Pinter v. Dahl
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486 U.S. 622 (1988)
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U.S. Supreme Court
Pinter v. Dahl, 486 U.S. 622 (1988)
Pinter v. Dahl
Argued December 9, 1987
Decided June 15, 1988
486 U.S. 622
Petitioner Pinter, an oil and gas producer and registered securities dealer, sold unregistered securities consisting of fractional undivided interests in oil and gas leases to respondent Dahl, a real estate broker and investor who was experienced in oil and gas ventures. Dahl touted the venture to the other respondents -- his friends, family, and business associates -- and assisted them in completing subscription agreement forms prepared by Pinter, but received no commission from Pinter when each of them invested in unregistered interests on the basis of Dahl's involvement. When the venture failed, respondents sued Pinter in Federal District Court, seeking rescission under § 12(1) of the Securities Act of 1933 (Act) for the unlawful sale of unregistered securities. After a bench trial, the court granted judgment for respondents, apparently rejecting Pinter's common law in pari delicto defense to Dahl's suit. The Court of Appeals affirmed, ruling that such defense was not available because § 12(1) creates a "strict liability offense," rather than liability based on intentional conduct, and distinguishing Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U. S. 299, which held that the defense applies in actions under § 10(b) of the Securities Exchange Act of 1934, on the ground that § 10(b) contains an element of scienter. The court also held that Dahl was not a "seller" within the meaning of § 12(1), and therefore could not be held liable in contribution for the other respondents' claims against Pinter, since, although Dahl's conduct was a "substantial factor" in causing the other respondents' purchases, there was no evidence that he had sought or received financial benefit for himself or anyone other than the other respondents.
1. The in pari delicto defense is available in a § 12(1) private rescission action. Pp. 486 U. S. 632-641.
(a) Bateman Eichler is not limited to § 10(b) claims, to cases involving willful or negligent misconduct, or to implied, as opposed to express, private causes of action. Rather, the decision provides the appropriate test for allowance of the in pari delicto defense in a private action under any of the federal securities laws, including a § 12(1) rescission suit. Pp. 486 U. S. 633-635.
(b) The first prong of the Bateman Eichler test is satisfied in the § 12(1) context if the plaintiff is at least equally responsible for the issuer's illegal failure to register the securities or to conduct the sale in a manner that satisfies the Act's registration exemption provisions. A purchaser's knowledge that the securities are unregistered cannot, by itself, constitute equal culpability, even where he is a sophisticated buyer who may not necessarily need the Act's protection. Rather, the relative responsibility assessment turns upon the facts of each case. The second prong of the Bateman Eichler test is satisfied in the § 12(1) context where the plaintiff's role is primarily as a promoter, rather than as an investor. The determination depends on a host of readily accessible factors, including, but not limited to, the extent of the plaintiff's financial involvement compared to that of the third parties he solicited, the incidental nature of his promotional activities, the benefits he received for those activities, and the extent of his involvement in the offering's planning stages. Pp. 486 U. S. 635-639.
(c) The District Court's findings are inadequate to determine whether Dahl may be subjected to Pinter's in pari delicto defense under the Bateman Eichler test, as it applies to § 12(1) actions. Pp. 486 U. S. 639-641.
2. A nonowner of securities must solicit the purchase, motivated at least in part by a desire to serve his own financial interests or those of the securities owner, in order to qualify as a "seller" within the meaning of § 12(1), which provides that "[a]ny person who . . . offers or sells a security" in violation of the Act's registration requirement "shall be liable to the person purchasing such security from him." Pp. 486 U. S. 641-655.
(a) Section 12(1)'s language and history, as well as the statutory purpose of protecting investors, demonstrate that "seller" is not limited to an owner who passes title, or other interest in a security, to the buyer for value, but extends to a broker or other person who successfully solicits a purchase of securities, so long as he is motivated at least in part by a desire to serve his own financial interests or those of the securities owner. It strains the meaning of § 2(3) of the Act, which defines "offer" for § 12(1)'s purposes as including every "solicitation of an offer to buy . . . for value," to say that a person who gratuitously urges another, even strongly or enthusiastically, to make a securities purchase solely for the buyer's benefit is "soliciting" or is requesting value in exchange for his suggestion or seeking the value the titleholder will obtain in exchange for the ultimate sale. Only if the soliciting person is motivated by such a financial interest can it be fairly said that the buyer "purchased" the security from him, such that he can be aligned with the owner in a rescission action. Pp. 486 U. S. 642-647.
(b) The language, history, and statutory context of § 12(1) demonstrate that the "substantial factor" test, whereby a nontransferor seller
is defined as one whose participation in the buy-sell transaction is a substantial factor in causing the transaction to take place, is not an appropriate standard for assessing § 12(1) liability as a statutory seller. Without affording guidelines for determining when the defendant's conduct is sufficiently integral to the sale, the test would expand primary § 12(1) liability beyond persons who pass title and those who "offer" or "solicit" offers for financial gain to persons who merely participate in unlawful sales transactions but are only remotely related to the relevant aspects of the transactions, including accountants and lawyers simply performing their professional services. Such persons do not even arguably fit within the definitions set out in § 2(3). Congress did not intend such a gross departure from the statutory language. Pp. 486 U. S. 648-654.
(c) The record is insufficient to determine whether Dahl may be liable as a statutory "seller" under § 12(1). The District Court's finding that Dahl solicited the other respondents' purchases is not clearly erroneous. However, the Court of Appeals' apparent conclusion that Dahl was motivated entirely by a gratuitous desire to share an attractive investment opportunity with his friends and associates was premature, since the District Court made no findings that focused on whether he urged the other respondents' purchases in order to further some financial interest of his own or of Pinter. Pp. 486 U. S. 654-655.
787 F.2d 985, vacated and remanded.
BLACKMUN, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BRENNAN, WHITE, MARSHALL, O'CONNOR, and SCALIA, JJ., joined. STEVENS, J., filed a dissenting opinion, post, p. 486 U. S. 655. KENNEDY, J., took no part in the consideration or decision of the case.