Affiliated Ute Citizens of Utah v. United States

PETITIONER:Affiliated Ute Citizens of Utah
RESPONDENT:United States
LOCATION:Christian County, Kentucky

DOCKET NO.: 70-78
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: United States Court of Appeals for the Tenth Circuit

CITATION: 406 US 128 (1972)
ARGUED: Oct 18, 1971
DECIDED: Apr 24, 1972

ADVOCATES:
Potter Stewart – .
Mr. Attorney General
A. Raymond Randolph, Jr. –
Marvin J. Bertoch – for respondents First Security Bank of Utah, N.A., and others
Parker M. Nielson – for petitioners

Facts of the case

Question

Audio Transcription for Oral Argument – October 18, 1971 in Affiliated Ute Citizens of Utah v. United States

William O. Douglas:

70-78, Affiliated UTE Citizens versus United States.

Mr. Attorney General:

Mr. Justice Douglas, and may it please the Court.

I move the admission pro hac vice of A. Raymond Randolph for the purpose of arguing this case.

Mr. Randolph is a member of the Bar of the State of California and a member of my staff, and I recommend him to the Court.

William O. Douglas:

Your motion is granted.

Mr. Nielson, you may proceed when you’re ready.

Parker M. Nielson:

Mr. Justice Douglas and may it please the Court.

The matter now at bar involves the seemingly unrelated provisions of the Securities Exchange Act of 1934 and the Ute Termination Act of 1954.

These two seemingly unrelated statutes are drawn into focus in this case because both of them involved prohibitions against overreaching and both of them create limited fiduciary obligations with respect to those who are subject to their provisions.

The Ute Termination Act of 1954 had the effect of dividing the Ute Indian Tribe of the Uintah and Ouray Reservations into two entirely artificially created groups and directing that all of the assets of the reservations, including in particular, as far as the fact of this case are concerned, beneficial interest in the mineral estate, were to be divided between the two groups and to be distributed to the — the Indians about to be terminated.

Now, I note in passing that those who are responsible for the drafting of this law have referred to the group that was about to be terminated as mixed-bloods.

The term “mixed-blood” is itself a slur, and it is offensive to the petitioners in this case who prefer to be referred to by the term “terminated Utes”.

The petitioner Affiliated Ute Citizens of the State of Utah is the authorized representative of all the terminated Utes, which was formed in the manner specified in Section 6 of the Ute Termination Act by a constitution and bylaws which was duly ratified by the majority vote of all of the adult terminated Utes at a special election called by the Secretary of the Interior.

Why the statute of course, talks about mixed-blood and the only terminated Utes are those who were referred to in the statute as mixed-blood, isn’t that correct?

Parker M. Nielson:

That is correct, Mr. Justice Stewart.

When I made reference to that circumstance, what I had in mind is that in reality, if we want to talk in terms of the ancestry of the Indians on this reservation, all of them are indeed mixed-bloods.

(Voice Overlap) talking?

I thought it might helpful to talk in terms of the statute.

Parker M. Nielson:

Yes.

And the statute does use that phrase throughout.

Parker M. Nielson:

It does, Mr. Justice Stewart, and my point simply was that the term itself is offensive to the petitioners and they have designated themselves otherwise in these proceedings.

(Inaudible)

Parker M. Nielson:

The statute that so provide.

No one in these proceedings disputes that the Affiliated Ute Citizens was the organization which was formed in the manner specified by the statute.

There is, however, a rival organization, which we will discuss in some detail in these proceedings, known as the Ute Distribution Corporation.

The Ute Distribution Corporation is a corporation formed under the corporate laws of the State of Utah.

It was not formed by the adoption of a constitution and bylaws, it was not ratified by a majority vote of all terminated Ute Indians nor was it considered at a special election called by the Secretary for that purpose.

That’s the crux of the problem in this case.

These are the — these two rival organizations is the question of how the powers of the authorized representative could have been transferred from the Affiliated Ute Citizens, who admittedly were originally invested with those powers, to the Ute Distribution Corporation.

It is, thus, a conveyancing problem, plain and simple.

Parker M. Nielson:

And I invite the Court to pay particular attention to the manner in which it is proposed that those powers were shifted one — from one organization to the other.

The question turns on the definition of authorized representatives as contained in the Act.

We’re not concerned for the purpose of that definition with the question of ownership of property.

Section 10 of the Ute Termination Act which is the Section which defines the — the authorized representative powers refers exclusively to the question of powers to manage the jointly held and — and restricted assets of the two groups of Indians in the mineral estate.

It does not speak in terms of ownership of property.

The United States has proposed that the powers were transferred from AUC to UDC by virtue of the provisions of Section 13 of the Termination Act.

Section 13 by contrast speaks only and speaks exclusively of powers with respect to the ownership of property.

The joint — the — the authorized representative powers were not powers that had any relationship to the ownership of property and in particular, to the ownership of property by the individual mixed-blood or terminated Ute Indian, which is all that Section 13 relates to.

The individual petitioners in these proceedings are members of the Affiliated Ute Citizens who have brought a fraud claim based upon their sale of stock in the Ute Distribution Corporation.

Now, for the purpose of their fraud claim, and this distinction must be kept in mind, the question of the regularity of the formation of the Ute Distribution Corporation is not an issue.

It is not an issue because the proceeds from the management of this joint mineral estate over the period of time that we’re here concerned with has been paid in the form of dividends through the Ute Distribution Corporation.

The recognition at this point that the Affiliated Ute Citizens as the proper authorized representative will not have the effect of restoring to the terminated Utes the dividends or the royalties which they have lost by reason of — of those practices.

Thus, the regularity of Ute Distribution Corporation is an issue with respect to the Affiliated Utes part of the claim, it is not an issue with respect to the individual Indians fraud claims in the real side of this case.

The defendants in the fraud claims are the First Security Bank of Utah and two of its officers.

The United States was not a defendant in the fraud claims.

The conduct of the bank and its officers arises by reason of its conduct in executing its duties under a business agent agreement which contemplated that they were to act as stock transfer agent to hit the books and reference of the corporation and perform certain incidental services.

It is the common element of the conduct of the bank pursuant to that practice which are important as far as the fraud claims are concerned.

These common elements affected every Indian sale.

It doesn’t really matter who the sale was — was negotiated with.

The common elements affected necessarily affected every sale.

By common elements I refer to the fact that every Indian stock certificate, which had bold, red letter legend, warning him of — of its value and of restrictions on its transfer were locked up in the bank walls and the bank refused to make those certificates available to any Indian prior to August 27, 1964 even when he requested them and made no alternate effort to convey the purport of those warnings to the — to the Indian who desire to sell his stock.

That practice affected every Indian.

The bank and its officers were also acting in a capacity which we could loosely refer to as a market making function, that is they were encouraging purchasers of the stock, many of whom are located throughout the United States.

They were encouraging the — the sale of stock.

And in many cases, they were doing these things through the medium of agents on both sides.

That practice affected every Indian sale notwithstanding who he may have sold to.

In every Indian’s sale, there was also a deviation from the regulatory provision which had been promulgated by the Secretary of the Interior.

Specifically, the regulations require that any sale must be by endorsement of the certificate itself, never in the history of the Ute Termination Act, at least prior to August 27, 1964, was a sale negotiated in that fashion.

The regulations also required that the superintendent of the reservation supervise the price and the terms of the sale according to the terms of the offer which require payments by cashier’s check, certified check or postal money order, never was a sale supervised in that fashion.

Those practices affected every Indian’s transaction.

Parker M. Nielson:

Also, the bank and its officers neglected and failed to disclose to any of these Indians that they were acting on its dual capacity as market maker in relation to the stock.

Now, it is true that there are also a large number of other facts which affected any particular Indian stock and the petitioner certainly take the position that those dissimilar facts standing alone would be sufficient to give rise to a fraud claim.

And the bank, in its briefs in this case, has attempted to focus on those dissimilar facts.

The petitioners take the position that it is not necessary to get involve in the dispute over whether any particular Indian got a car, whether economic pressures were applied to any particular Indian in its sole and what fashion the economic pressures were applied for the simple reason that the common elements, which necessarily affected every transaction, are sufficient to give rise to the fraud claims and were so determined by the trial judge.

The claim against the United States with respect to the sales of the Ute Distribution Corporation stock has brought them on negligence.

It is the claim of the petitioners that the United States negligently permitted a deviation from the regulations which have been promulgated, permitted a deviation from their requirement that the endorsement of the stock certificate be the only way in which this — the stock could be transferred substituted in its step the — the transfer of the stock by means of a separate stock power.

That may seem unimportant on the surface that the effect of that deviation from the regulations was to withhold from the Indians the warnings which were — which were printed on that stock for his benefit.

The United States also, even though as we read the statute in regulations, Congress plainly directed that the superintendent was to regulate the price in terms of sale.

Instead of doing so, the superintendent adopted a practice of — of receiving a certificate from the Indian himself, the selling Indian who was legally in — in the position of a war, that he had in fact received his — his money.

Thus, there was a complete application of the responsibilities of the United States in that regard and the person who was legally in the position of the award was the one who the United States looked to — to satisfy those — those regulatory obligations whereas Congress, I think a fair reading of the Act would — would bear me out on this plainly contemplated that BIA should —

Thurgood Marshall:

Isn’t it true that the statute itself was — that — that getting rid of the awardship stated?

Parker M. Nielson:

That is true, Mr. Justice Marshall.

That was the dominant purpose of the statute, but it’s also true that Congress recognized in adopting the statute as it did in all of the termination acts that these people were going to have some trouble.

They were not accustomed to managing property because they had been under the protective wing of the United States for so many years, and so Congress wisely, I think, directed that there’d be a face period three in which services and protections would be withdrawn from that, and that that period was to extend for a full 10 years.

Now, experience was proven that even that wasn’t enough, that — that these people needed protections even beyond what Congress contemplated, but the thing we are here complaining about is — is that the protections which Congress directed were not secured to these people and that by reason of that, they were deprived of their property.

Now, in many ways, the complaint of these petitioners seems based upon fine distinctions in the law.

We presented enough a lot of complex legal arguments in the briefs.

In reality, however, we’re talking about a very fundamental proposition, a very practical and fundamental proposition.

We could analogize, I think, to a situation where it say, a person were to buy an annuity and pay for it throughout his life, and when that annuity were to mature, instead of the insurance company paying the proceeds of the annuity to the annuity simply took the proceeds and invest with it for his benefit will stay in a mutual fund.

Now, it is not a question of whether that investment is a good one or a bad one.

It’s not a question in this case as to whether the Ute Distribution Corporation is a good idea or bad idea.

It’s not a question of whether Ute Distribution Corporation was — was well managed or whether it was mismanaged.

The problem really is the indignity of the Act itself to take a group of people such as these terminated Utes and say to them by way of congressional enactment that we’re going to remove restrictions on — on your person and on your property, and you’re going to be treated like any other citizens in this country and yet before that property ever gets into that Indian’s hands to take it and assign it, to have BIA assign it to this corporation, and not only to assignment but to make the assignment or purport to make the assignment irrevocable so that it would bind himself and his heirs forever.

Now, Congress plainly declared in the statute that they were to receive their property in such a fashion that it could be inherited and decreed.

That is the language of the statute.

But BIA attempted to completely frustrate that — the congressional intent by making this assignment to the Ute Distribution Corporation.

Now, turning to the Rule 10b-5 aspects of the case, this case represent for the first time in which this Court has had occasion to speak with reference to the fundamental ingredients of a cause of action under Rule 10b-5.

I submit that the case is a very good one.

It’s a very good vehicle for this Court to consider the elements of a tried action under Rule 10b-5 because of the wide variety of misconduct which is alleged in this case, which accord this Court an opportunity to consider the whole array of possible conduct which could be considered as a violation of Rule 10b-5.

It’s also a good vehicle because the petitioners themselves have a peculiar need for the sort of protection which were afforded under Rule 10b-5.

Parker M. Nielson:

And this Court, many times in the past, in the Capital Gains case and — and other cases which it has considered on — on related issues have said that the need for investor protection is a relevant consideration which should be taken into account in determining whether any particular factual situation falls within the proscription of Rule 10b-5.

William J. Brennan, Jr.:

(Inaudible) quorum of claims of this kind?

State quorums (Inaudible)

Parker M. Nielson:

Not for the Rule 10b-5 claim, not for the fraud claim.

The federal court of that is with exclusive jurisdiction under the Exchange Act of a cause of action under Rule 10b-5.

William J. Brennan, Jr.:

Well, does — does that — alleged conduct, is that the basis of any other claim, the state court (Inaudible)

Parker M. Nielson:

There is no other claim (Inaudible)

William J. Brennan, Jr.:

But could there be?

Parker M. Nielson:

I don’t think that — well —

(Inaudible)

Parker M. Nielson:

I suppose it would have been possible for them between (Inaudible) on the fraud claim.

I think that it would have been impossible to bring in Indian law claims in the state court even with respect to the state (Inaudible) however the — the very reason that most of these security fraud cases wind up in the federal court is because the remedy under the state (Inaudible) is inadequate.

It’s inadequate for a number of reasons.

First of all, the States are played with short statutes of limitations, which frequently bar fraud claimant.

Secondly, the state procedure affords the opportunity for devices such as nonresident cash funds and things of this sort which are — which are employed by defense attorneys (Inaudible) to bring in a legitimate claim.

And so, in general, as a practical matter, we suggest that as —

William J. Brennan, Jr.:

Indian claims, is that fact alone or (Inaudible)

Parker M. Nielson:

No, I don’t suggest that.

Now, as I read Rule 10b-5, it basically requires inhibition to the jurisdictional elements, the showing of two elements.

And they are as follows.

First of all, there must be one or two prohibited acts, that is there must be in their brief a (Inaudible) or there must be a misstatement of a material fact or omission of statement of material facts or a course of business which is preclude might be build in a fraud.

Secondly, that conduct, whatever it might be, must be accomplished in connection with the purchase or sale of a security.

Now, I stress the words “in connection with” because, as Professor Bromberg has said in his credos on the subject of Rule 10b-5, the words “in connection with” are elusive and we assume intentionally elusive (Inaudible) which is prescribed in any of the federal security laws.

Section 17 (a) of the 1933 Securities Act, for example, uses the term the fraudulent practice which is substantially the same must be in the offer or sale of a security.

It must be in the offer or sale.

This Act says “in connection with the offer or sale of a security”.

The lower federal court in — during the period of time that implied liability have been developing under the Exchange Act, Section 10 and Rule 10b-5 have wrestled with the question of whether additional elements may be engrafted on to those prescribed by the Rule.

They have considered a wide assortment of additional element including scienter, proximate cause, reliance, I’ve incurred the principle, one could say it’s considered.

The error of the court below in this case was that it went far beyond even what has been required in — in other courts which have considered the elements and required in this case that there be a direct participation as a purchaser or a seller and that that direct participation must be for a promise.

Thus, the lower court in this case imposed upon these plaintiffs a standard which is far higher than even that which is described in Section 17 (a) of the 1933 Securities Act, and I might add, even higher than was required at common law.

Parker M. Nielson:

We submit that the limiting factors which are prescribed in the statute and rule itself are entirely adequate and are the only ones which ought to be considered.

I refer in particular to the requirement of a suing of materiality.

The respondent bank itself is no different that even the Court, which talk in terms of reliance, quite often sum up defining reliance so that it comes out sounding just about like materiality.

The other limiting factor which was prescribed by the statute and rule is that of causation.

I note that the Rule itself does not meet the term “causation” but I have cited some legislative history in my brief which would indicate that Congress in considering the 1934 Act did make reference to the fact that any person who is injured by these practices or whose injury was caused by these practices ought to be able to recover and therefore I submit with causation in the (Inaudible) sense would be an appropriate limiting factor.

I think that that instruction has borne out by the language of the Act, and I know them particularly within this Act, Congress attempted to proscribe any misconduct (Inaudible) which is defined by the Rule in connection with any purchase or sale of security.

I think the use of the term “any” in both of those contexts were the calculated one and that it should be given effect.

As I say the common law in cases most analogous to the fact now it bar does not impose a requirement nearly as high as that required by the Court of Appeals in this case.

I cited in my brief the common law deceit cases which were — which arose in the contract of market sales of securities.

And what those cases stand for?

And also some writings of Professor Thompson denoted expert on corporation.

What those cases stand for is the proposition that if a person makes a misstatement were played by — by means of a prospective and he distributes — distributes it to the public at large in one case that was cited by means of leaving it at a bank so that any member of the public could pick it up and read it.

If there are lies in that prospective, any member in particular should be permitted to recover because it was directed to any member of the public thus, they come within the ambit of responsibility by contracts of the misrepresentation was made to a limited group why then also the ambit of responsibility which refer to be restricted.

That was the rule at the common law and it is universally recognized that Rule 10b-5 is an expansion of — of the common law and therefore, I submit that we should at least read this Rule as broadly as the provision of common law.

Now, they say the facts of this case and the legal questions are complex.

I would like to reserve an ample of my time for rebuttal because I think that I will have a lot of things that I will — want to respond to in relation with the Government in particular.

If there are no questions by the Court at this point, I reserve the balance of my time for rebuttal.

Harry A. Blackmun:

It is a matter of one with the– am I correct in concluding that Judge Christiansen at the District Court level came up with a (Inaudible) of $1500 was —

Parker M. Nielson:

That’s correct, Mr. Justice Blackmun.

Harry A. Blackmun:

Do you feel that there is evidence in the record sufficiently supporting that figure?

Parker M. Nielson:

I think there’s no question, Mr. Justice Blackmun.

What — I think we have to understand what Judge Christiansen.

Judge Christiansen considered all of the evidence which was presented including in particular the evidence of the appraisal of the mineral estate which, if divided by the number of shares involved here, would have, and capitalize, would have given rise to a damage figure in excess of $28,000 of share.

Now, Judge Christiansen felt that that would be — that would not be a proper result because of the position of those shareholders who were not told.

And we — I’ve cited his comments in — in the appendix where he — he makes reference that — that it would seem unfair to — to any such penalize those who did not sell by giving those less prudent who did sell the true value immediately whereas the others may have to wait that this may be (Inaudible) to recover that — that amount.

Now, I think that was a wise approach.

The trouble with it is that it leaves the benefit, the — the remaining value of the mineral estate in the hands of the wrong jurors.

And that was the very reason why the Affiliated Ute case was initiated.

And that was initiated, I might say, prior to the time of judgement so that there would be a way that — that that windfall in a fraudulent party could be avoided and the — and the mineral estate should be vested in those who — who — to remain in mineral estates to be vested on those properly entitled to it.

Harry A. Blackmun:

Well, as I understand at the moment anyway, you’re — you’re not complaining the $1500, isn’t it?

Parker M. Nielson:

I think that if the Court were to grant a remedy set as I had suggested, we would have to remand this case for a further hearing on what proper amount of damages should be.

We have to have some evidence on what the distributions were during the period of time that the (Inaudible) in those case.

William O. Douglas:

Mr. Randolph.

A. Raymond Randolph, Jr.:

Mr. Justice Douglas, may it please the Court.

This people thought a — case of — raise quite different issues with respect to the library of United States.

The issue in the Affiliated Ute case is whether the District Court properly dismissed the action for lack of jurisdiction finding that it was an unpresented pursuit against the United States.

The issue in the Reyos case from the other hand is whether the Court of Appeals properly found that the United States had no duty to prevent terminated mixed-blood Indians from selling their shares at less than fair market value.

Although the case has raised quite different issue so — as counsel for the petitioner had said, those relate to the Ute Partition Act of 1954.

And I think that that fills that Act in a working of that Act is necessary for an understanding of the claims in these cases.

In 1954, the Ute Indian Tribe of the Uintah and Ouray Reservation in Utah consisted of approximately 1800 members.

There were two distinct groups, the — the full-blood Indians and the mixed-blood Indians.

The mixed-blood Ute Indians consisted of approximately one quarter of the 1803 — 1800 members of the tribe.

For a number of years, preceding 1954, there had been considerable fixing among the mixed-bloods and full-blood Indians.

The reason for this is quite understandable.

Many of the mixed-bloods do not live on the reservation.

Many of the mixed-bloods were already integrated within the non-Indian society which standard of living was virtually indistinguishable from the non-Indian society in which they live and their educational status was the same.

The crutching between these two groups reached its peak in 1950 and 1951 when this group of Indians went on Ouray Reservation became entitled to 60% of the $31 million budget against the United States.

The full-blood Indians also quite understandably wished to increase money to — to improve their reservation to build schools and hospitals.

However, many of the mixed-bloods wished to have the money in cash and had no interest from spending it on a reservation where, of course, they never lived and had not lived.

The groups met in tribal council over a period of approximately one year to work up these differences.

The Ute Partition Act of 1954 was the result of their compromise that represent more than anything else a treaty of peace between these two groups because the Act itself is drafted and hammered out by the Indians and then introduced at their request in Congress.

And while the Act was being considered by Congress, both representatives of the mixed-blood and full-blood group went to Washington and supported, fully supported the bill and said that if we submitted to a vote of their respective membership and approve overwhelmingly.

The three main features of the Ute Partition Act, one is the division of the tribal assets that of course affected, did not affect the individual assets held by the individual membership tribe, only the tribal assets.

The second feature is the combination of the — of the mixed-blood Indians who were defined as having — as having not more than one-half Ute Indian blood.

The third feature is that the full-blood with — the trustee relationship between the United States and the full-blood would remain.

The way the Act was administered and the way this partition for place of course is quite complicated.

One thing that can be said about it is that we’ve done by the group themselves for the Act provided that the group was, first of all, first, the mixed-blood and full-blood groups were be together and divide its plan for — for dividing their efforts between them one on the judgement of the relative numbers in the group.

This turned out to be when the final rolls were published 27% mixed-blood and 73% full-blood.

The next — the next step in the process was to have the mixed-blood meet by themselves and determine the plans of distributing these assets.

The plan of distribution and the final provision were contained in the record from this case.

A. Raymond Randolph, Jr.:

One of the difficulties, of course, the group ran into with how to distribute assets that were not equally, equitably divided, such as oil, gas and mineral rights.

When the — when the Ute Indians were considering drafting this Act, the Court realized that it would be inequitable to split up just solely on the basis of geographical consideration the mineral rights.

Approximately, the tribe owns at that time approximately one million acres of mineral rights which is approximately the size of Delaware.

So what they did and what they decided to do is to retain the mineral rights, the oil, gas and mineral rights at tribal property and to split up only one thing or only two things, the proceeds from the mineral rights and — and the management.

The management was to be joint.

The proceeds will be distributed on a 27% and 73% basis.

As the plans worked out across the — the — both groups via its representatives who negotiated the plans and work them out for them, deprive at its own tribal council, and that was no problem.

However, the mixed-blood, first of all, adopted a constitution forming an organization known as Affiliated Ute Citizens.

In that — in the constitution of the Affiliated Ute Citizens which provided the delegating authority irrevocably the corporation in order to manage certain of the assets of the mixed-blood group.

Three corporations were formed, the Rock Creek Cattle Company, the Antelope-Sheep Range Company which felt with graving lands, and the other, Ute Distribution Corporation, which is involved in this case.

The corporation was formed in 1958.

It is of ten shares of stock to each individual mixed-blood Indians and the mixed-blood hurdled 490 at that time.

This range is appositive of the case.

Byron R. White:

(Inaudible)

A. Raymond Randolph, Jr.:

They specifically authorize, Mr. Justice White.

The resolution —

Byron R. White:

(Inaudible)

A. Raymond Randolph, Jr.:

Yes.

They adopted a resolution.

They’re clear after that way.

The first thing that I —

Byron R. White:

(Inaudible)

A. Raymond Randolph, Jr.:

It was a general membership meeting under the quorum under their constitution.

Byron R. White:

What was the quorum?

A. Raymond Randolph, Jr.:

How many people require the quorum, Mr. Justice Brennan?

30.

William J. Brennan, Jr.:

How many?

A. Raymond Randolph, Jr.:

30.

William J. Brennan, Jr.:

Well, come again, you have 490 you say?

A. Raymond Randolph, Jr.:

Yes.

William J. Brennan, Jr.:

How many attended the meeting?

A. Raymond Randolph, Jr.:

I don’t know.

It’s not in the record.

The issue in the affiliated — I was (Inaudible) about the Affiliated Ute Citizens (Inaudible)

Byron R. White:

(Inaudible)

A. Raymond Randolph, Jr.:

There were two aspects.

There’s an (Inaudible)

The first thing was when they — when they divide the plan of distribution.

The plan of distribution had, and I believe it’s Section 10, was similarly appendix to the amicus brief by the tribe considered in full.

They contemplated in forming a corporation.

That’s the plan to handle the — the mineral rights.

That plan was unanimously adopted by the membership or at least so it’s reported in a — in a — or in a resolution by Affiliated Ute Citizens.

The next step of the process was the actual delegation of the authority according to the constitution and that was the — that was the second resolution I was talking to a few minutes ago before I started a moment ago.

I said our — first of the issue in the Affiliated Ute case and then discussed to use it in Reyos.

The Affiliated Ute case, it was brought — the suit was brought by this unincorporated association purporting to represent all accommodated mixed-blood Indians.

William J. Brennan, Jr.:

(Inaudible)

A. Raymond Randolph, Jr.:

Yes.

William J. Brennan, Jr.:

Was there any responsibility in — with your (Inaudible) to supervise (Inaudible)

A. Raymond Randolph, Jr.:

They were supervised throughout until 1961 when termination took place.

Yes, of course, there was constant consultation.

And I might add there — there was a contract with University of Utah which provided for educational service, training and relocation and another factor.

William J. Brennan, Jr.:

Well, I’m thinking particularly the procedure that you’ve been describing to us by which the distribution —

A. Raymond Randolph, Jr.:

Yes.

William J. Brennan, Jr.:

— of the share of the mixed-bloods who are to be affected.

A. Raymond Randolph, Jr.:

Yes.

The plan was —

William J. Brennan, Jr.:

(Voice Overlap) of the corporation the approvals of the membership (Voice Overlap) —

A. Raymond Randolph, Jr.:

The plan was —

William J. Brennan, Jr.:

(Inaudible)

A. Raymond Randolph, Jr.:

— worked out.

William J. Brennan, Jr.:

Or supervise.

A. Raymond Randolph, Jr.:

Or supervise, yes.

Byron R. White:

But the plan, I take it, was — already been agreed upon (Inaudible) by the tribe?

A. Raymond Randolph, Jr.:

Well, it’s rather an informal raise — what is the tribe — was the mixed-blood in terms of their own plans of distribution.

It was a full-blood in this case —

Byron R. White:

Could the Act — could the Act provide for this manner of going through all these?

A. Raymond Randolph, Jr.:

Yes.

The Act provided for the plan of distribution and the plan of division of the tribal assets, yes.

Byron R. White:

And it provided for the formation of Affiliated Ute Citizens.

A. Raymond Randolph, Jr.:

Oh, yes.

(Inaudible)

A. Raymond Randolph, Jr.:

677e of the Act provided specifically for this.

In the Affiliated Ute Citizens case simply brought against the United States and may have informed.

And in the complaint, the claim was that the individual members of this organization were entitled to “an individual undivided pro rata share of 27% of approximately 1,200,000 acres of mineral lands subject only to the right of the association to manage that property jointly to the Tribal Business Council”.

Jurisdiction was invoked primarily under 25 U.S.C. 345.

The District Court dismissed for lack of jurisdiction and prepared the date of claim upon which the relief would be granted.

The Court of Appeals affirmed on the basis that this was an (Inaudible) against the United States and this Section 345 did not comply the necessary percent to be sued.

Unlike many recent cases in this Court where the question was whether a suit against an officer of the United States was really a suit against the United States, this — this case, there’s no such question.

It brought directly against the United States and may have informed.

And it’s long been held in this Court that a suit relating to government property against the United States cannot be brought without the United States’ consent.

The principle applies equally to Indian land held in cross by the United States and applies also when the suit is brought by a group of Indians claiming the beneficial interest in that land.

In this case, there’s no dispute whatsoever that the United States holds — holds title in trust to the mineral assets on the reservation.

Therefore, plaintiff action in order to go forward has to be based on some specific statute, federal statute, authorizing this kind of suit.

They’ve invoked Section 25 U.S.C. 345.

That Section which is setout on pages 90 to 91 of our brief provides that any person who are wholer in blood — wholer in part of Indian blood or decent, he were entitled to an allotment of land under an act of Congress were claimed to be so entitled or under any allotment act or any under grant made by Congress or the claims beyond were lawfully denied or exclude from any allotment or any parcel of land and bring action in the District Court to determine, and the jurisdictional section is after the semicolon.

Where the District Court may determine any action, pursuit or proceeding involving the right of any person pursuing allotment of land, we think this case does not fall within that statute.

William O. Douglas:

In the Affiliate Ute case you cited (Inaudible) the plaintiff asked for pro rata —

A. Raymond Randolph, Jr.:

Yes.

William O. Douglas:

— distribution?

A. Raymond Randolph, Jr.:

They asked for — I’m —

William O. Douglas:

Are the (Inaudible) interest in the allotted land?

A. Raymond Randolph, Jr.:

Yes

I’m not exactly clear how this could be done but I quote, “They kind to be entitled to individual undivided pro rata share of 27% of approximately 1,200,000 acres of minerals.”

The merit to that question has never been reached.

Allotment is a term of art in Indian law.

And the latter half of the 19th century, it was the policy of United States, in particular, stressing the General Allotment Act of 1887, the shift, the right of Indian in real property consistently participation in tribal property the right of individual ownership in particular tracks.

The land or the mineral estate involved in this case is a very (Inaudible) within the allotment of land because it’s never been divided.

It’s tribal property.

There’s no question about that.

There’s no individual ownership of this land involved.

In the usual allotment situation, a reservation would be surveyed, a track of a certain number of acres set aside, the Indian would make a selection and the Secretary of Interior would issue a patent.

Section 345 relates only to those kinds of situation.

You think this is not a suit regarding an allotment of land by any stretch of imagination.

For now to the Reyos case.

In Reyos, there were 12 designated in this plaintiffs the claim that during 1963, 1964 —

William O. Douglas:

(Inaudible)

A. Raymond Randolph, Jr.:

Yes.

We pointed that out in our brief, Mr. Justice Douglas.

It was stipulated, I might point out, in the Reyos case that the corporation was a validly formed corporation and the District Court so found.

The whole point in the Reyos case was that the stock has substantial value.

In the Affiliated Ute case on the other hand, the claim — the corporation was invalid and that it should never been given the assets to manage to begin with.

We think there are basically inconsistent.

They have the right recognition that the stock wouldn’t have any value.

A. Raymond Randolph, Jr.:

That’s right.

In Reyos, the 12 designated mixed-blood plaintiffs sold their stock during 1963, 1964 and 1965.

It sued the United States under the Federal Tort Claims Act and their claim was that the Government was negligent by selling — to prevent them from selling their own shares for less than fair market value.

We think the Court of Appeals correctly held that the trust relationship between the Government and each individual mixed-blood terminated in 1961 before any of the sales took place and that the Government therefore had no duty to supervise mixed-blood sellers disposing of their stocks.

They pointed out under the Act that oil, gas and minerals were owned by the tribe and were not divided.

But the proceeds were and the management rights were divided.The mixed-blood formed UDC in 1958 may issue stock.

Under 677d of the Act, the Secretary of Interior on August 27th, 1961, and this is on page 40 of our brief, issued a termination proclamation stating, “With respect to each and every individual mixed-blood, federal restriction from the property have been removed.

A. Raymond Randolph, Jr.:

The federal trust relationship of such individual is terminated.

That such individual shall not be entitled to any of the services performed for Indians because of his status as an Indian and all statutes of the United States which affecting the — the course of their status of Indians shall no longer be applicable.”

We think that after this period, Secretary of Interior had no duty to say perhaps indeed no right to say to an Indian, “You can’t sell your stock for that amount” or “I’ll only let you sell your stock if you really need the money at this time” or even had he might have said that these were restricted Indian property, “You can only sell your stock if you spend the money in the proceed for — for food and clothing for you and — and your family”.

We think that after 1961, he not only had no duty to do that, I think the mixed-blood would be — would have been infuriated if he had tried to do that.

The plaintiff had claimed however that there’s — right there was a right of first refusal and that they claimed this right of first refusal somehow created the duty on the part of the United States specifically the Bureau of Indian Affairs to supervise their shares even after 1961.

William J. Brennan, Jr.:

Well, why did they suggest as tort in the right of first refusal?

A. Raymond Randolph, Jr.:

It’s not entirely clear, Mr. Justice Brennan.

We think the right of first refusal stems from Article VIII of the Articles of Incorporation of Ute Distribution Corporation which provides that any mixed-blood who sell their shares before August 27th, 1964 must first offer them to members of the tribe.

There’s no acceptance of that offer.

He may then sell the same or greater amount under the same terms and conditions offered for the members.

The Secretary of Interior was — was required under the Articles of Incorporation certified of one thing, that he offered to members of the tribe was made in accordance with the law and regulations of the Secretary of Interior.

That is the original offer which, if not accepted, would allow the mixed-blood to sell to whom he may please.

This is contained on page 6 of the exhibit appendix.

Also, the regulation finally, I — I may point out, that under the Act, under 677n of the Act was a similar right of first refusal for land.

And so when the Secretary promulgated regulations dealing with the right of first refusal for land, the very last clause in those regulations stated that as far as practicable, these regulations should apply to sales of stocks in the corporations formed by the mixed-blood.

The bank operated its transfer agent for the stock and the Ute Distribution Corporation and the bank worked out a procedure in September of 1963.

I might point out at this point that there were no sales of stock until the late summer of 1963.

In the time of corporation was forming until December of 1963, there were no sales of stocks, the first sale took place, I think, approximately August of 1963.

The bank work out —

(Inaudible) on this right of first refusal, I’m looking for summary of your argument on page 23 of your brief.

Before a mixed-blood could his stock to a non-member of Ute Indian Tribe, he was required first to offer the stock to members of the tribe at a price not less than that to which he intended to sell to the outsider?

A. Raymond Randolph, Jr.:

Yes.

Shouldn’t that be not more?

A. Raymond Randolph, Jr.:

Yes, it should be.

Not more, isn’t it?

A. Raymond Randolph, Jr.:

That’s correct.

He could — he could not sell it to an outsider for less.

A. Raymond Randolph, Jr.:

That’s right.

So may I (Inaudible) changing that percent (Inaudible)

A. Raymond Randolph, Jr.:

Yes.

A. Raymond Randolph, Jr.:

Please, please.

Thank you.

A. Raymond Randolph, Jr.:

I’m very sorry about that.

In any event, the — the bank operated its transfer agent of stock.

And they worked out a procedure with the Ute Distribution Corporation whereby, and this is contained on page 29 and 31 — 29 and 31 of the exhibit appendix, whereby after the offer had been made and not taken up by a member of the tribe to seller, when he completed the sale would furnished an affidavit and a stock power to the — including the superintendent of reservation.

And then the superintendent of reservation would issue the certificate stating that the offer, the original offer had been properly made to the bank, he would then transfer the stock to the buyer.

Apparently, the main thing according to petitions of the superintendent did wrong here was that he failed to investigate whether the plaintiffs in this case were telling the truth on their affidavit.

The superintendent apparently thought that the regulations in the Ute Distribution Articles of Incorporation required only to certify that the original offer was proper.

And I think maybe that was too strict in interpretation of the regulation.

However, the one thing which seemed perfectly clear is that the right of first refusal did not create any duty for the people that were selling the stock.

This apparently had not called it’s true from their affidavit because the right of first refusal of anything was for the benefit of the people who (Inaudible).

It’s for the benefit of the people who remained in — remained in the tribe and also for the mixed-blood so they could retain control of their corporation.

The seller obviously cannot accept its own offer and we think therefore that this created no duty to the people who bring this suit, the mixed-blood seller who claimed there had been — have sold for less than fair market value.

We don’t think they’re entirely without protection however.

I think — and point 3 — part 3 of our brief deals with our question whether they’re entitled to protection of Securities Exchange Act.

William O. Douglas:

Mr. Bertoch.

Marvin J. Bertoch:

Mr. Justice Douglas and if the Court please.

I represent the respondent, the bank and the two individuals who are employed by the bank, Gale and Haslem.Of course, it is our desire that this Court sustained the decision of the United States Circuit Court of Appeals.

One difficulty in this case in getting a (Inaudible) that counsel for the plaintiff and now the Securities and Exchange Commission in connection with — with its brief has constructed hypothetical facts that do not relate to the particular individuals, who were the petitioners in this case.

There is a suggestion, was made here today seems to be that somehow we (Inaudible) offered sale with some kind of fraudulent (Inaudible) which is (Inaudible) had this — this stock or sale by all of the mixed-blood.

And the question, of course, was whether or not, Gale and Haslem are employees violated 10b-5.

And the only way whether that can be ascertained and whether or not that affected, whether it caused damage to any of these 12 petitioners is to be found in the fact and the law related to those 12 individuals which is not to be found out here in abstract (Inaudible)

Plaintiffs’ counsel or petitioners’ counsel have insistently and repeatedly tailored a — a code of many odious colors which has never been worn by and which does not fit any of the particular petitioners in this lawsuit.

So I can only appeal to the Court in deciding this case has been only be determined whether or not these 12 individuals has — have been injured or any of them have been caused damage because of the violation can be divided by examining the facts and the law with respect to each one of those individuals.

Now, let’s go to the Act which have been considered — which may have been considered violative of 10b-5.

Today, with respect to the wrongful acts of the facts or the corporate — corporate itself, my friend and colleague Mr. Nielson has said that they retained these stock (Inaudible) whether its (Inaudible) or the Indians couldn’t read, the mixed-bloods couldn’t read this notation on it that they — that have been (Inaudible)

Well, of course, that was done by the bank at the request of the Ute Distribution Corporation at the request of the Bureau of Indian Affairs, the agreement of all three believing that would be helpful to the Indians so they wouldn’t loose those shares of stocks.

That is hardly thought in having this part of its allusion of fraud which (Inaudible)

As far as the market making is concerned, which has been mentioned, the Circuit Court of Appeals specifically said there was no evidence with the bank, did anything about making markets.

And on these general matters where it is of no help to this Court and Mr. Nielson, and I just stand up here and he said he did and I say he didn’t.

Marvin J. Bertoch:

All he and I can do is refer you to the record and that is what I do, I just categorically deny that — that there — all these actions by the Government which created an atmosphere of fraud.

Well, let’s talk about specific things that even the Circuit Court of Appeals said they’re — they did post a possibility of violation of 10b-5 in connection of the action with a couple of these — of these petitioners.

And I think we ought to examine those.

And I’m willing to examine those words that where the Circuit Court said “Maybe you did, your man did violate Section 10b-5.

Let’s take Mr. Gale, it should be kept in mind first of all that there’d be 12 petitioners.

Mr. Gale bought stocks in only two.

He bought five shares from Mr. Reed, five shares from Mrs. Wopsock and that’s all he bought.

With respect to the other (Inaudible) he didn’t buy any shares of the.

He had nothing to do with encouraging the sale with participation in the sale of getting some benefits in the sale, nothing at all to do with them except in connection with some of them, he signed and notarized an affidavit or he’s — he (Inaudible) you see the signature on top of.

And that’s all he had to do with them.

Some of them, he had nothing to do with them or didn’t even know about it.

In regard to Mr. Haslem on the other hand, he bought some only two of them.

One of them was again Mr. Reed, he bought his other five shares from —

He bought (Inaudible)

Marvin J. Bertoch:

Mr. Glen Reed.

(Inaudible)

Marvin J. Bertoch:

That’s principle.

Yes.

Of course now, these were bought to the banks and sold with the bank, then there’s nothing on.

He bought —

And how did all these used car dealers (Inaudible)

Marvin J. Bertoch:

Well, the used car dealers got in the picture on their own.

And there were many car dealers in on the picture.

Of these approximately 1500 shares of stocks sold and it very existed during in 54 and 55 (Inaudible) that we’re — we’re dealing with the 1500 shares of stock sold.

There were 32 different white men who — who purchased stocks.

As a matter of fact, Gale and Haslem bought 115 shares put them together.

Only 8.3% of all those who were bought sold.

What’s in this — the used car dealers.

Now, the end of this doesn’t show whether the car dealers themselves committed fraud on these people.

They — they may have done.

Marvin J. Bertoch:

The record doesn’t show that these used car dealers paid the money and — and ran, got out of the case, settled out of the case.

So we cannot say that it may well be from these used car people (Inaudible) some of this people or some of their stock and gave them less desirable consideration.

There were a total of 113 individual non-Indian buyers of this stock over the period involved definitely.

Marvin J. Bertoch:

No.

There were 32 non-Indian buyers that I know of.

There were 113 shares of stock bought by Gale and Haslem.

I see.

Marvin J. Bertoch:

Out of 1300 shares that were sold by the mixed-bloods.

So a total of 32 buyers.

Marvin J. Bertoch:

Right.

Non-Indian buyers.

Marvin J. Bertoch:

That’s right.

And the — the buyers were not all people from this locality, instead they were — some of them from elsewhere of United States.

Marvin J. Bertoch:

Yes.

I think the record shows that were about seven of them who were outside of Utah.

How far away is that (Inaudible)

Marvin J. Bertoch:

One from Illinois, one from New Orleans, one from Arizona, several from Colorado.

How —

Marvin J. Bertoch:

(Inaudible)

— how would people that far away likely to know about these availability of shares of stocks?

Marvin J. Bertoch:

I don’t know.

They may have known from relatives, you see it wasn’t the bank who advertised it.

I don’t know how these people found out.

But the —

Marvin J. Bertoch:

I know that some of them came in and they contacted the bank and said the bank (Inaudible)

But allegations with the bank and its employees that made a market for this, is it not?

Marvin J. Bertoch:

Yes.

And — and we submit that that has — has got them involved and the record will not support it and the Circuit said that considerably at (Inaudible)

The record does not support contention of the fact as a market method.

Is there any — is there any showing of how somebody in Illinois would know about the availability of the (Inaudible) obtain stock of sale on little village and little town in Utah?

Marvin J. Bertoch:

I don’t know how the man in Illinois knew about it.

It’s maybe in the record, Your Honor but I don’t know.

Now, the Circuit Court of Appeals said that (Inaudible) in connection with the sale, purchase of this five shares of stock with Mr. Reed.

I’m asking it because I think this is my — my most dangerous case, a violation of case.

That when he bought fives shares in January, the Circuit Court is to made both on this representation and perhaps a nondisclosure.

He bought the shares for $350 and he sold them sometime later to another white man one for $530 who spend share.

Now, the Circuit says, and I certainly want (Inaudible) said, “There is in effect a misrepresentation here because he indicated that this man, Reed, has certainly applied the $350 worth of market.”

The value of the stock at that time when it wasn’t because it’s (Inaudible) sell up for $530 and maybe guilty of nondisclosure because he did not reveal from Mr. Reed that he was going to sell — that he is going to sell it later for $530.

Now, this is no worst case, then the Circuit said, “However, there is no evidence even if this is a misrepresentation of a nondisclosure which would be in violation of 10b-5.

There’s no evidence that there was reliance here, that this was the cause of misrepresentation or this non-disclosure was the cause of the sale.”

Now, that — of the one — was that — accept I want to put Haslem in — in focus hereto because there is something that he did, the Circuit said (Inaudible) was in a violation.

They said that if Haslem indicated when he purchased some stock, but that was the market price, he made a misrepresentation.

However, with Haslem, there is no evidence in the record that he ever sold it to anybody else at any profit.

So they cannot be found to be a violation of 10b-5 as far as she is concerned.

Then I was going back to Mr. Gale.

The question we get down to the real question in place by the Securities and Exchange Commission and that is the subject to go on.

Now, I think we all get down (Inaudible) is the real bonus concession in this matter.

First, of course, I wanted to say about reliance.

Is reliance to be — to be assumed if the representation or the nondisclosure is material?

Now, the reason about, I believe, because of the case Mills versus Auto-lite, this is a case in which — decided by this Court last year and that the case which reserved the tension on as such.

It is a case in which — which I believe is right and with which I do not coil it up.

And the satisfaction is entirely different in that case and this one.

And the other like case you will recall is the matter of miner stockholder suing a class to set aside a merger on the grounds that a statement and a proxy — proxy statement was — was hailed to disclose that those of the selling — of the merging corporation, the directors in the merging corporation sent out proxy were completely controlled by the Court relation into which it was to be merged.

And so the lower court — well, and as a matter of fact, they were thousands, according to Justice Harlan’s opinion, there were thousands of stockholders involved and these are minority stockholders.

And the problem was in the trial and in the Circuit Court, how we’re going to determine whether or not they relied on the nondisclosure that they were influenced by the nondisclosure in the proper statement.

Whether or not they would have voted otherwise had this fact been included in that Circuit.

And the Circuit Court and the trial came up with rather fictitious formula saying, “Well, this is the tough thing to do because there are thousands and they came in inquiring for just relying to each one causation with each one, we — so we’ll adopt its formula.

If it appears from the evidence that the merger was a good move, then we can assume that if they had known all of the facts, they would have bought it.

Well, this Court, and I think quite properly said that doesn’t improve anything and we’re not going to accept that formula.

And this Court said — and this, I think, as Justice Harlan was done exactly quoting the Circuit Court.

Marvin J. Bertoch:

He said that reliance of thousands can scarcely — can scarcely be inquired inquiry.

So this Court decided that a case like that where the nondisclosure was something that everybody knew and knew what it was, where it was, certainly material.

Or the Court said, Justice Harlan said had a (Inaudible) it caused someone to vote one way or another, then we’re going to assume that there was reliance, that there was causation, and the causation and the reliance and the materiality will merge.

And I think that was properly made in that case.

That these people could not have been protected any other where — way when there were thousands of them, you can’t put them on the stand.

This is an entirely different case.

In this case, there were 12 petitioners, every one of them took the stand and all the lawyer had to do to Mr. Reed would say, “Would you have sold your stocks if you’d been given this information,” and he could have said yes or no.

Everyone of them could have been asking if that — if they relied or if they didn’t rely because this caused them to show.

But that evidence was never in the record, never put in the record perhaps because counsel didn’t know what they were going to say or they’re going to say the trainer, they forgot to ask.

We don’t know.

But the fact is that it could easily be in the record.

I don’t think this Court wants to take the position for posterity that when you can determine whether there’s reliance or causation without any doubt.

That in those cases, we should assume it, and we don’t have to.

I think that would be dangerous jurisprudence.

Were this (Inaudible) represent here to the fact these parties where bellwether plaintiffs?

Marvin J. Bertoch:

Yes.

Is this a class action or was this —

Marvin J. Bertoch:

It started as a class action, Mr. Justice, and then Judge Reed decided it was not a class action on the ground that the individual problems would be more expensive than the common problems.

And so then in conference, counsel with Judge Christiansen, it was decided that we should take 12 cases and Judge Christiansen who tried this bellwether cases, we should try those and then all of the information that was adduced, the evidence was adduced that would be common use of any other cases could be used in the other cases if it’d ever be tried.

So we go ahead with these 12 having tried and appeals with (Inaudible)

So these were 12 separate plaintiffs.

Marvin J. Bertoch:

Right.

This was — and the — and the District Court decided it was not a proper class action.

Marvin J. Bertoch:

Right.

But they did have common — good many common issues and they —

Marvin J. Bertoch:

There are some common issues.

That is true.

But then only the 12 were chosen, this way six were chosen by the plaintiff and six were chosen by the defendant, and that’s the way the 12 — 12 were chosen.

I just — how — how is the — the bellwether — bellwether cases somewhere between an individual case of class action?

Marvin J. Bertoch:

Yes.

Marvin J. Bertoch:

[Laughs]

Apparently.

I think that — I — I tried out the zone.

Now, of course, what we — we relied on is the List versus the Fashion Park case and that — where it says there needs — needs to be reliance and they just describe reliance in that case.

In a case of a representation, the Court and the Fashion — List versus Fashion Park — Fashion Park, Second Circuit says the proper test is whether the plaintiff would have been influenced to act differently than he did act if the defendant had disclosed the — the undisclosed fact.

Now, that’s a case of a nondisclosure.

In a case of a disclosure, a or false representation, the Court said, “Insofar as this is pertinent here, the test of reliance and to whether the misrepresentation is a substantial factor in determining the course of the conduct which results in the recipient’s loss.

Of course, this was a case, Fashion Park, where there was an individual involved which you can put on the stand and he could be questioned as to whether he relied or he didn’t rely.

That’s a case again where he sold — he sold his stock for $18.50 a share and the corporation shortly later, the company sold all the other stocks for $50, and he sued and the court said (Inaudible) that you — the nondisclosure that they were going to sell, there’s no evidence that they’re going to sell that — that that had any effect upon your sale, you may have done it anywhere.

I will close by just —

Byron R. White:

What was the first (Inaudible)

Marvin J. Bertoch:

In this case, Your Honor, they’ve decided that there was — that there was no evidence of — of reliance.

Byron R. White:

Or the bank (Inaudible)

Marvin J. Bertoch:

The bank and as far as the two individuals are concerned.

Since there was no reliance, there was no liability, but they said, “We will send it back for action to be taken into importance of this opinion.”

Now, if the Court wants to ask me what I think that means, I’m not sure I can give an accurate answer but I think it —

Byron R. White:

To give somebody an opportunity to prove reliance?

Marvin J. Bertoch:

I think — I think that it means of giving opportunity for those who were involved in the sales to Gale and Haslem to prove the cases and to prove the reliance.

I don’t think it meats of these 12 can go through it.

Byron R. White:

(Inaudible) say there was conduct, that’s part of this individual that violated 10b-5?

Marvin J. Bertoch:

Right.

Byron R. White:

(Voice Overlap) —

Marvin J. Bertoch:

In the ones that I have mentioned, the two cases, yes.

The two cases have —

Byron R. White:

(Voice Overlap) bank.

Marvin J. Bertoch:

They didn’t — well, they said the bank would be responsible for it.

Byron R. White:

They did.

Marvin J. Bertoch:

They did.

They attributed their sale to — to the bank because they —

Byron R. White:

But — but the conduct prescribed by 10b-5 has no liability because it has no reliance?

Marvin J. Bertoch:

Right.

That’s right, Your Honor.

Byron R. White:

But not as a remand.

Marvin J. Bertoch:

Yes, Your Honor.

Byron R. White:

And — and a major damage in this case.

Marvin J. Bertoch:

Yes.

The — they set — what — what they thought the major damage would be.

They said the cases to be considered and those cases were mixed-blood sold to Gale or to Haslem and the measure of damages means how much the difference between what they sold to Gale and how much Gale got from somebody else.

Byron R. White:

(Inaudible)

Marvin J. Bertoch:

No.

Byron R. White:

No.

Are you — are you attempting to sustain the judgment below on the ground that the concept involved was not — was not within the reach of 10b-5?

Marvin J. Bertoch:

That’s right, Your Honor.

We’re — we’re willing to accept the challenge of the Circuit Court to go back and let them see if there was reliance.

Byron R. White:

That is right.

But if you concede that the concept is by the bank and by — by individuals at the time of conduct was barred by 10b-5?

Marvin J. Bertoch:

I concede in the one case that I mentioned, Your Honor.

The purchase from — from Mr. Gale — by Mr. Gale from Mr. Reed in that one case I proceed if you accept the fact as the Circuit solve them and I will do that for this purpose —

Byron R. White:

Now, that’s —

Marvin J. Bertoch:

— in the one case only.

Byron R. White:

If — if some — if — if an individual comes and wants to sell his stocks and the bank — employees of the bank (Inaudible)

Marvin J. Bertoch:

If he is going to — he knows at that time that he’s going to sell it to somebody else with some more money.

Byron R. White:

Well, what if another shows and he just wants to sell his stock to somebody else and the bank has to (Inaudible)

Marvin J. Bertoch:

Well, I would say no and the Circuit didn’t say — say that that would be a violation.

(Inaudible)

Marvin J. Bertoch:

The SEC.

I think that concern better if I understand it correctly.

Byron R. White:

(Inaudible) sell as — as — considerably less.

Marvin J. Bertoch:

Right.

You’re right.

Byron R. White:

The bank shows that there’s $1000 price on stocks (Inaudible)

Marvin J. Bertoch:

That’s right, Your Honor, they do on this basis that there was fiduciary relationship.

And of course, I attack that in my second brief and reply to them.

That’s a —

Byron R. White:

You did not complete that at all.

Marvin J. Bertoch:

Not at all.

Byron R. White:

All right.

Marvin J. Bertoch:

No.

Thank you.

William O. Douglas:

You have 12 minutes, Mr. Nielson.

Parker M. Nielson:

Thank you.

Mr. Justice Douglas, may it please the Court.

Before I get in to my argument as such I might comment for the benefit of Mr. Justice Stewart that his term “bellwether” is not a legal term as such.

It’s a sheepherder’s term, that’s what it is.

It refers to the fact that when a sheepherder discovers what the lead sheep is, the one that the other members of the flock follow while he ties a bell around it, then, of course, it — it’s dark or the weather is bad or something of that sort why he — he can follow the sheep and this really is a procedure which Judge Christiansen has device to — to handle these — it’s just another device to handle —

Cattleman (Voice Overlap) —

Parker M. Nielson:

— multiple —

— of cow.

Parker M. Nielson:

Right.

Now, I note from Mr. Randolph’s argument that he had nothing to say about the security’s aspect of the case.

I remind the Court however, as I think the Court is aware that Securities and Exchange Commission has taken the position in this case.

I think it’s regrettable that Mr. Randolph does not speak for that issue because I know that this Court has expressly added to in the past and cases such as the National Securities case that it is not desirable to decide these important securities issues without receiving the — the benefit of the thinking of the Securities and Exchange Commission.

However, they have appeared by way of their amicus brief, and I invite the Court to take careful attention to the position which they had taken and which I might say I should describe to it completely.

As far as this matter of the — the legends on the stock which Mr. Bertoch referred to and indicated the — that the stock was locked up in the bank with the request of the corporation.

I think this Court ought to consider for a moment just what was going on here.

Why would they every — even put that legend on the stock if it wasn’t going to be given to the stockholder and — so that he could read it and understand it?

Why would they take the position that these people were fully competent and — and capable of managing their affairs and — and that they should be held to the strict standards of accountability that Mr. Randolph would now like to impose upon him and still, at the same time, take the position that they weren’t even competent to handle that piece of paper?

It’s almost as if there was some guilty knowledge involved here.

It’s almost as if that legend was printed on the stock to try to mitigate the — the circumstances that these — these people would be in — placed under.

Certainly, that’s the view that the petitioners take, and we feel that there was a complete application of responsibilities here that gives rise to liability on the part of both the bank and the United States.

Parker M. Nielson:

Now, with respect to this matter of reliance, I don’t think we can go us — over the matter of reliance as easily as Mr. Bertoch would like to and say that, “Well, just — it just ought to be an element of the Rule.

It ought to be an element of the statute.”

Because if we look at the statute, the construction of the statute and the construction of the Rule, it seems that Congress had a particular thing in mind.

Congress, if it meant to say reliance, knew how to say that and — and did show another context.

I’ve directed the Court’s attention in my brief to the provisions of Section 18 of the very same Act that we’re talking about.

Now, Section —

William J. Brennan, Jr.:

(Inaudible)

Parker M. Nielson:

I think that the Commission’s position in the List case was substantially right that — as I recall they took the position that — that it was not really a problem in List as a factual matter.

I’ve cited in my petition for certiorari at the brief that the SEC filed in the List case in which they took the very position that I am now espousing, which is that reliance should not be an element because it leads to confusing doctrine.

How are you going to prove the negative of the undisclosed fact?

That’s what Mr. Bertoch suggested that we should do when we go back to the trial court.

How am I going to ask one of these people if they — if they relied upon something they didn’t know about?

You see, that’s the problem we get into, and that’s why reliance is not an appropriate concept.

But in Section 18 which deals with — with reports filed with the Commission, there’s a cause of action that was prescribed there for people who rely upon statements contained in those — in those reports.

Now, that’s the very same act.

And in that context, Congress said that you’ve got to show reliance.

Also, in Section 11 (a) of the 1933 Securities Act, which this Court has held is in pari materia.

Congress said that when a person brings an action based upon a prospectus, he must show reliance.

Now, in this Act, in — in Section 10, Congress didn’t say reliance, they substituted something else.

They said, “What you got to show is that it was immaterial”.

And material is — is a very nice limiting factor too, and as Mr. Bertoch has correctly pointed out, sometimes it means the same thing as reliance and sometimes it doesn’t.

That — that is the term which Congress selected, I think it’s the one that this Court should apply.

And I think that it isn’t the business of this Court to be writing terms into the statute which Congress didn’t put there, particularly when it appears in the context that Congress knew how to supply that term, if they thought that it should be an element of the cause.

Now, I’d like to turn to the Indian lines aspect of this case, and I’d like to start off by making reference to the dialogue between Mr. Justice White and Mr. Randolph relative to the authority for the establishment of the Ute Distribution Corporation.

Mr. Randolph indicated that there was statutory authority for the formation of the Ute Distribution Corporation.

I submit that he was in error.

There was no such statutory authority.

Section e — Section 677e, which is the Section which Mr. Randolph directed Mr. Justice White to does not provide authority for — for a corporation.

It provides authority for the adoption of a constitution and bylaws.

Now, that’s quite a different thing.

Parker M. Nielson:

A membership association is quite a different thing from a corporation.

A corporation, a stock in corporation may be sold.

One cannot sell his right to membership in such unincorporated association.

It’s almost as if one were to form a corporation for — for citizens of the United States and then permit them to sell their citizenship to — to aliens who would — who would come to this country.

I — it — it’s — to me, it’s an absurdity, and I think that Congress had a definite thing in mind and — and by substituting the corporation for the organization which Congress prescribed a very substantial change was brought in the — in the statutory scheme, and it was one which resulted in the loss to these people.

Now, Mr. Randolph said that it was approved by the Indians.

It was approved at a meeting of a quorum of 30.

Congress said that such an organization must be approved at a special meeting called for that purpose by the Secretary and by a majority vote of the adult mixed-blood.

That was far in excess of 30.

I’m not sure exactly what the number was but it was something like about 140.

So you see, by — by substituting the procedures under the plan of distribution and the — and the constitution of AUC accorded procedures which Congress prescribed.

The — the intent of Congress was emasculated.

Congress said a majority of the adult mixed-bloods.

Instead of doing that, they used the provisions in the constitution which permitted the vote of a mere 30.

And there’s another important thing here too, Mr. Justice White, that I think ought to be considered and that is —

Byron R. White:

(Inaudible)

Parker M. Nielson:

Constitution and bylaws.

Byron R. White:

(Inaudible)

Parker M. Nielson:

It doesn’t.

Well, the word “unincorporated” is not in the statute.

I think that’s a fair construction of it.

Byron R. White:

It could have been (Inaudible)

Parker M. Nielson:

Well, they used the term “corporation” in other sections.

I suppose that if they meant corporation, again, they knew how to say it and they said it in Section 13.

The fact that they said it in Section 13 and they didn’t say it in Section 6 is persuasive that they didn’t mean it in Section 6.

There’s another —

Byron R. White:

If the statutes authorized the constitution to provide for the selection of authorized representative of the — of the Affiliated —

Parker M. Nielson:

That is correct.

And that gets us into a whole different question which is —

Byron R. White:

Well —

Parker M. Nielson:

— which in brief.

Byron R. White:

— the — the tribe was authorized to form or the mixed-bloods had authorized to form a constitution.

Parker M. Nielson:

Yes.

Byron R. White:

And the — and the (Inaudible) authorized the constitution to provide for the choice of authorized representatives.

Parker M. Nielson:

Yes.

And that was provided —

Byron R. White:

Your claim is that — that — is simply that (Inaudible) corporation has an authorized representative, was it (Inaudible) in the statute?

Parker M. Nielson:

If we want to consider it in that way, Mr. Justice White, I’m not saying in that sense that it’s inconsistent with the statute.

I’m saying that as a factual matter, it didn’t happen because the constitution and bylaws provided that the authorized representative’s powers were those defined in Article V Section 1 (a) and those powers were never delegated to anyone.

That’s — if — if those were the powers, they still reside where they’re originally were placed with the Affiliated Ute Citizens.

There is no showing that there is ever any delegation of that power.

That’s a factual question however.

It’s not a legal question.

But the point I wanted to get to here which I think is maybe more fundamental than that is simply this.

This statute provided that upon publication of the rolls, every terminated Ute would have his rights in severalty, inheritable, and in such a condition that they could be decreed.

Now, that Section 10, it says that, it’s just plainly as can be, thus, at the time of this purported resolution, which Mr. Randolph refers to, there was no power for the general membership to dispose of any particular person’s property because that had already vested in the individual including the beneficial interest in — in the undivided assets.

And I’d like to just read that Section because —

Byron R. White:

Well, so they hold to be, for authorized representatives, was just mirage.

Parker M. Nielson:

No.

Byron R. White:

Well, you say that the undivided interest (Inaudible) directly in the individual.

Parker M. Nielson:

The beneficial interest.

Byron R. White:

(Inaudible)

Parker M. Nielson:

The beneficial interest.

Byron R. White:

(Inaudible) and no one — (Inaudible) that no business of accepting the authorized, anybody to deal with those beneficial interest.

Parker M. Nielson:

No, absolutely not, Mr. Justice White.

The —

Byron R. White:

Well, who could they have authorized to it?

Parker M. Nielson:

Pardon me.

I didn’t catch you on that.

Byron R. White:

Well, who — who could they have authorized to represent the individual?

Parker M. Nielson:

Well, I suppose they could have authorized a person to do it or — or a bank to do it.

Byron R. White:

Or a corporation?

Parker M. Nielson:

Or possibly even a corporation if in fact they have done that, but they did not.

You see, the statute, Section 10 provides that all unadjudicated and unlikefully claims against the United States gas, oil and mineral rights of every kind and all other assets is not susceptible to equitable and practical for distribution shall be managed jointly.

You see, we’re talking about management powers.

We’re not talking about ownership powers.

We’re talking about management powers.

The — the statute —

Byron R. White:

Or disposition powers.

Parker M. Nielson:

Or disposition powers.

Right.

Byron R. White:

So no — they had no authority to authorize anybody to dispose of any property.

Parker M. Nielson:

Not to dispose of any individual member’s property.

They could — they could execute leases to — to exploit these resources but they had no power to dispose of any individual member’s property because they didn’t know of it, the individual member did.

I see my time is up.

I —

William O. Douglas:

Your time is up, Mr. Nielson.

Parker M. Nielson:

— appreciate the indulgence of the Court.

William O. Douglas:

The case is submitted.