RESPONDENT: First Interstate Bank Of Denver, N. A., et al.
LOCATION: Colorado Springs, Colorado
DOCKET NO.: 92-854
DECIDED BY: Rehnquist Court (1993-1994)
LOWER COURT: United States Court of Appeals for the Tenth Circuit
CITATION: 511 US 164 (1994)
ARGUED: Nov 30, 1993
DECIDED: Apr 19, 1994
GRANTED: Jun 07, 1993
Edwin S. Kneedler - on behalf of the United States, as amicus curiae, supporting the Respondents
Miles M. Gersh - on behalf of the Respondents
Tucker Karl Trautman - on behalf of the Petitioner
Facts of the case
In 1986 and 1988, the Colorado Springs-Stetson Hills Public Building Authority issued $26 million worth of bonds to fund public improvements and residential and commercial developments. The Central Bank of Denver served as a trustee on the bonds. In 1988, there was concern that the land was no longer worth 160% of the value of the bonds’ outstanding principals and interests as required by the bond covenant. Before a review was completed, the Public Building Authority defaulted on the bonds.
First Interstate Bank of Denver and the other respondents had purchased $2.1 million of the bonds, and after the default, sued for violations of the Securities Exchange Act of 1934. The respondents argued that Central Bank was also liable for aiding and abetting the violations. Central Bank petitioned the district court for summary judgment, which the district court granted. The United States Court of Appeals for the Tenth Circuit reversed.
Does the Securities Exchange Act of 1934 impose a private liability for aiding and abetting manipulative or deceptive trading practices?
Media for Central Bank of Denver , N. A. v. First Interstate Bank of Denver , N. A.Audio Transcription for Oral Argument - November 30, 1993 in Central Bank of Denver , N. A. v. First Interstate Bank of Denver , N. A.
Audio Transcription for Opinion Announcement - April 19, 1994 in Central Bank of Denver , N. A. v. First Interstate Bank of Denver , N. A.
Anthony M. Kennedy:
The opinion of the Court in No. 92-854, Central Bank of Denver versus First Interstate Bank of Denver will be announced by Justice Kennedy.
This is the opinion in Central Bank of Denver versus First Interstate Bank of Denver.
The case presents an issue we have twice read before and we reach it now.
The issue is whether in a suit based on Section 10(b) of the Securities and Exchange Act of 1934, a plaintiffs may sue and recover damages from a party alleged to have done no more than aid and abet the violation of securities laws.
The complaint in this case alleged a securities fraud in the issuance of bonds to finance public improvements for a plan residential community in Colorado.
The allegation was that the bonds were issued in reliance on an appraisal that reflected earlier land values that should have been readjusted to take account of a declining real estate market.
The petitioner, Central Bank of Denver, served as the indenture trustee for the bond issue.
According to the complaint, Central Bank did not itself commit a violation to Securities Act but it did aid and abet of violation by agreeing to postpone an independent review of the land valuation.
The District Court granted summary judgment to Central Bank but the Tenth Circuit disagreed.
Consistent with the Tenth Circuit's precedents, the court stated that the private plaintiffs may sue and recover damages from a party who aids and abets the violation of Section 10(b) of the 1934 Act, and the court further held that there was sufficient evidence to create a triable issue of fact on the question whether Central Bank had aided and abetted the violation.
In the opinion filed today, we reverse the Court of Appeals.
We hold that the sue for aiding and abetting a 10(b) violation is not available under the federal securities laws.
Our case is considering the scope of conduct prohibited by Section 10(b) have emphasized adherence to the statutory language and we have refused to allow challenges to conduct not prohibited by the text of the statute.
It would be inconsistent with settled methodology in Section 10(b) cases to extend liability to aiding and abetting.
The statue does not include giving aid to a person who commits a manipulative or deceptive act.
We cannot immune the statute to create liability for acts that are not themselves manipulative or deceptive within the meaning of the statute.
Respondents make a number of non-textual arguments for the imposition of aiding and abetting liability under Section 10(b) but none of which leads us to a different answer.
We cannot assume, as respondents urged, that Congress implicitly intended to impose aiding and abetting liability in the Securities Act of 1934.
Congress imposed some forms of secondary liability in the 1934 Act but did not include aiding and abetting liability.
That indicates the congressional choice with which the courts should not interfere.
Respondents also point that post 1934 legislative developments to support the various post-1934 congresses have acquiesced in the aiding and abetting cause of action recognized by some Federal Courts.
But, as we have held before, Congress' failure to overturn statutory decisions reached by the Federal Courts is not itself a reason to adhere to those decisions.
Congressional inaction cannot amend a duly enacted statute.
In this case, the Securities and Exchange Act passed by Congress in 1934.
The Securities and Exchange Commission also makes various policy arguments in support of aiding and abetting liability under Section 10(b), but those arguments do not show that adherence to the statutory text would lead to a result Congress would not have intended.
We note, indeed, that there are many policy arguments against the imposition of aiding and abetting liability under Section 10(b).
We hold that a private plaintiff may not maintain an aiding and abetting suit under Section 10(b).
Justice Stevens has filed a dissenting opinion which is joined by Justice Blackmun, Justice Souter, and Justice Ginsburg.