 N.Y. 275, 54 N.E.2d 823 (1944), that absent an express assignment of accrued causes of action for breach of fiduciary duties, such causes of action do not pass to the transferee of a corporate bond. It adopts precisely the opposite rule, advocated by Judge Jerome Frank in Phelan v. Middle States Oil Corp., 154 F.2d 978 (2d Cir.1946), that unless the seller of a bond expressly reserves accrued causes of action they pass with the transfer of the bond. See Recommendation of the Law Revision Commission to the Legislature Relating to the Transfer With Bonds of Claims Connected Therewith, Dec. 14,1949, 9 Leg.Doc. No. 65(D), reprinted in New York State Law Revision Commission Report, Recommendations and Studies, at 25^17 (1950). Parties to a sale can agree otherwise, but when they do not memorialize a different intention, the statute fills in the gap in the transaction.
One effect of the change in New York law with respect to how transfer of accrued causes of action respecting bonds must be evidenced was to make the rule on bond transfers consistent with that respecting stock transfers. See N.Y. [Personal Property Law] § 168, repealed by U.C.C. § 10-102, eff. Sept. 27, 1964 (McKinney 1976) (repealed N.Y. version of the Uniform Stock Transfer Act, Section 7). The Uniform Commercial Code now deals with investment securities generally. It provides that “[u]pon delivery of a security the purchaser acquires the rights in the security which his transferor had or had actual authority to convey....” N.Y. [Uniform Commercial Code Law] § 8-301 (McKinney 1964). Thus the Uniform Commercial Code and the New York General Obligations Law are consistent.7
The Uniform Commercial Code and the New York General Obligations Law reflect the judgment of the commercial world that marketability of securities will best be encouraged by a rule that upon transfer all increments of market value travel with the security unless expressly reserved. Carving out an exception for increments of market value resulting from public information about actual or potential section 10(b) claims will seriously interfere with commercial relationships in that marketplace.
That observation suggests the plain answer to the third question. Assuming the need for a uniform federal common-law rule about assignability of section 10(b) claims, what considerations would prompt *743the adoption of any rule other than that embodied in the New York General Obligations Law and the investment security transfer provision of the Uniform Commercial Code? The three judges who espouse a requirement of an express assignment mention the possibility of lack of uniformity, but it is their proposed rule which introduces lack of uniformity. The Uniform Commercial Code governs in any place where a market for investment securities is likely to exist. If a federal common-law rule is deemed appropriate to prevent the application of different rules elsewhere, it is the rule of the New York General Obligations Law and the Uniform Commercial Code which obviously should be adopted. See New York, N.H. & H.R.R. v. Reconstruction Finance Corporation, 180 F.2d 241 (2d Cir.1950), noted in 64 Harv.L.Rev. 342 (1950) (Negotiable Instruments Law a source of federal common law).
There are, moreover, overriding federal concerns which militate strongly against separating ownership of the federal law and state law claims attaching to an investment security. The federal courts have exclusive jurisdiction over claims predicated on section 10(b). 15 U.S.C. § 78aa (1976). Such claims are frequently filed, as in this case, as class actions. The federal courts have a significant interest in the expeditious settlement of those claims. State law claims arising out of the transaction complained of must as a matter of practical necessity be filed as pendent claims so that they, too, can be disposed of in any settlement or litigated decree. A rule which for all practical purposes subdivides the ownership of claims in connection with investment securities along federal/state lines would make the settlement of class actions infinitely more difficult. Damages for state common-law fraud and for manipulative and deceptive acts and practices under section 10(b) will be largely identical, but different classes will be able to recover. The three judges who suggest that ownership should be subdivided in this manner observe with apparent equanimity that there is no absolute rule precluding double liability. Typescript, Judge Garth’s opinion, at 731 n. 16. District judges who have to deal with class action settlements would not greet such a rule with equal equanimity.
Because the weird judgment in this case does not actually rest upon any majority rationale, the district court to which it is remanded will be faced with some difficult issues. We are remanding the state law claims. The defendants will be faced, in defending against those claims, with the collateral estoppel effect of the facts which were found in the Pittsburgh Terminal case. It seems highly unlikely that those facts will permit a judgment on all pendent state law claims in favor of the defendants. Thus it is highly likely that the class of bondholders who purchased after December 13, 1977 will prevail. At that point the district court will have to decide whether by virtue of the agreement with the Indenture Trustee the bondholders who sold to that class can also recover, even though they presumably recovered in the marketplace the increment of market value arising from public knowledge of the section 10(b) claim.
Moreover, the judgment affirms dismissal of the claims of bondholders who converted after December 13, 1977, although only this opinion and a footnote in Judge Garth’s opinion mention that class. They, too, will have state common-law claims. If they prevail, however, the defendants will only have to pay once.
III.
The entry of a judgment based on two legal propositions, neither of which commands a majority, is a disgrace to the judicial process. The scandal is compounded by the fact that two judges have voted to rest the judgment on grounds which the defendants are collaterally estopped from asserting. The other non-majority position, that a different rule of assignability applies to the assignment of federal and state claims incident to ownership of an investment security, is fundamentally unsound. The same rule of automatic assignment absent express reservation applies to all legal claims, federal or state, which are incidents *744of ownership of the transferred securities. Thus the only proper judgment in this case is an outright reversal and remand on all claims.

. The original rule is set forth in Commissioner of Internal Revenue v. Textile Mills Corp., 117 F.2d 62, 63, 67 n. 4 (3d Cir.1940), aff'd, Textile Mills Corp. v. Commissioner of Internal Revenue, 314 U.S. 326, 62 S.Ct. 272, 86 L.Ed. 249 (1941).

. See Commissioner of Internal Revenue v. Textile Mills Corp., 117 F.2d at 70 (referring to John Hancock Ins. Co. v. Bartels, 308 U.S. 180, 60 S.Ct. 221, 84 L.Ed. 176 (1939)).

. Lang’s Estate v. Commissioner of Internal Revenue, 97 F.2d 867, 869 (9th Cir.1938).

. Western Pac. R.R. Corp. v. Western Pac. R. Co., 197 F.2d 994, On Petitions for Rehearing, 197 F.2d 1012 (9th Cir.1952).

. Pittsburgh Terminal v. Baltimore & Ohio R. Co., 509 F.Supp. 1002, 1009 (W.D.Pa.1981).

. Judge Adams dissented in the Pittsburgh Terminal case, but concedes that he is now bound by its holding.

. The claims being asserted are not derivative shareholder actions. Thus the special rule as to such claims in Fed.R.Civ.P. 23.1, requiring that the plaintiff be a shareholder at the time of the action complained of, has no application. Compare W. Fletcher, Cyclopedia of the Law of Private Corporations §§ 5980-81 (rev. perm. ed. 1980) (discussing state and federal rules concerning stockholders’ derivative suits) with id. § 5936.1 (discussing decisions holding that shareholder maintaining nonderivative action is not required to own stock at time of events complained of).