Affiliated Ute Citizens of Utah v. United States - 406 U.S. 128 (1972)
U.S. Supreme Court
Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972)
Affiliated Ute Citizens of Utah v. United States
Argued October 18, 1971
Decided April 24, 1972
406 U.S. 128
The Ute Partition Act was designed to provide for the partition and distribution of the tribe's assets between the mixed-blood and full-blood members; for termination of federal supervision over the trust and restricted property of mixed-bloods; and for a development program for the full-bloods with a view toward terminating federal supervision of them. In addition to cash and land, the tribe owned oil, gas, and mineral rights (principally oil shale deposits underlying the reservation) and unadjudicated and unliquidated claims against the Government. The Act provided that, upon publication of the final membership rolls, the tribal business committee (representing the full-bloods) and the mixed-bloods' "authorized representatives" were to start dividing assets that could be practicably distributed, based upon the relative number of persons in each group, with a further plan to be prepared for distributing the mixed-bloods' assets to individual members. After each mixed-blood had received his distributive share, federal restrictions were to be removed except as to the remaining interest in tribal property. The assets not practicably distributable were to be jointly managed by the committee and the mixed-bloods' representatives. Under the Act, the mixed-bloods, by way of selecting their representatives, organized the Affiliated Ute Citizens (AUC) as an unincorporated association which, as authorized by the statute, created the Ute Distribution Corp. (UDC) to manage (jointly with the committee) the oil, gas, and mineral rights and unadjudicated or unliquidated claims against the Government as part of the plan for distributing assets to individual mixed-bloods. UDC issued 10 shares of its stock in the name of each mixed-blood and made an agreement with First Security Bank of Utah (the bank) for the bank to become the UDC stock transfer agent, the bank to hold the stock certificates and issue receipts to the shareholders. Under UDC's articles, a mixed-blood shareholder desiring to dispose of his stock prior to August 27, 1964, had to give first-refusal rights to tribe members, absent which no stock sale was valid. A sale could be made to a nonmember
only if no member accepted the offer, and the price could be no lower than that offered to members. The UDC certificates were to bear a stamp revealing these conditions, along with a caveat that the certificates did not represent ordinary corporate shares; that the stock's future value could not be determined; and that the stock should be retained for the shareholder's benefit. Upon the sale to a nonmember, the seller was to furnish an affidavit to the reservation superintendent stating the amount he received. The federal trust relationship involving the divided assets contemplated by the Act was terminated by proclamation of the Secretary of the Interior effective August 27, 1961. AUC Case. AUC, acting for itself and its 490 mixed-blood members, in April, 1968, sued the United States for a pro rata distribution to the individual members of the mixed-bloods' 27% of the mineral estate underlying the reservation and for a determination that AUC, and not UDC, was entitled to manage that property jointly with the committee. Jurisdiction was asserted under 25 U.S.C. § 345 and 28 U.S.C. §§ 1399 and 2409. The District Court granted the Government's motion to dismiss, and the Court of Appeals affirmed. Reyos Case. In February, 1965, a group of mixed-bloods (12 of whom were selected as "bell-wether plaintiffs" for initial trial purposes) sued the bank, two bank employees (Gale and Haslem) and (under the Tort Claims Act) the United States, charging violations of the Securities Exchange Act of 1934 and the SEC's Rule 10b-5, which prohibits "any device, scheme, or artifice to defraud" in connection with securities transactions. The claimed violations involved plaintiffs' sales of UDC shares in 1963 and 1964 (some made before, and some after, August 27). The District Court, inter alia, found that mixed-bloods had sold 1,387 shares of UDC stock to nonmembers, Haslem buying 50 shares (after August 27, 1964) and Gale 63 (44 before that date and 19 after). The 12 plaintiffs sold 120 shares, Gale buying 10 and Haslem six. Thirty-two other whites bought shares from mixed-bloods during the 1963-1964 period. In 1964-1965 mixed-bloods sold shares at $300 to $700 per share, while the price range on transfer between whites was $500 to $700. Gale and Haslem received various commissions for their services in connection with transfers of UDC stock from mixed-bloods to nonmembers, solicited contracts for open purchases of UDC stock on bank premises during business hours, and prepared the necessary affidavits and other papers, using, at best, "informal" procedures. The District Court
concluded that the Government had reason to know of the sales to non-Indians and failed to perform its duty to the mixed-bloods to discourage and prevent the sales; that Gale and Haslem had devised a scheme to acquire for themselves and others UDC shares at less than their fair value; and that the bank had notice of the employees' improper activities. The court found that each of the defendants (with certain exceptions applicable to the Government) was liable to each of the 12 plaintiffs, and assessed damages by using a $1,500-per-share value for the UDC stock as of the times of the sales. The court reached that figure after taking account of the oil shale deposits underlying the reservation, along with gas, coal, and other minerals; petitioners' remaining interests in an Indian Claims Commission award; unadjudicated claims against the Government; the specific prices for UDC share sales by mixed-bloods to whites; the fact that mixed-bloods (who were under heavy selling pressure) were not so well informed about the stock's potential value as were whites; the influence of Gale's and Haslem's improper activities on selling prices; opinion evidence as to worth above $700 per share; and other factors. The measure of damages for each seller, the court held, was the difference between the fair value of the UDC shares at the time of sale and the fair value of what the seller received. The Court of Appeals reversed in substantial part, holding that, after the 1961 termination, the Government owed petitioners no duty in connection with the UDC stock sales; that Gale and Haslem were liable only where they personally purchased shares for their own accounts or for resale to an undisclosed principal at a higher price, but not in other instances, where their actions were held to be only ministerial; and that the bank's liability did not extend beyond Gale's and Haslem's. The District Court's valuation of the UDC stock was held to lack record support, and the proper measure of damages was held to be "the profit made by the defendant on resale" or, absent a resale, "the prevailing market price at the time of the purchase from the plaintiffs." A petition for certiorari covering both the AUC case and the Reyos case was granted.
The AUC Case
1. The AUC case was properly dismissed for want of jurisdiction as an unconsented suit against the United States. Pp. 406 U. S. 141-143.
(a) Though, under 25 U.S.C. § 345, the Government has consented to suits to enforce an Indian's right to an allotment of land, the AUC's claimed interest in the mineral estate has not been made subject to an allotment. Pp. 406 U. S. 142-143.
(b) Title 28 U.S.C. §§ 1399 and 2409 are inapplicable, since those provisions confer jurisdiction with respect to partition suits where the United States is a tenant in common or a joint tenant, which is not the situation here. P. 406 U. S. 143.
2. The UDC, and not the AUC, is entitled to manage jointly with the full-bloods the oil, gas, and mineral rights underlying the reservation. Pp. 406 U. S. 143-144.
The Reyos Case
3. The Ute Partition Act and the 1961 termination proclamation ended federal supervision over the trust and the mixed-bloods' restricted property, including the UDC shares, and the right of first refusal specified in the UDC corporate articles created no duty on the Government's part to the terminated mixed-bloods seeking to sell their shares. Pp. 406 U. S. 149-150.
4. The Court of Appeals correctly determined that Gale and Haslem violated Rule 10b-5 by making misstatements of material fact, namely, that the prevailing market price of the UDC shares was the figure at which their purchases were made, but the court erred in holding that there was no violation of the Rule unless the record disclosed evidence of reliance on the misrepresentations. All that is necessary is that the facts withheld be material in the sense that a reasonable investor might have considered them important in the making of his decision. Pp. 406 U. S. 150-154.
5. The bank's liability is coextensive with that of Gale and Haslem. P. 406 U. S. 154.
6. The correct measure of damages under § 28 of the Securities Exchange Act of 1934 is the difference between the fair value of what the mixed-blood seller received for his stock and what he would have received had there been no fraudulent conduct (except where the defendant received more than the seller's actual loss, in which case the defendant's profit is the amount of damages). Pp. 406 U. S. 154-155.
7. The District Court's valuation of $1,500 per UDC share has adequate record support. Pp. 406 U. S. 155-156.
431 F.2d 1349, affirmed; 431 F.2d 1337, affirmed in part, reversed in part.
BLACKMUN, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, STEWART, WHITE, and MARSHALL, JJ., joined. DOUGLAS, J., filed an opinion concurring in part and dissenting in part, post, p. 406 U. S. 157. POWELL and REHNQUIST, JJ., took no part in the consideration or decision of the case.