# Petitioners Reply Brief — First Boston Corp. v. Chris-Craft Industries > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_2113%3A5 ## Record - **Collection:** Supreme Court brief - **Document type:** Petitioners Reply Brief - **Published:** January 1, 1975 - **Citation:** 423 U.S. 944 ## Text FOR ARGUMENT No. 75-354 IN THE Supreme Court of the United October Term, 1975 THE FIRST BOSTON CORPORATION, Petitioner, v CHRIS-CRAFT INDUSTRIES, INC., Respondent. On WRIT OF CERTIORARI TO THE UNITED STATES CourRT OF APPEALS FOR THE SECOND CIRCUIT CONSOLIDATED WITH Nos, 75-353 AND 75-355 FIRST BOSTON’S REPLY BRIEF Davip W. PECK 48 Wall Street, New York, New York 10005. Counsel for Petitioner Louis Loss The First Boston Corporation Of Counsel ARTHUR H. DEAN JOHN F. ARNING JOHN L. WARDEN CHARLES W. SULLIVAN PHILIP K. HowarD SULLIVAN & CROMWELL Of Counsel September 16, 1976 INDEX PAGE THE ISSUES FOR DECISION ...........-000ee005: l EE Cree neebeecsdesocteovcersveceece 5 PT Jiu degheeSeedesdcccccccoesccoces 10 ee scene k es catdedscecseeeens 16 ee eae dees deueareacecesecs 17 ee a cet us ede bedsecesseeneess 18 diced eneeenndsecdedne ses cee 19 AUTHORITIES CITED CASES: Affiliated Ute Citizens v. United States, 406 US. ite eee deteeseeneeeneoes bens 16, 17 Barnes V. Osofsky, 373 F.2d 269 (2d Cir. 1967) .. Y Berenyi Vv. Immigration Director, 385 U.S. 630 inp heeeeanenebnuees éébdeunadaded 3 Blue Chip Stamps v. Manor Drug Stores, 421 U.S. EE Dh sc echiesShdieeudeudndeneceee 9,10 Cort v. Ash, 422 U.S. 66 (1975) ..........04.. 6 Electronic Specialty Co. v. International Con- trols Corp., 409 F.2d 937 (2d Cir. 1969) .... 8,9 Ernst & Ernst v. Hochfelder, 96 S. Ct. 1375 i scheebewsGed Geeks veducessies 10, 12, 13, 14 Fischman v. Raytheon Mfg. Co., 188 F.2d 783 ee i adie eawradabees 10, 12 GAF Corp. Vv. Milstein, 453 F.2d 709 (2d Cir. 1971), cert. denied, 406 U.S. 910 (1972) .... 8 Gerstle v. Gamble-Skogmo, Inc., 478 F.2d 1281 oe ca ive ceheeddeedeséiaets 11 J. 1. Case Co. Vv. Borak, 377 U.S. 426 (1964) .... 6,8,9 ’ > ii Cases (Cont’d): PAGE Mills v. Electric Auto-Lite Co., 396 U.S. 375 SE heketesedcdsntwavenestaeuenen 4, 8, 16, 17 H. K. Porter Co. v. Nicholson File Co., 482 F.2d Se Se SD i'6 ce udndudueenueeanenns 7,8 Rondeau v. Mosinee Paper Corp., 422 U.S. 49 SE 2tkcndcccinwts taededabanaenteneae 4,7 Ronson Corp. Vv. Liquifin A.G., [1973-1974 Trans- fer Binder} CCH Fep. Sec. L. Rep. { 94,369 (D.N.J.), aff'd, 497 F.2d 394 (3d Cir. 1974) .. 8 Sargent v. Genesco, Inc., 492 F.2d 750 (Sth Cir. SE savednekdusedungeedansceeeeaus 7 Smallwood v. Pearl Brewing Co., 489 F.2d 579 (Sth Cir.), cert. denied, 419 U.S. 873 (1974) .. y TSC Industries v. Northway, Inc., 9% S.Ct. 2126 SEED nnounced a rule of law equating violation by corporate fiduciaries of the disclosure requirements of the proxy rules with legal injury to shareholders and, hence, with liability in a private action by such shareholders. If Mills has any direct application outside the shareholder- proxy context, which is questionable, it provides abso- lutely no basis for erecting a legal presumption of injury *0 First Boston was, in reality, not an “appraiser” at all and rendered no opinion on value to the public shareholders of Piper; First Boston did render to the Piper family, as required by their contract with Bangor Punta, its opinion that the package Bangor Punta proposed to offer to Piper’s public shareholders had a market value of $80 per Piper share. *! There is, of course, a question of damage causation raised by the compensation of Chris-Craft for market loss. 17 to one party by reason of an allegedly material omission in a statement made to someone else.** Chris-Craft both relies on the Court of Appeals’ erroneous presumption and asks this Court to find causa- tion by factual inferences (Chris-Craft Brief 82). The District Court, which considered and made findings on causation as a factual matter, found that the evidence did not justify any such inference (A145-46). Those findings are clearly correct and were unquestioned by the Court of Appeals, which felt compelled by its “Mil/s-Ute test” to presume injury (A59-60). Since injury, i.e., compensable loss proximately caused by the defendant, is an essential element in establishing liability in a civil action for money damages and was not proved by Chris-Craft, reversal is required on this ground alone. IV. Relief We note only the following as to relief, which is fully discussed at pages 46-55 of our main brief: The SEC now agrees that the rescission offer decreed at its instance may have fully remedied any injury done to anyone by the BAR omission (SEC Brief 149-50 n.359). Certainly that is so as to Chris-Craft, which bases its claim on a derivative presumption of injury. There- fore, no damages should be awarded. 22 See generally Note, Chris-Craft: The Uncertain Evolution of Section 14(e), 76 Cotum. L. Rev. 634, 655-57 (1976). Even Ute did not rely on Mills to postulate injury, but to find reliance in a situation ohens a factual inference of reliance by the plaintiffs was virtually inescapable and their injury was indisputable. 18 The Solicitor General in his statement appended to the SEC’s brief calls to the Court’s attention the earlier ex- pressed view of the United States that the Court of Appeals took “an incorrect approach in measuring dam- ages” (SEC Brief 198). The SEC agrees on the limitation of First Boston’s liability, as noted above, and tacitly con- cedes the broader proposition (SEC Brief 161 n.370). V. Summary Error pervaded every aspect of the decision below. The law was improperly construed and applied on ques- tions of culpability, causation and damages. The Court of Appeals’ analysis and understanding of the character of First Boston’s conduct as to the Bangor Punta regis- tration statement were particularly askew, both factually and legally. The basic inapplicability to this type of litigation of rules developed by the courts to protect defrauded or misled investors is itself grounds for denying the judicial implication of a cause of action for damages here. When litigation is focused on theoretical deceit, unconnected to any loss by the allegedly deceived, a predictable result is confusion and arbitrary decision. Such litigation puts honest businessmen in peril of their property and reputations, encourages certain businessmen to view the judicial process as a new area of diversification, and materially interferes with the functioning of capital mar- kets. Congress never intended to foster litigation of this nature, and it is devoid of social utility. 19 A full examination of all aspects of this case confirms that § 14(e) should not be construed to afford a cause of action for damages to contestants for control, and certainly not a cause of action against an underwriter of a rival exchange offer. Conclusion For the reasons stated herein and in our main brief, the judgment should be reversed and the complaint dis- missed. Respectfully submitted, Davin W. PECK 48 Wall Street, New York, New York 10005. Counsel for Petitioner The First Boston Corporation Louis Loss Of Counsel ARTHUR H. DEAN JOHN F. ARNING JOHN L. WARDEN CHARLES W. SULLIVAN PuitiP K. HOwArRD SULLIVAN & CROMWELL Of Counsel September 16, 1976 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_2113%3A5. Public record. Not legal advice.