Court Opinion

ID: 8911556
Source: CourtListenerOpinion
Date Created: 2022-11-27 03:13:26.081475+00
Date Added: 2024-06-11T17:08:34.292889
License: Public Domain

LAYTON, District Judge,
dissenting.
I agree with the majority that no federal cause of action exists based upon the mean*302ing of the word “create” in Sec. 322 of the Act here under consideration. However, I respectfully dissent from the opinion of the majority, concluding that a private right of action may be implied.
One of the basic questions is the effect of Touche Ross upon Cort. Does it not, essentially, render Congressional intent the sole criterion for implying a private cause of action?
Nor am I persuaded by the reliance of the majority on Transamerica Mortgage Advisors, Inc. as authority for the proposition that a private cause of action can be implied under the language of this Act. That case involved an unusual provision in the Investment Advisors Act, not at all analogous to this case, wherein Congress created a right of action on behalf of investors wherein certain types of contracts might be declared void. The majority, relying on this provision and citing certain language of Commissioner Douglas during the Committee hearings,* reached the conclusion that a private right of action was intended.
I am unable to agree. Not only, as just stated, was the provision of the Act declaring certain types of contracts void completely foreign to the provisions of the Act here under consideration but, with deference, I submit that the circumstantial evidence to be gleaned from the Committee hearings preceding the passage of this Act points more strongly to an intention on the part of Congress to use the state, not federal, courts for a remedy. In this connection, I quote from an article in the Tulane Law Review by Charles E. Dropkin, entitled Implied Civil Liability Under the Trust Indenture Act. The language concerns not only the Act under consideration, but certain other language of Commissioner Douglas at the same hearings.
When Congress enacted this key section, it intended neither to allow bondholders resort to a federal forum nor to federalize the prudent man concept. It simply sought to mandate that a particular private contract, namely the indenture, should now contain a provision establishing the appropriate standard of trustee conduct during default administration. As Commissioner Douglas testified: ‘The indenture, after it has been ‘qualified’ under this statute, will be enforceable, in the same manner as any other contract is enforceable, in the same manner that indentures presently executed are enforceable’. An indenture is nothing more than a private contract and should be treated as such. Since ordinary contract disputes are resolved in state courts under state law, so also should indenture disputes continue to be settled.
52 Tul.L.Rev. 299, 323 (1978) (My emphasis).
This conclusion is strongly fortified by placing the testimony of Commissioner Douglas, and particularly his use of the word “presently”, in the context of the time of these Congressional hearings, which was 1938, over forty years ago. Unlike the present, there was then no controversy in the courts as to the proper forum in which indenture abuses should be resorted to. Legal thinking simply assumed that the state courts were the proper forum and an examination of a number of cases seems to fortify this conclusion. E. g., Gouley v. Land Title Bank & Trust Co., 329 Pa. 465, 198 A. 7 (1938); Fleener v. Omaha Nat’s Co., 131 Neb. 253, 267 N.W. 462 (1936); Newhall v. Norristown Trust Co., 280 Pa. 195, 124 A. 337 (1924).
For these reasons, I feel that the conclusion of the majority as to the existence of Congressional intent is quite inconclusive. However, even if we employ the remaining Cort considerations as a means of inferring the presence of such intent, the result is, at best, ambiguous. Although plaintiffs here *303are of the class for whose benefit the statute was passed, and it is consistent with the legislative intent to imply a right of action in plaintiffs, the remedy is traditionally a matter of state law.
Under these circumstances, and in the light of the apparent intention of the Supreme Court to limit sharply the doctrine of implication, see Touche Ross & Co. v. Red-dington, supra, I would hold that no federal cause of action is implied under this Act.

 The majority has cited testimony before Congress by Commissioner Douglas indicating that the Act aimed at dealing with the problem “in a uniform way”. Slip op. at 299 n.23. In view of the structure of the Act, however, I think it likely that Commissioner Douglas was stressing the importance of creating uniform provisions in the indenture, not a uniform forum. The Act, by its terms, requires certain uniformity among the contracts governing debentures. Indeed, certain legislative history quoted by the majority supports the proposition that the focus of the Act is the content of the indenture. See slip op. at 297.