Brief for Respondents in Opposition — Supt. of Insurance v. Bankers Life & Cas. Co.

te

. "Supreme Gout, us .

tome Court inf the Pnited Sta tex

October Term, 1976 ree 19 1971

c* No. 5° O-60) % so

pent glcaver, CLERK |

(SUPERINTENDENT or LvsuRANCE oF THE STATE OF hew omen

‘ as Liquidator of MaNHATTAN Casudty Company,

against

-

Petitioner,

Bankers Lire and Casuauty Company, Irvine Trust

- Company, Betcian AMERICAN- BANKING CORPORATION,

Beieian American Bank & Trust Company, Garvin,

BaANTEL & Company, GrorGcE K. Garvin,

"Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE SECOND CIRCUIT =>

RESPONDENTS’ BRIEF IN OPPOSITION é

Isaac M. Bayba,

aes ‘PERSINGER & PARKER,

OFre ounsel.

’

Joun B. DANIELS,

WILLIAM C.F. Kurz,

WINTHROP, STIMSON, PUTNAM

& RoseERrts,

: Of Counsel.

MicHAEL M. MANeEy,

SULLIVAN & CROMWELL,

Of Counsel.

KEvIN SEITS,

Basch, SEIts & SHAPIRO,

, Of C ounsel.

RosBert M. Hart,

PoLETTI FREIDIN PRASHKER

FELDMAN & GARTNER,

Of Counsel.

IRVING PARKER, .

Counsel for Respondent

Bankers Life and- Casualty

Company, .

70 Pine Street,

New York, N, x. 10005.

WILLIAM W. "KaRATz,

Counsel .for Respondent

Irving Trust C OMpOny, .

40 Wall Street,

~ New York, N. Y. 10005.

Witiam E. W1u1s,

Counset for Respondents

Belgian-American Banking

_ » Corporation and Belgian-

American Bank &. Trust

Company, ,

48 Wall Street,

New York, N. Y. 10005.

WILLIAM HELLER,

C ounsel for Respondent

\ Garvin, Bantel & Company,

110 East 42nd Street,

New York, N. Y. 10017.

HERBERT PRASHKER,

Counsel for Respondent ~

George K. Garvin,

77% Third Avenue,

_ New York, N. Y. 10017.

_ .

INDEX .

PAGE

, Preliminary Statement 1

y)

Olfstions Presented : - 1

‘Stalcuent of the ORNG eee roe , 2.

~ Reasons for Denying the Petition “ncaa L. 5

.

I. Petitioner Hak Failed to State Any Claim Under ee

the Federal enact eatoasaeneiens a.

, a mo fas 7

“II The Deeistoref the Second Circyit Is Not In |. :

; Conflict With the Decision of the Fifth Circuit :

. in Hooper y. Mountain States Securities Corp..... 7

TI: ‘Thé Purchaser-Seller Requirement of Birnbaum

v. Newport Steel Corp. Should Not Be nevewed

on the Record In This Case 9

Conclusion ..: poieleass aes ‘11

“ay . . . ; . os j

’ TABLE OF AUTHORITIES

t

@ ~~

_ a PAGE

. Table of Cases: a

Birnbaunt vy. Newport Steel Corp., 193 F.2d 461 (2d

Cir.), cert denied, 343 U.S. 956 (1952 woneeseetecnggptececnnne 2, 9,11

, Dasho v. ‘Susquehanna Corp., 380 F.2d 262 (7th Cir. )s

cert. denied sub nom. Bard v. Dasho, 389 U.S. 977

REPO YF hanscceccsecedcuaces esaceaneceeazpactrstcceyuvetendsccacaseatssustasseavenseass

. 9

_ Erling v- Powell, 429 F.3d 795 (Sth Cir. 1970) -20.2.22... a)

- Greenstein v. Paul, 400 F.2d 580 (2d Cir. 1968) ............ 9

9

Herpich v. Wallace, 430 F.2d 792 (Sth Cir. 1970) .......... 7,

Hooper v. Mountain Statcs. Securities Corp., 282

F.2d°195 (5th Cir. 1960), cert. denied, 365 US. 814

GL: :) 9 eer enn ee 7, 8,11

Iroquois Industries, Inc. v. Syracuse Ciwe Corp., 417

F. 2d 963 (2d ‘Cir. 1969), cert. denied, 399 US. 909

MOT) coerce ce cetreeee eeecssten ieee 9

Mader v. Armel, 402 F.2d 158 (6th Cir. 1968), cert.

denied sub nom. Young v. Mader, 394 U.S. 930 .

GEL: een en Te 9

Pettit v. American Stock Exchange, 217 F.Supp. 21 Gi

- - (S.D.N-Y.. 1963) -.............., Servant kuneasesdcensnastasdanteouvosnaneatvaane

The Greater Iowa Corp. V. McLendon, 378 F.2d 783°

(Sth Cir, 1967) 0: Soh oss smireeceeionccees 9

oa

Table of Statutes asrd” Rules:

Securities “Act of 1933,- Section W(a), 15 USC.

§ 77 q(a) ee re : 2,3

Securitiés: Exchange Act of 1934, Section, 10(b), 15

U.S.C. § 78j(b) .....-- ae Sener eee Poneseecteccosnienecesnnnaness 3,9

Federal Rules of Civil Procedure: . |

RNG TOY ccc rae 3

52010) ene ce 3--

Securities and Exchange Commission Rules: |

Rule 10b-5, 17 C.F.R. 240.10b:5. 3

“ie

New York Civil Practice Law and Rates, Rule 3117 (¢ )

IN. THE

‘Supreme Court of the United States

October Term, 1970

No. 1159

EE ee

SUPERINTENDENT OF INSURANCE OF THE STATE OF NEW YorRK,

_as Liquidator of Mannattan Casuatty CoMPANY,

. Petitioner,

against

- Bankers Lire anp Casuatty Company, Irvine. Trust

Company, BrLgian AMERICAN BANKING CoRPORATION,

Berean American Banx & Trust Company, GARVIN,

_ BaNvTen & CoMPANY,, GrorceE K: Garvin,

Respondents.

RESPONDENTS’ BRIEF IN OPPOSITION ~

Preliminary Statement.

| This\ brief i is submitted ; in opposition to the petition for

a writ of certiorari to the United States Court of Appeals

for the Second Circuit seeking review of the judgment of

that Court which affirmed judgments of the United States —

District Court for the Southern District of New York dis-

missing the complaint for lack of subject matter jurisdiction.

Questions Presented

None of the five numbered questions set forth i in the Peti-

tion justifies review by this Court of the decision below.

Questions “1,” “2” and “5” concern no more than peti-

Ss

e

@ = = ats ————— _ teers

Oe BESS ea OR SONI I T Sarsnasa sae

Se lS eee Sa ey

2

tioner’s mistaken contention that conduct allegedly consti-

- tuting corporate waste and mismanagement is a violation

of the-federal securities acts merely because certain securi-

ties transactions occurred incidental thereto. Question “4”

seeks abolition of the, purchaser-seller requirement first

— enunciated in Birnbaum v. Newport Steel Corp., 193 F.2d

461 (2d Cir.), cert. denied, 343 U.S. 956 (1952), though its

abolition would not affect the result reached by the court

below. Question “3” asserts a conflict between two Circuits

_ which does not exist. ;

| Statement of the Case:

Petitioner initiated this action in August 1963 and al-

leged in his complaint, as the sole jurisdictional basis for

' the action, “violations of Section 17A of the Securities

Act of 1933 (15 U.S.C.A. §77q(a)).” Commencing with the’

respondents’ answers to the complaint, and from time. to

time thereafter, petitioner was put on notice of the lack of

federal jurisdiction. In August 1967 petitioner represented -

that he had completed all of his pretrial discovery by filing

the required Note of: Issue in which he again stated that

“a violation of Section 17(a) of the Securities Act of 1933”

was the jurisdictional basis for the action.

The essence of the complaint is that the late James F.

Begole, a defendant. who was the sole purchaser of all of the

outstanding capital stock of Manhattan Casualty Company

(“Manhattan”), engaged in a scheme, with others, to de-

plete and misappropriate assets of Manhattan and to con-

ceal that misappropriation from the Superintendent of

_- Insurance of New York. In 1965,.in the midst of pretrial

discovery and in apparent recognition of the absence of

_ federal jurisdiction, petitioner commenced an action—still

pending—in the Supreme Court of the State of New York

against the same defendants, alleging virtually, the same

facts, and seeking relief under stateaw identical to the .

relief sought in this action.

3

In an order dated June 19, 1968, the District Court (Hon. —

. Sylvestér J. Ryan) questioned its jurisdiction over the sub-

ject matter of the action and indicated the need for resolu-

tion of that issue.* Respondents thereupon moved to dis-

miss the complaint under Rules 12(c) and 12(h) of the

Federal Rules of Civil Procedure on the grounds that the

District Court lacked subject matter jurisdiction and that

the complaint failed to state a claim under federal law.

On June 3, 1969, the District Court (Hon. William B.

Herlands) filed its opinion granting the motions of respon-

dents Bankers Life and Casualty Gompany, Belgian-Amer-

ican Banking Corporation and. Belgian-American Bank & -

Trust Company. (App. D).** On June 9, 1969, that court

(Ryan, J.) filéd a second opinion granting similar motions

of respondents Irving Trust Company, Garvin, Bantel &

Company and George K. Garvin. (App. E). On July 22,

1970, the. Court: of Appeals for the Second Circuit af-

firmed th® judgments dismissing the complaint. (App. A).

Petitioner’s motions for réhearing and rehearing en banc

were denied on September 30, 1970. (App. B and C).

In opposing respondents’ jurisdictional motions and in

. connection with his application for leave to amend the com-

plaint, petitioner resorted to use of.the entire record ac-

cumulated during the four years of pretrial discovery.

For the first time he asserted that federal jurisdiction was

based upon Section 10(b) of the Securities Exchange Act

of 1934 (15 U.S.C. §78j(b)) and Rule 10b-5 promulgated

thereunder. Judge Herlands considered the motions to dis-

miss on the basis of the allegations of the complaint, the

additional facts presented in petitioner’s brief and peti-

tioner’s “amendatory allegations presented in open court.”

* Thereafter, petitioner served a “Preliminary Pre- trial Memo-

randum” in which. he again claimed as the sole basis for federal

jurisdiction that “This action is based on Section 17A of the Securi-

ties Act of 1933° (15 U.S.C.A. 77q(a) ).” .

** Appendix references are to the appendices to the Petition.

4

2

(App. D, p. 44a). After a comprehensive analysis of all | .

of the facts presented by petitioner, Judge Herlands con _

-cluded that the “complaint in this case presents no more

than a complicated scheme of common law fraud” and held

that there was no federal jurisdiction under either the 1933

or 1934 Acts. (See App. D, p. 56a).

Judge Ryan, in granting the motions before him, ex-.

pressed full agreement with the opinion of Judge Herlands

and also found that the “fraud alleged was not ih the pur-

chase or sale of securities, but was waste of Manhattan’s

assets by diversion and misappropriation of its securities.”

He further agreed “with Judge Herlands that ‘the complaint’

in this case presents no more than a complicated scheme-of

_common law fraud’ over which there is no independent fed-

eral jurisdiction.” (App. E, p. 58a). Judge Ryan expressly

stated that the dismissal of the complaint was without °

prejudice to the prosecution by petitioner of his pending

New York Supreme Court action. (App. EB, p. 58a).*-

Similarly, the Court of Appeals in affirming the judg-

‘ments of the District Court stated that it did “not decide

that the creditors of Manhattan do not have any remedy

under general state tort law for the fraud practiced on

their debtor, but only that the federal Securities Acts have

not provided a federal forum for its enforcement.” (App.

A, p. 12a). a

As the opinions of the courts below and the Petition it-

self. plainly evidence, the facts presented by this case are

“highly individualized”. (A’pp. D, p. 51a,.n.16). For this

reason and because, as wiJl hereinafter appear, the grounds

upon which the Petition is based de not present any “spe-

* New York Civil Practice Law and Rules, Rule 3117(c), provides

- in part: “When an action has been brought in any court of any state

or of the United States and another action involving the same sub-

ject matter is afterward brought between the same parties or their

representatives or successors in interest all depositions taken in the

former action may be used in the latter as if taken therein.”

3D

cial and important reasons” ‘justifying further review of

the questions decided below, it is eel submitted that

the Petition should be denied. :

« . -

Reason¢ For Denying the Petition

Le

-

Petitioner has failed to state any claim under the

Federal Securities Acts. |

Petitioner asserts that during the course of certain trans-

actions, which occurred between January 1962 and April

1963, Manhattan was defrauded of certain assets by defen-

dant Begole and others, that those assets were -used to

finance Begole’s acquisition of the outstanding capital stock

of Manhattan, and that the misappropriation of Manhat-

tan’s assets was concealed in a camplex series of transac-

tions. Petitioner contends, in effect, that Begole’s self-

inflicted fraud as the sole stockholder-purchaser of Manhat-

tan is actionable under the federal securities laws merely

"because secnrities transactions occurred ‘incidental to it.

While in his complaint, petitioner ‘alleged that ‘the 1933

Act was violated by defendant Begole’s purchase of the out-

standing/Manhattan capital stock, in opposing respondents’

jurisdic ional motions he reformulated his theory and urged

that the alleged misappropriation of Manhattan’ Ss assets

_ Wlolated the securities Jaws because Manhattan’ s govern-

ment securities were sold and various certificates of deposit

‘were purchased. (App. D, p. 44a).*

* There is no need for respondents to bé drawn into any dispute

as to those matters which are set forth as purported facts in the

Petition’s cae ef the Case” and which bear little resemblance

to the allegations of the complaifit or the.pretrial discovery record.

The Court of Appeals, as the Petition acknowledges (p. 13), in af-

firming the judgments of the District Court, considered petitioner’s

version of the facts and concluded that a federal claim had not been

stated.

nade 2

6 ao

Petitioner has never claimed, and after exteusive pretrial

discovery is unable to claim, either that the alleged misap-

propriation of Manhattan’s assets resulted in any injury to

any shareholder or investor or that any market for any

| security was manipulated or otherwise abused.

Petitioner’s disagreement with the decision of the Court

of Appeals is primarily based upon what he characterizes

as the “terms of the sale test”. (See Petition, pp. 14-16, 18,

21). Petitioner mistakenly contends that the Court of

Appeals held the federal securities laws inapplicable by

looking only to “the terms of the sale” of the various |

securities. involved. The contention”. is demonstrably

incorrect.

The Court of Appeals held, as did the District Court, that —

’ a federal claim had not been stated because the misappro-

priation of Manhattan’ 8 assets was not, in the language of

the 1934 Act, a fraud ‘ in connection with the purchase or

sale of any security.” In interpreting those words the

courts below did not confine themselves to any “terms of the

sale test”, but properly inquired into the scope and purpose

of the Congressional enactment: (App. A, pp. Ila-12a;

App. Dy. pp. 49a-50a). As was so sais stated by. the Court

of Appeals :

either the securities markets or the investing public.

Nod stockholders were defrauded, no investor injured. -

The purity of the security transaction and the purity.

of the trading process were unsullied. There was.no

danger that the securities sold would be overvalued

. on reaching the public markets. 2 CAND, Ax Dp. Ha).

The Court of Appeals went on to state that the civil lia-

bilities provisions of the federal securities acts “were ‘part

of a broad integrated program designed to obtain honest -

dealings in. securities,’ Wilko v. Swan, 127 F.Supp. 55, 58

“The fraud alleged in this case in no way affected

44

@ |

ish

a a eS ee PEP

(S.D.N.Y. 1955), not one to create an .unlimited federal

right of action for damages for all. who have been

defrauded in any area of economic activity.” (App. A, pp.

11a-12a). —_

The acts of corporat onal and mismanagement alleged |

by petitioner do not. gonstitute wrongs which the federal.

securities laws: were intended to remedy. As the Court of

Appeals for the Fifth Circuit recently stated in H. erpich v.

Wallace, 430 F.2d 792, 809 (1970):

“If Congress had intended that.the federal courts

inquire into every decision affecting the management

of corporations and then fashion a new federal law

_ Superseding state law on the fiduciary responsibility

of corporate directors, officers, and controlling per-

sons, presumably so revolutionary a federal inter-

vention into an area traditionally handled .by the

‘states would have pecn clearly expressed.”

. .

.

~

e “y \

. ~ 4

' The decision of the Second Circuit is not in conflict.

with the decision of the Fifth Circuit in Hooper v.

Mountain States Securities Corp. —

Petitioner claims that the decision of the Court of

Appeals for the Fifth Circuit in Hooper v. Mountain States

Securities Corp., 282 F.2d.195 (5th Cir. 1960), cert. denied,

365 U.S. 814 (1961), which also decided Herpich v. Wallace,

' supra, conflicts with the decision of the Court of Appeals

for the Second Circuit in this case. In so arguing, however,

petitidner ignores: the fact that in Hooper the Court of

Appeals found the relationship, absent in this case, which

must exist ‘between an alleged fraud and a securities trans-

action for a federal claim to be stated.

mentee gine 2 ae vas tah ele OR Te oc Sea ed Sc oe ENCE Ae EY, SE YI! SLES SED: LICE SIR ROR NBER SPS: ie: AES TE

; oa 35 .

\

‘In Hooper, a trustee in bankruptcy was permitted to.

maintain an action on behalf of-a eorporation whose stock

had been issued and, without registration, distributed to

the public. It was ‘held that the plaintiff sufficiently

alleged a violation of federal law because the transfer agent

for the corporation was induced, by fraudulent representa-

tions of the officers of the corporation, to issue stock of the

corporation for inadequate consideration, so that the cor-

poration was found to be a defrauded “seller” of that stock.

As Judge Herlands, inf examining. Hooper, stated below:

Because the purpose and object of the scheme were

to have valuable corporate stack issued . ... in ex-

change for worthless consideration, and then to dis-

tribute the stock publidly, the fraud was definitely -

“fn connection with’ the purchase and sale of securi- .

ties. The scheme induced an unfair sale of securities

and it had as a major purpose the spread of watered

stock to many investors.” (App. D, p. 55a).

Petitioner has never contended that any comparable

wrongdoing occurred in this case. Analyzing petitioner’s

' version of the facts and the relevant statutory provisions,

the courts below found that no federal claim could be .

_,asserted because, unlike Hooper, this case involves no

-manipulation or other abuse of any securities.market or the .

trading process, no impurity of. any security transaction,

and no possibility of any injury to Renarenaniers or the in-

' vesting public.

_ Accordingly, the decision of the Court of Appeals for the

Second Circuit her¢in is fully consistent, and not in conflict,

with the decision of the Court of Appeals for the Fifth

Circuit in Hooper. |

ca

III.

«

The. purchaser-seller requirement of @Birnbaum v.

Newport: Steel Corp: should not be reviewed on the :

record in this case.

\

The courts below held that- petitioner, Suing on. behalf -

,of Manhattan, had no standing to assert any federal claim

with respect to the sale, of the Manhattan capital stock

since Manhattan was Mither a purchaser nor a seller of

those securities. ° Birnbaum,v: Newport Steel Corp., 193

F.2d 461 ¢2d “Cir.), cert. denied, 343 U.S.. 956 (1952).

Birnbaum held that only a defrauded purchaser or seller .

could maintain a private damage action under Section 10(b)

of the 1934 Act for alleged fraud “in connection with the ©

purchase or sale of any security.” That holding has been

uniformly and repeatedly followed by every Circuit con-

sidering the issue. See Greenstein v. Paul, 400 F.2d 580

(2d Cir. 1968) ; Herpich v. Wallace, 430 F.2d 792 (5th Cie.

1970); Mader v. Armel, 402 F.2d 158 (6th Cir. 1968), cert.

denied sub nom. Young v..Mader, 394 U.S. 930 (1969); Dasho

.

v. Susquehanna Corp., 380 F.2d 262 (7th Cir.), cert. denied

sub nom. Bard v. Dasho, 389 U.S. 977 (1967); The Greater

Iowa Corp. v. McLendon, 378 F.2d 783 (8th Cir. 1967) ; and

Erling v. Powell, 429 F.2d 795 (8th Cir. 1970).

Only one year ago, the Court of Appeals for the Second

Circuit ‘reaffirmed the purchaser-seller requirement. Iro-

quois Industries, Inc. v. Syracuse China Corp., 417 F.2d

963 (2d Cir. 1969), cert. denied, 399 U.S. 909 ala The

court, in that case, stated:

“The Birnbaum rule recognizes the policy of Con-

gress in enacting Section 10(b) and of the Commis-

sion in adopting Rule 10b-5, namely, the protection of

defrauded purchasers and sellers. It is not the prov-

ince of the courts to extend Eeoon 10(b) to apply

se

RPL. FORE SBE ALR NILE NEES LIYE PRED LE LES LE GY ELLOS IIE LOT rn ee Pee AP ot Th) MET he eR

10

to transactions not interided to be-covered by Con-

gress. We do well to heed the words of Mr. Justice

“Black, writing for the -Court in a case about an-

other section of the 1934 Act, Blau-v: Lehman, 368

,U.S. 403, 413, 82 S. Ct. 451, 457, 7 L: Ed. 2d 403

(1962) : ee

we ‘Congress | can. ind might amend [the Aet] if the

. Commission would present to it. the policy argu-

Congress is the proper agency to change an inter-

pretation of the Act unbroken since its passage,

if the change is to be made.*” 417 F.2d at 969.

' Pefitioner nevertheless asserts that the long-standing

purchaser-seller requirement. should be abolished. He

argues that the holding that he has no standing .to assert

a federal claim with respect to the sale of the Manhattan

gapital stock presents to this Court the question of whether

that requirement ‘should be eliminated. However, review

of that requirement by this Court is not merited on the

record in this case because the decisions of the.courts below |

would not be changed even if the purchaser-seller requires

ment.were abolished.

The courts below held that petitioner did have wanding

to assert a federal claim with respect to the sale of Man-

hattan’s Government securities. Nevertheless, the courts

concluded that petitioner was unable to plead a federal

_ claim. (App. D, pp. 44a, 47a-48a; see App. A, p. 9a). The

_ reasoning of ‘the courts below (see Point I supra) in con-

cluding that petitioner could not plead a federal claim

applies not only to the sale-of Manhattan’ s Government

_ securities and the purchase of certificates * of deposit but

iso to the sale of the Manhattan Capital stock. In fact

the District Court explicitly held that, assuming petitioner’s

standing. to assert a federal claim with respect to the sale

of Manhattan’s stock, no federal claim could be stated on

; behalf .of Manhattan with respect to tlie sale of those secu-

- yities. (App. D, p. 48a) The reseoning of the Court of

Appeals — the same result.

ments. it has: presented to us, but we think that’

ar

11 ©

Any standing to sue which might be afforded petitioner

by abolition of the Birnbaum rule would not cure the juris-

dictional deficiency of the complaint, because ‘petitioner

would still have nothing more than a claim based upon an

alleged misappropriation and waste of corporate assets to

which certain securities transactions were incidental. As

the District Court observed in Pettit’ v. American Stock

Exchange, 217 F.Supp 21, 25 (S.D.N.Y. 1963) :

“[Clourts have been ‘disinclined: to allow ‘innumer-

_ able facets. of internal corporate affairs’ to be in-

cluded within federal question jurisdiction on the

basis of a purchase or sale of securities that is only

incidental to a major mismanagement issue.”

Since the outcome of this case cannot bé affected “ the .

abolition of the purchaser-seller. requirement, it is respect-

fully submitted that this i ” not a.proper case for its review. -

. Conclusion

The Petition is devoted in large park to a restatement of

the purported facts of this case and to a renewed effort by

petitioner to discover a formulation of those facts which

may create a suggestion of federal jurisdiction. Notwith-

standing the effort made, the Petition describes no more

than a claim of misappropriation of corporate assets and °

corporate waste. Such a claim does not provide a basis:

for federal relief. i

Petitioner’s contention that a conflict exists between the

decision of the Second Circuit in this case and the decision

of the Fifth Circuit in Hooper is erroneous. Even a cursory

review of Hooper indicates that the facts present in that

case were a paradigm af the evils which Congress sought . _

to prevent by enacting the federal securities laws. In con-

_ trast, as the courts below indicated, the facts alleged here

present no more thin a common law ane not cognizable ,

under the federal securities laws. , ‘

The argumnént that the purchaser-seller requirement

should be set aside has uniformly beef rejected. In any -

“£ .

’ Rosert M. Hart,

PoLettr FREmrn PRASHEER

_ February 19, 1971

12 —

~ event, that requirement should not be reviewed in this case,

the outcome of which cannot be affected by its abolition.

Finally, the issues presented in this case have been care-

fully examined and: correctly determined by the courts

below and do. not present a suitable occasion for this Court

to exereise its discretion to review them. |

The Petition for a Writ of Conon to the United

States Court of Appeals for the Second ‘Circuit should

be denied.

Isaac M.-Baypa, “

Jacoss Perstncer & Parker,

Of Counsel.

Respectfilly submitted,

Tavinc ParKER,

Counsel for Respondent ~

Bankers Life and Casualty

— . Company,

_ 7% Pine Street,

AOEN B. DanIELs,

muaM C. F. Kurz,

\ Win rHROP, Srrmson,

-Purnam & Roserts, .

Of Counsel.

MicHazn M. ._MANEY,

Sutirvan & CroMweELL,

Of Counsel.

_ Kevin Serrs,

Bascu, Serrs & Suarro,

5 & Of Counsel.

_ Ferpman Paecan ‘

- Of Counsel.

- Belgvan-Am

_ New York, N. Y. 10005.

Wruuiam W. Karatz,

Counsel for Respondent

Irving Trust Company,

40 Wall Street,

- New. York, N.. Y. 10005. -

Wititam K. Wixi,

Counsel for Respondents

Belgian-American Banking |

Corporati mn and .

merican Bank &

Trust Company, .

48 Wall Street,

New York, N. Y. 10005.

“Writiam HeEwét

Counsel for Respondent -

Garvin, Bantel & Company,

110 Hast 42nd Street,

_. New York, N. Y. 10017. .

HERBERT SHKER, :

Counsel f Respondent

George K. Garvin,

- 777 Third Avenue,

‘ New York, N. Y. 10017.

, 54 & -_

Question oresenited: eee eee eee eee ee ease 2

Statement _-_%_-___ =~ eee - 2

The interest of the Securities and Exchange Com-

PISSIOD So ho oe eee ee eee 6

Discussion... ...-.-------=------------.----- 7

CONCHIBION Wooo eee ee neces eae yenn ee 13

_ CITATIONS

Cases:

Birnbaum v. Newport Steel Corp., 193 F. 2d

461, certiorari denied, 343 U.S. 956_______- 5.

Ellis v. United States, 206 U.S. 246__.------ -" -8

_ Errion v. Connell, 236 F.2d 447-~__-=_------ 11,12

+ Globe Securities Co.; Lid., 10 SEC 1105_-_--- 12

‘Heit v. Weitzen, 402 F. 2d 909, _ certiorari |

denied, 395 U.S. 903____-..--.-----_---- 9, 10

Herpich v. Wallace, 430 F. 2d 792__:-..-.-.8, 10, 11

Hooper v. Mountain States. Securities Corp., -

282 F. 2d 195, certiorari denied, 365 U.S.

814__.____-_.2-_------, Sede 8, 10, 11-12°

_. Hoover v. Allen, 241 F. Supp. 213_--.----_--- 3

~ J. Case Co. v. Borak, 377 U.S. 426.---.--- Tn

Kahan v. Rosenstiel, 424 F. 2d 161, certiorari

denied, sub nom. Glenalden Corpyv. Kahan, __

308. U.S. 060... .... 5s eee 8,10 ».

Kohlet v. Kohler Co., #19 F. 2d 634..-..---. 9

Los Angeles Tr. D. & M. Exch. v rites.

and Exchange Commission, 285 . 2d 162, _

certiorari denied, 366 U.S. ‘919. Potent eel

McClure v. Borne Chemical Co., 292 F. 2d 524,

certiorari denied, 368 U.S. 939:____- ead wine eb

(I)

419-137—71——-1 .

Ph ° . 7 ae

. 9

. ~ - . a

eh , f

e . ad "

: v

: «

.

° ’

- Cases—Coiitinued a | 2 | * ie

Matheson v. Armbrust, 284 F. 2d 670__------ .. 10:

-: Mills v. Electric Auto-LiteCo., 396 U.S. 375... 7, 12:

Myzel v. Fields, 386 F. od 718.__- See eles 9

-. Pappas v. Moss, 393 F. 2d 865- - --.-----=-- 11

Rekant v. Desser, 425 F. 2d 872-------- _-- 9, 10, 1h

_ Securities and Exchange Commission v. Bowler,

TT OY Oe ree te If

Securities and. Exchange Comaniecion v. “Capital

Gains Research Bureau, Inc.,375 U.S. 180_. 7,8, 9

- Securitiés and Exchange Commission v. Charles .

‘Plohn & Co., CCH Fed. = L. Rep: .» Para.

. +92, 848.0..21.2----2--+---2---+--6------ 12

wns Securities avd Exchange’ Comaniesion v. Cul- ;

- pepper, 270.F. 2d 241___..--------------. ll

Securities and Exchange. Commission v. Federal:

| Shopping Way,’ Civ. Action : No. 7351, em 2

.? affirmed, 433 F.2d-148-_-----,- eateae oe ae |

Securities and Exchange Commission v. Fifth .

‘Avenue Coach Lines, 289 F. Supp. 3 affirmed, .

CCH Fed. Sec. L Rep., Para. 92,880------ ll ¢

Securities and Exchange Commission v.. First...

° Devonshire Corp., 70 Civ. 3752___------- 13: °

_ Securities and Exchange. Commission v. Lawson,

24 F. Supp: 360_..<.+--------------+---- 12

Securities and Exchange Commission v. Na- |

tional Securities, Enc.,393)U-S. 453... 4, 6, 7, 12-18

. Securities and Exchange Cémmission v. Parvin - .

Dohrmann Co., et al., 69:Civ. 4543-------- i

. Securities and Exchange Commission v. Robin- :

«2 son & Co., Civ. Action No. 70-2396, E.D. .

+ Pa_-}----------------+--- fasointidaiteaud 12°»

Securities and Exchange Commission v. Texas ’

Gulf Sulphur Co., 401 F. -2d 833, certiorari

denied sub. nom. Coates vy. Securities and Ex- - —

change Commission 394 U. S.976.....----- 9,10

————

_ 2

.

-Cases—Continued.

>

._ mm 3, gs

- Page

Speed v. Transamerica Corp., 99 K. Supp. 808-12

Stevens v. Vowell, 343 F.52d 374_--------- 2 ‘Ul, 12 .

Tcherepnin v. Knight, 389 -U.S: 832___.----- a 7,8

_ United States v. Mongar, 147 F.'2d 916, cer- . |

tiorari denied, 325 U.S. 859_-_----------- 11

Statutes, rules and regulations: . = .- °

Securities Act of 1933: rn

Preamble, 48 Stat. 74.......-.--.---.-.. 6

’ Section 17(a), 15 U.S.C. 77q(a)--- eee ‘. 2

‘Securities Exchange _ Act.of 1934: 7 _

Preamble, 48 Stat. 881__.....____-- a - 6

- Section 3¢a)(9), 15 U.S.C. 78e(9) __---=--- 11

“Section 8, 15 U.S.C. 78h_.--:-- 22-12

‘Section 10(b), 15 U.S.C. 78j(b)_-----_-- _. passim

Rules under the Securities Exchange ‘Act of |

1934: :

‘Rule 8c-1, 17 CFR: 240.8¢-1____- a 12

' Rule 10b-5; 17 CFR 240. ts ‘___ passim

Miscellaneous: . .

Bromberg, Securities Law: Fraud-SEC Rule

-10b-5___.-------------------------- 8,9

_ Hearings on H.R, 7852 and 8720, House Com-

mittee on Interstate and Foreign Commerce,

73d Cong., 2d Sess. 115-----------.------ » 9

H. Rep. No.‘1383, 73d Cong.; 2d Sess___-+- 9

S. Rep. No. 1455, 73d Cong., 2d Sess. (1934)__ 10

/ Xo

a

al lc ct

é

e,.

Pied

. 3n the Supreme Gurt of the iled Sintes

ge pt

OcTOBER TERM{ 1970 . 24a

te No. 1159 te YS,

Supénry: TENDENT OF INSURANOE OF THE STATE OF New

‘York, AS LiQUIDATOR OF MANE AN CasuALTY CoM-

‘PANY, PEpITIONER |

a |

oe ies LiFe AND CASUALTY ComMPANy, ET AL. .

~

¥ a ° ‘

ON (aa FOR A-WRIT OF CERTIORARI TO ‘PHE. UNITED.

STATES COURZ, OF APPEALS FOR THE SECOND CIRCUIT .

BRIEF FOR THE SECURITIES AND EXCHANGE COMMISSION AS

' AMICUS CURIAE IN § ORT THE PETITION FOR A WRIT

oF CERTIORARI |

7 F

The Solicitor Geherf, 0 on behalf of the Securities

Exchange Commission, i filing this bfief amicus curiae -

because this ease presenfs an important ques ion i in the ©

administratjon of the mans Exchange Act of 1934

which this Court shoild review. ° et

-1 While we recognize that this brie? i is not timely filed under

this Court's Rules, it has not beeh possible to file it at an earlier \

date and we believe the importance of the question nonetheless .

warrants the expression of the Commission’s views. We note that

the parties will not be prejudiced by the resulting delay. Even

allowing a reasonable time,for response, it i#’evident that con-

. sideration of the petition Will be had during the present term of

QQ) 4