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Law School Case Brief

Pinter v. Dahl - 486 U.S. 622, 108 S. Ct. 2063 (1988)


At the very least, the language of § 12(1) of the Securities Act, 15 U.S.C.S. § 771(1), contemplates a buyer-seller relationship not unlike traditional contractual privity. Thus, § 12(1) imposes liability on the owner who passed title, or other interest in the security, to the buyer for value.


An investor, who was a veteran of two unsuccessful oil and gas investment ventures, invested approximately $310,000 with an oil and gas producer in a drilling venture involving leaseholds acquired by and held in the name of the producer. The investor then contacted a number of friends, family members, and business associates about the venture, all of whom, because of the investor's involvement, decided to invest about $7,500 in the venture, although most of them had not met or spoken to the producer or personally toured the leaseholds. The investor helped each of his contacts complete a subscription-agreement form, which the producer had prepared. Each form stated that the venture interests were being sold without benefit of registration under the Securities Act of 1933  and the interests were never registered with the SEC. When the drilling venture failed and the investment interests proved to be worthless, the investor and the contacts brought suit against the producer in the United States District Court for the Northern District of Texas, seeking rescission of their investment agreements on grounds that such agreements constituted the unlawful sale of unregistered securities under 12(1) of the Securities Act of 1933.  The producer counterclaimed, alleging that the suit was barred by the doctrine of in pari delicto. The lower court granted judgment for respondents and held that the doctrine of in pari delicto was inapplicable in an action under § 12(1) and that the investor was not considered a seller within the meaning of § 12(1).


Is the common law defense doctrine of in pari delicto applicable in this action alleging unlawful sale of unregistered securities?




The United States Supreme Court reversed and held that the common-law in pari delicto defense was available in a private action brought under § 12(1). Moreover, the Court held that one did not have to confer a benefit on himself or on a third party in order to qualify as a seller within the meaning of § 12(1). Thus, the Court remanded for a determination of whether respondent bore substantially equal responsibility for the failure to register and distribute the securities and whether respondent was primarily a promoter of the offering.

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