holding that reliance is an element of a Rule 10b-5 claim, and that enforcing a nonreliance clause is inconsistent with Section 29(a)’s prohibition on anticipatory waiver
How later courts described this case
- holding that reliance is an element of a Rule 10b-5 claim, and that enforcing a nonreliance clause is inconsistent with Section 29(a)’s prohibition on anticipatory waiver
- interpreting substantively identical provision of Utah’s Uniform Securities Act as not requiring reliance and citing several decisions of other states' courts reaching a similar conclusion
- finding that enforcement of a non-reliance clause to bar a Rule 10b-5 fraud claim as a matter of law would be inconsistent with 15 U.S.C. § 78cc(a)
- noting that determination of reasonable reliance must “be made on a case-by-case basis based on all of the surrounding circumstances”
Written by the judges who cited it.
The opinion
CLIFFORD, Senior Circuit Judge.
I agree the case should be reversed, but disagree on the evidentiary use of the stipulations and waivers on remand.
Section 29(a), 15 U.S.C. § 78cc(a), states, “Any ... stipulation ... binding any person to waive compliance with [the Securities Exchange Act] ... shall be void.” AES and Dow’s stipulations are waivers of compliance, and under the express terms of section 29, they are “void.” The majority holds that the void stipulation can nonetheless be evidence of the reasonableness of AES’s reliance. I write separately because I cannot join in the majority’s interpretation of the word “void.”
A void clause is “of no effect whatsoever.” BlacK’s Law DICTIONARY 1568 (7th ed.1999). It is “an absolute nullity.” Id. It is “ineffective,” “useless,” “having no legal force or validity.” The AmeRican Heritage DICTIONARY 911 (4th ed.2001). If we permit the void stipulation to have evidentiary value, it is no longer a nullity, ineffective, or useless. Instead, it becomes a very potent weapon in the 10b-5 defendant’s arsenal. This is precisely what section 29(a) prohibits.
At its core, section 29 seeks to prevent parties from contractually avoiding the requirements of Rule 10b-5. If the void stipulation may be evidence in a later Rule 10b-5 claim, how likely is it that the seller of securities will lose the 10b-5 claim? Imagine the mountains of evidence the 10b-5 plaintiff will need to compete with the evidence of the stipulation. Realistically, how will a plaintiff convince a reasonable juror that he reasonably relied on a representation when he signed a provision that stated otherwise? To permit the void stipulation to serve as evidence of a lack of reasonable reliance would be to take the teeth out of section 29. It would make a 10b-5 claim logically possible, but essentially hopeless. Congress meant more when it enacted section 29(a).