Blue Chip Stamps v. Manor Drug Stores

421 U.S. 723, 95 S. Ct. 1917 (1975)



The principal express non-derivative private civil remedies, created by Congress contemporaneously with the passage of § 10(b) of the Securities Exchange Act of 1934 (1934 Act), for violations of various provisions of the Securities Act of 1933 and the 1934 Act are by their terms expressly limited to purchasers or sellers of securities. Thus § 11 (a) of the 1933 Act confines the cause of action it grants to "any person acquiring such security" while the remedy granted by § 12 of that Act is limited to the "person purchasing such security." Section 9 of the 1934 Act, prohibiting a variety of fraudulent and manipulative devices, limits the express civil remedy provided for its violation to "any person who shall purchase or sell any security" in a transaction affected by a violation of the provision. Section 18 of the 1934 Act, prohibiting false or misleading statements in reports or other documents required to be filed by the 1934 Act, limits the express remedy provided for its violation to "any person who shall have purchased or sold a security at a price which was affected by such statement." It would indeed be anomalous to impute to Congress an intention to expand the plaintiff class for a judicially implied cause of action beyond the bounds it delineated for comparable express causes of action.


In a civil antitrust action brought by the United States against a corporation engaged in the business of providing trading stamps to retailers, the Court entered a consent decree, which contemplated the merger of the corporation into a newly formed corporation under a plan requiring the new corporation to offer a substantial number of its shares of common stock to retailers who had used the stamp service in the past but were not shareholders in the old corporation. The plaintiff retailer filed the present class suit, alleging that the defendant new corporation violated the antifraud provisions of the Securities and Exchange Commission's Rule 10b-5 by statements, in the prospectus prepared and distributed by the defendant, which constituted an intentional overly pessimistic appraisal of defendant's status and future prospects. The District Court dismissed the complaint for failure to state a cause of action. On appeal, the United States Court of Appeals for the Ninth Circuit reversed.


Did the plaintiffs have standing to sue for violation of Rule 10b-5?




The Court held that held that the plaintiffs were not entitled to sue for violation of Rule 10b-5, since they neither purchased nor sold any of the offered shares.

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