author: GODBOLD, Circuit Judge:

text:
    Luciano TRUJILLO et al., Plaintiffs, Jose Antonio Ortiz, Plaintiff-Appellant, v. UNITED STATES of America et al., Defendants-Appellees. Ruby Lee McELVEEN, by her parent Roy Lee McElveen, Plaintiff-Appellant, v. BOARD OF PUBLIC INSTRUCTION OF PALM BEACH COUNTY, FLORIDA, et al., Defendants-Appellees.
    No. 73-3537
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    April 1, 1974.
    Bruce S. Rogow, Miami, Fla., William S. Finger, Stephen J. Press, Thomas Montgomery, Belle Glade, Fla., for McElveen, and others.
    William J. Manikas, Fla. Rural Legal Serv., Pompano Beach, Fla., for plaintiff-appellants.
    Michael E. Jackson, Michael Jenks, Palm Beach, Fla., for Board of Public Inst.
    Robert W. Rust, U. S. Atty., Miami, Fla., Raymond Battochi, U. S. Dept. of Justice, Washington, D. C., for U. S. A.
    Monroe A. Coogler, Jr., West Palm Beach, Fla., for Palm Beach County Sheriffs Off.
    Daniel Dearing, Dept. of Legal Affairs, Civ. Div., Tallahassee, Fla., for State of Fla.
    R. Wm. Rutter, Jr., Asst. County Atty., West Palm Beach, Fla., for Palm Beach County.
    Raymond W. Gearey, Civ. Div., Tallahassee, Fla., Kathryn H. Baldwin, Dept. of Justice, Thomas G. Wilson, Washington, D. C., for defendants-appellees.
    Stephen K. Johnson, Gainesville, Fla., Brian J. Sherr, Fla. Rural Legal Serv., Delray Beach, Fla., for other interested parties.

      Before GEWIN, GODBOLD and CLARK, Circuit Judges.

       Rule 18, 5 Cir.; See Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York et al., 5 Cir., 1970, 431 F.2d 409.

   GODBOLD, Circuit Judge:

The appellants in this consolidated appeal initiated suits in the United States District Court for the Southern District of Florida, and moved to proceed in for-ma pauperis. Their lawyers were supplied by Florida Rural Legal Services, Inc. (FRLS). In a preliminary hearing in the McElveen case, the District Court ascertained that FRLS received $515,000 in federal funding to finance its fiscal year 1973 operations, of which its officers earmarked $7,000 for paying court costs. The District Judge stated that appellants’ allegation of poverty was true and their causes not clearly lacking in merit. Nevertheless, he denied the IFP motions. Reciting that the IFP statute, 28 U.S.C. 1915(a), accorded him discretion in the matter, he found cause for denial in the fact that “Congress, by funding an overall legal services program, has already provided for the payment of court costs . ” Disagreeing with that assessment of Congress’ intention, we reverse.

The District Court holding was grounded in the concern that granting IFP treatment would violate traditional notions of separation of powers, interfering with an intention of Congress expressed in the Equal Opportunity Act of 1964, 42 U.S.C. §§ 2701, 2809(a)(3), to preempt the IFP statute by providing a different method for defraying court costs in the case of persons represented by OEO-funded legal aid societies. We can find nothing in the Equal Opportunity Act of 1964 to suggest that Congress possessed the preemptive intent on which the District Court holding is based. The Act created

[a] “Legal Services” program to further, the cause of justice among persons living in poverty by mobilizing the assistance of lawyers and legal institutions and by providing legal advice, legal representation, legal counseling, education in legal matters, and other appropriate legal services.

42 U.S.C. § 2809(a)(3). The list of specific services to be rendered does not include payment of court costs. Nor does the catchall “other appropriate legal services” mandate payment of costs. By tradition, clients in the United States pay their own court costs and do not look to their lawyers for subsidization. That tradition invests “other appropriate legal services” with an ordinary meaning which would exclude payment of court costs. We must presume that was Congress’ intended meaning.

In sum, we hold that § 2809(a)(3) cannot bear the preemptive weight the District Court places on it. We stress that today’s holding merely identifies one duty that 42 U.S.C. § 2809(a)(3) does not require of legal aid societies. We imply neither approval nor disapproval of voluntary allocation and disbursement by legal aid societies of federal money for payment of clients’ court costs.

Reversed and remanded.

      . Under the Economic Opportunity Act of 1964, 42 U.S.C. §§ 2701, 2809(a)(3), as amended, and appropriations pursuant thereto.

      . The portions of the IFP statute relevant to this appeal are as follows:
      (a) Any court of the United States may authorize the commencement, prosecution or defense of any suit, action or proceeding, civil or criminal, or appeal therein, without prepayment of fees and costs or security therefor, by a person who makes affidavit that he is unable to pay such costs or give security therefor. Such affidavit shall state the nature of the action, defense or appeal and affiant’s belief that he is entitled to redress.
      An appeal may not be taken in forma pauperis if the trial court certifies in writing that it is not taken in good faith.
      }£ Sk # Sk
      (d) The court may request an attorney to represent any such person unable to employ counsel and may dismiss the case if the allegation of poverty is untrue, or if satisfied that the action is frivolous or malicious.
      28 U.S.C. § 1915(a), (d).

      . Because of the manner in which we dispose of this case, we pretermit the question whether § 1915(a) limits judges’ discretion to instances of untruthfulness of the affidavit or lack of merit in the claim. The District Court reasoned that the word “may” in subsection (a), see note 2 supra, implied the existence of an additional area of discretion beyond the area expressly delineated in subsection (d). Appellants would harmonize subsection (a) as merely authorizing the judge to impose a less drastic sanction than dismissal when he finds the allegations of poverty untrue.

      . In Adkins v. E. I. DuPont de Nemours & Co., 335 U.S. 331, 69 S.Ct. 85, 93 L.Ed. 43 (1948), cited prominently by appellants, the Supreme Court held that under § 1915(a) judges could not take the attorney’s means into consideration in deciding an IFP motion, even when the attorney, employed under a contingent fee contract, would share in any recovery. But Adkins is not directly controlling. As indicated in text, the District Judge in the present case focused not on the amount of FRIiS’s wealth or on the fact that its employees were attorneys, but on the source (federal appropriations) of its funds.


source: Caselaw Access Project

author: PER CURIAM:

license: Public Domain

text:
    Walter Gene SCOTT, Plaintiff-Appellant, v. Clarence JONES, Sheriff, Dallas County, et al., etc., Defendants-Appellees.
    No. 73-2648.
    United States Court of Appeals, Fifth Circuit.
    April 4, 1974.
    Samuel W. Hudson, III, Dallas, Tex., for plaintiff-appellant.
    John B. Tolle, Asst. Dist. Atty., Dallas, Tex., for defendants-appellees.
    Before RIVES, GEWIN and RONEY, Circuit Judges.
   PER CURIAM:

Appellant Walter Gene Scott, a state prisoner, filed this civil rights action pursuant to 42 U.S.C. § 1983 seeking injunctive and declaratory relief against various officials of the Dallas County, Texas Jail asserting that the appellees were denying him proper psychiatric care. Subsequent to the district court judgment denying appellant relief and appellant filing his notice of appeal, he was transferred from the Dallas County Jail to the state prison in Huntsville, Texas. Thus, any relief which this court might grant would be ineffective since the Dallas County Jail officials have no authority over the state prison in Huntsville. Accordingly, this case has been rendered moot and is remanded to the district court with directions to vacate its judgment and dismiss appellant’s complaint. See Armendariz v. Hershey, 413 F.2d 1006 (5th Cir. 1969); Taylor v. United States, 410 F.2d 392 (5th Cir. 1969).

      . Appellant did not bring a class action nor did he seek damages for the alleged inadequate medical services dispensed within the Dallas County Jail.

      . This court was informed by counsel for both parties that appellant was transferred from the Dallas County Jail pursuant to a recent Texas law which directs the transfer of convicted defendants to state prisons pending their appeal to the state appellate courts. Article 42.09 of the Vernon’s Ann.Texas Code of Criminal Procedure provides:
      If a defendant is convicted of a felony and sentenced to death, life, or a term of more than fifteen years in the Department of Corrections and he gives notice of appeal, he shall be transferred to the Department of Corrections on a commitment pending a mandate from the Court of Criminal Appeals.
      It is our understanding that this legislation was enacted to eliminate the extreme overcrowded conditions of the county jails. Appellant along with many other prisoners in the same status was transferred to the state prison to alleviate the crowded conditions in the Dallas County Jail. There is no showing here that the county authorities had appellant transferred to moot this case.


text:
    Genaro GARCIA et al., Plaintiffs-Appellants, v. TEXAS STATE BOARD OF MEDICAL EXAMINERS et al., Defendants-Appellees.
    No. 73-2557.
    United States Court of Appeals, Fifth Circuit.
    April 4, 1974.
    Mario G. Obledo, Sanford, Jay Rosen, Alan B. Exelrod, Michael A. Mendelson, Mexican Am. Legal Defense & Educational Fund, San Francisco, Cal., for plaintiffs-appellants.
    John L. Hill, Atty. Gen., Melvin E. Corley, Bill Campbell, Asst. Attys. Gen., Austin, Tex., for defendants-appellees.
    Before ALDRICH, Senior Circuit Judge, and BELL and GEE, Circuit Judges.

       Hon, Bailey Aldrich, Senior Circuit Judge of the First Circuit, sitting by designation.

   PER CURIAM:

Concluding as we do that federal questions are present here which are not wholly insubstantial or obviously without merit, Sands v. Wainwright, 491 F.2d 417 (5th Cir. 1973), and the other requisites being present as well, we vacate the judgment of the court below and remand for the convening of and action by a three-judge court.

Vacated and remanded with directions.


text:
    UNITED STATES of America, Plaintiff-Appellee, v. Gerald Francis GAUDIN, Defendant-Appellant.
    No. 73-3242.
    United States Court of Appeals, Fifth Circuit.
    April 4, 1974.
    Thomas J. Baumler, Jr., New Orleans, La., for defendant-appellant.
    John W. Stokes, Jr., U. S. Atty., J. Robert Cooper, Asst. U. S. Atty., Atlanta, Ga., for plaintiff-appellee.
    Before ALDRICH, Senior Circuit Judge, BELL and GEE, Circuit Judges.

       Hon. Bailey Aldrich, Senior Circuit Judge of the First Circuit, sitting by designation.

   PER CURIAM:

Defendant Gaudin claims that evidence upon which he was convicted of unlawfully passing and of possessing with intent to defraud counterfeit obligations of the United States was the product of an unreasonable search. He was taken into custody after passing two counterfeit bills at a shopping center in Sandy Springs, Georgia, a suburb of Atlanta. A later search of his automobile produced many others. It is of this search which he complains, asserting that an erroneous refusal of the court below to suppress its fruits should be held to vitiate not only his conviction on the possession count but, since without the fruits little evidence of scienter remained, the passing conviction as well. We affirm.

Gaudin told the arresting officer that he had been driven to town by his wife earlier in the day and had later gone to the center by bus. A call to his home telephone number, however, produced information from a female identifying herself as Mrs. Gaudin that he had left alone, that the red Toyota which he normally drove was not in sight, and that she did not know how he got to town. A Louisiana driver’s license and a key chain, with General Motors keys and a miniature license tag had been found on Gaudin’s person in a custodial search. Subsequently observing a Buick with Louisiana plates among the three or four cars left on the lot as night drew on, officers obtained the keys and approached the car, observing currency— later found genuine — in view on the car floor. The automobile license was within one digit of the number on the miniature tag found on Gaudin. The season was Christmas, the hour was late, and the officers attempted to reach first the Assistant United States Attorney and then their supervisor without success. Suspecting the car contained evidence and apprehensive that it might be driven away, they entered the trunk by means of the keys found on Gaudin but found nothing incriminating. They then entered the car itself by means of the keys and, though the visible bills were genuine, in the glove compartment and under the carpet they struck gold, as it were.

The circumstances were exigent, and the search was not unreasonable. Gau-din had just been apprehended passing counterfeit money, the keys found on his person connected him with the car, currency was in view inside the car, and his wife was at large. Carlton v. Estelle, 480 F.2d 759 (5th Cir. 1973). Seizure of the automobile was justified in these circumstances, and its search was not a significant further intrusion. Chambers v. Maroney, 399 U.S. 42, 90 S.Ct. 1975, 26 L.Ed.2d 419 (1970).

Affirmed.


author: GEE, Circuit Judge:

text:
    Marie J. BRADFORD, Plaintiff-Appellant, v. TARRANT COUNTY JUNIOR COLLEGE DISTRICT, Joe B. Rushing, Chancellor, et al., etc., Defendants-Appellees.
    No. 73-1650.
    United States Court of Appeals, Fifth Circuit.
    April 4, 1974.
    Rehearing Denied May 8, 1974.
    William C. Odeneal, Jr., Dallas, Tex., for plaintiff-appellant.
    Thomas H. Law, Fort Worth, Tex., for defendants-appellees.

      Before COLEMAN, AINSWORTH and GEE, Circuit Judges.
   GEE, Circuit Judge:

Plaintiff-appellant Marie J. Bradford claimed below that her teaching contract was not renewed because of her exercise of rights of free speech secured to her by the First and Fourteenth Amendments. After a full bench trial, the district court found otherwise. She also asserted that minimal standards of procedural due process were not observed in connection with her non-retention, but was able to show neither tenure, de facto tenure, nor any stigma or damage to her community standing entailed in the non-renewal. Thus, neither liberty nor property were at stake, and questions of procedural due process do not arise. We affirm.

From 1967 through May 1970, Mrs. Bradford was employed as an English instructor by Tarrant County Junior College, a state institution, on successive one-year contracts. In April of 1969, a faculty meeting was held to air faculty concerns centering around the non-renewal of several other teachers’ contracts. At this meeting, Mrs. Bradford put several awkward, but entirely proper, questions to the college president. The situation was tense, and the manner and tone of her interrogation was described by various witnesses as hostile, sarcastic, needling and intended to embarrass. Other witnesses saw nothing exceptionable in her behavior. About three weeks later, she was offered a contract for the 1969-1970 academic year at a substantial raise, which she accepted.

In December of that year, Mrs. Bradford received indications that her contract would again be renewed, though these came from her immediate superiors and she knew that the actual offer of renewal could come only from the president. Later that month, pursuant to customary policy and procedure at the college, she attended a confidential evaluation conference with Dr. Speegle, the Dean of Instruction, and her two intermediate supervisors. Following such conferences, at which an instructor’s performance was appraised and critiqued, formal recommendations for renewal customarily went forward along the chain of command. The conference proceeded, she being again given to understand that a recommendation for renewal of her contract would be made, to a point at which Speegle remarked, in what he described as a spirit of good will and constructive criticism, that her manner of putting questions at the April, 1969, faculty meeting had been “unprofessional” and a repetition of such conduct might cause her termination. Mrs. Bradford took strong and immediate offense at the term and the conference ended on a strained note.

Next day the meeting was reconvened at her request. Taking the floor, Mrs. Bradford asked Speegle whether she had misheard him as referring to her conduct as unprofessional on the prior day. He confirmed his statement. She then advised him that in so doing he had defamed her before her two other superiors present, that she had consulted an attorney the previous evening, and that if he did not give her a written retraction of his statement she would proceed to law. With this, he terminated the meeting to consult the school attorneys. Subsequently, Speegle and his superior re-evaluated their positions and recommended against her rehiring. Speegle testified that this was not prompted by any objection to her exercise of free speech, but rather by a feeling that one who could not receive what was meant as constructive criticism at a private conference without demands for formal retraction and reference to litigation posed threats to the teacher evaluation system and the orderly administration of the school. Further proceedings followed, including a presentation by Mrs. Bradford to the college Board of Trustees, which we need not detail in view of our disposition of the case. Mrs. Bradford was not rehired and this suit followed.

Mrs. Bradford correctly recognized below, and recognizes here, that to prevail she must draw her case under the Roth-Sindermann shield. To do so, it was necessary that she establish that she was non-renewed for exercise of constitutional rights, which would have entitled her to direct reinstatement, or show a property right or interest in liberty of which she was deprived, which would have required that the college accord her minimal due process in deciding her renewal. She was unable to do either. As to First Amendment rights, the court below found that the failure to rehire her did not result from her free speech at the April faculty meeting, a finding which is not clearly erroneous. As to rights of liberty or property, it found that the incident which precipitated unfavorable action on her new contract was private and was reflected neither in news media nor in her personnel file. Thus, she was in no way stigmatized or injured in her good name or reputation by action of any defendant. It was undisputed that she had no tenure, de jure or de facto. All she showed was a mere expectancy of employment. Since under Roth-Sindermann this does not necessitate a hearing, or invoke the protection of procedural due process, we need not inquire whether she received it.

Affirmed.

      . See Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972).

      . Mrs. Bradford did not count in contract. She pleaded: “Plaintiff’s Complaint herein is based upon Constitutional rights rather than contractual rights.” And in a trial brief, she characterized her case as one which “ . . . will stand or fall on the merits by whether or not she brings herself within Perry v. Sindermann [408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570]. . . ”

      . Mrs. Bradford admitted that she had no proof of any publicity given anywhere by the college to the incident. She gave publicity to it because she felt it “needed professional attention,” but admitted that for all the college said she could have given it out that she left to take a position closer to home.


text:
    Mrs. Margaret M. BROUSSARD, Plaintiff-Appellant, v. Sam A. DISTEFANO, Sr., Superintendent of Schools of Iberville Parish, et al., Defendants-Appellees.
    No. 72-3235.
    United States Court of Appeals, Fifth Circuit.
    April 4, 1974.
    Michael R. Fontham, New Orleans, La., for plaintiff-appellant.
    Joseph W. Cole, Jr., Port Allen, La., for defendants-appellees.
    Before AINSWORTH, GODBOLD and CLARK, Circuit Judges.
   PER CURIAM:

The decision of the District Court is VACATED and the cause remanded for reconsideration under Cleveland Board of Education v. LaFleur, 414 U.S. 632, 94 S.Ct. 791, 39 L.Ed.2d 52 (1974). Costs are taxed against the appellees.


author: BROWNING, Circuit Judge: HUFSTEDLER, Circuit Judge

text:
    MANOR DRUG STORES and all other users of Blue Chips Stamps who were entitled but failed to purchase stock of Blue Chip Stamps, on behalf of themselves and all other persons similarly situated, Plaintiffs-Appellants, v. BLUE CHIP STAMPS, a corporation, et al., Defndants-Appellees.
    No. 71-2223.
    United States Court of Appeals, Ninth Circuit.
    Oct. 15, 1973.
    As Modified on Denial of Rehearing and Rehearing En Banc April 1, 1974.

      J. J. Brandlin (argued), James E. Ryan (argued), Ray E. McAllister (argued), Los Angeles, Cal., for defendants-appellants.
    Thomas J. Ready (argued), Allyn O. Kreps, Michael D. Zimmerman, of O’Melveny & Myers, G. Richard Doty (argued), Peter W. James, David T. Peterson, of McCutchen, Black, Verleger & Shea, Los Angeles, Cal., for plaintiffs-appellants.
    G. Bradford Cook, Gen. Counsel, David Ferber, Solicitor, Richard E. Nathan, Asst. Gen. Counsel, Jerry W. Markham, Securities and Exchange Commn., Washington, D. C., for the amicus curiae.
    Before BROWNING, HUFSTEDLER, and CHOY, Circuit Judges.
   OPINION

BROWNING, Circuit Judge:

The district court, 339 F.Supp. 35, dismissed appellants’ complaint under section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Securities and Exchange Commission Rule 10b-5, claiming damages for alleged

fraud in connection with an offering of stock of appellee Blue Chip Stamps to appellant and the class it seeks to represent. The court held that because appellant and other members of the class did not purchase the stock they lacked standing to sue under the rule announced in Birnbaum v. Newport Steel Corp., 193 F.2d 461 (2d Cir. 1952). We conclude that it does not appear “beyond doubt” that appellant “can prove no set of facts in support of [its] claim which would entitle [it] to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). We therefore reverse.

The alleged facts are as follows.

In 1963 the United States filed a complaint charging Blue Chip Stamp Company, Thrifty Drug Stores Co., Inc., and eight grocery chains with conspiracy to restrain trade and monopolization in the trading stamp business in California, in violation of the Sherman Act. This litigation was settled in 1967 by entry of a consent decree. See United States v. Blue Chip Stamp Co., 272 F.Supp. 432 (C.D.Cal.1967).

The defendants in the antitrust suit, other than Blue Chip Stamp Company, were major California retail merchandisers who used Blue Chip stamps to stimulate patronage in their businesses. They owned 90 per cent of Blue Chip Stamp Company's stock.

Other retailers who used Blue Chip stamps in their business but owned no stock in Blue Chip Stamp Company (a group that includes appellant and others in the class it seeks to represent) appear before the court in the antitrust proceeding as amicus curiae. They contended that Blue Chip Stamp Company was to have been a non-profit venture on behalf of all users of Blue Chip stafnps, and that they (the non-stock-holding users) in fact owned an equitable interest in Blue Chip Stamp Company and in the $20,000,000 in profits it had accumulated. They asked that this interest be recognized in the decree.

These claims and contentions on behalf of the non-stockholding retail users of Blue Chip stamps “prompted the provisions” of the consent decree requiring the reorganization of Blue Chip Stamp Company. Under the reorganization plan eventually approved, Blue Chip Stamp Company was to be merged into a new company — Blue Chip Stamps. The defendant stockholder-users were to be cent of the common stock of the new in the enterprise. This was to be accomplished by issuing to others 55 per company; 621,600 shares of the common stock of the new company were to be offered to the retail users of Blue Chip Stamps who were not stockholders of the old company. The shares were to be offered on a pro-rata basis determined by the quantity of stamps issued to each of these non-stockholding users during a designated period. The offering was to be made in units consisting of three shares of common stock and a $100 debenture for a cash payment of $101. Any of the 621,600 shares not purchased by the non-stockholding users were to be divested of 55 per cent of their interest sold on the open market.

The offer of debentures and stock to non-stockholding users was intended by the court and government to be, and was, a bargain. Each unit offered to the non-stockholding user for $101 had a reasonable market value of $315, as defendant-appellees knew.

Users who were stockholders in the old company (including the defendantappellees in this case) did not want the non-stockholding users to exercise their right to purchase stock in the new company. To accomplish their purpose they caused to be prepared and circulated a prospectus “calculated to mislead and dissuade users not knowledgeable of the true value of said shares from purchasing said shares.” The prospectus repeatedly emphasized certain “Items of Special Interest” as having an adverse effect upon the value of the offered stock. “Constant reference to said items was intended to, and did cause plaintiffs to be misled as to the true value of said shares.” When defendant-appellees offered “their own” shares to the public a year later, the prospectus then issued made no reference to any of these “Items of Special Interest,” although they were as relevant (or irrelevant) on the date of the second prospectus as they had been on the date of the first.

Defendant-appellees, by these and other means, intended to and did mislead plaintiff-appellant and other user-offer-ees as to value of the stock. Plaintiff-appellant and others in the class it represents, relying upon these representations, “were induced and did, in fact, not accept said offer and purchase said Units,” and were thereby damaged in the amount of the difference between the offering price of the units and their fair market value.

We are not satisfied that these allegations establish on their face that appellant is barred from maintaining the action by the judicially created “purchaser-seller” prerequisite to standing to sue for damages under section 10(b) and Rule 10b-5.

The complaint alleges the use of a fraudulent scheme involving untrue statements and omissions in offering securities of Blue Chip Stamps for sale.

The statute and rule were intended to protect the purity of stock transactions from just such manipulative and deceptive practices that deprive potential investors of a reasonable opportunity to make informed and intelligent investment decisions. It is obviously irrelevant to this purpose that the object of the deceptive practices was to prevent purchases rather than to induce them. And Congress and the Commission cannot have intended to prohibit such fraudulent practices if they failed but not if they succeeded. The language of the statute and rule does not require such a bizarre result. The statute and rule are not confined in terms to consummated purchases or sales. They have often been applied where, as here, “plaintiffs alleged that they had sought to enter a securities transaction as purchasers or sellers, but that the transaction was aborted as a result of the fraud of the defendants.” Mount Clemens Industries, Inc. v. Bell, 464 F.2d 339, 345 (9th Cir. 1972), citing Opper v. Hancock Securities Corp., 367 F.2d 157 (2d Cir.), affirming 250 F.Supp. 668 (S.D.N.Y.1966); Commerce Reporting Co. v. Puretec, Inc., 290 F.Supp. 715 (S.D.N.Y.1968); Goodman v. Hentz & Co., 265 F.Supp. 440 (N.D.Ill. 1967); and Stockwell v. Reynolds & Co., 252 F.Supp. 215 (S.D.N.Y.1965). See also Walling v. Beverly Enterprises, 476 F.2d 393 (9th Cir. 1973).

It can hardly be doubted, therefore, that the Securities and Exchange Commission, or a private person having a sufficient interest, could have obtained prophylactic injunctive relief against the defendants in a timely suit.

Thus the question is not whether the complaint alleges a violation of the statute and rule, but rather whether appellant is barred from suing for damages because it succumbed to the fraud and did not purchase the offered stock.

Like the provisions of the statute and rule relating to coverage, the Birnbaum, “purchaser-seller” standing requirement is to be construed to accomplish Congress’ purpose. Herpich v. Wallace, 430 F.2d 792, 806-807 (5th Cir. 1970), and cases there cited. If this were the sole consideration, standing would be allowed to any person whose investment decision was affected by fraud, whether the fraud caused him to buy or prevented him from doing so. In either ease the fraud would frustrate Congress’ purpose, as we have said; and, in either case, allowing the private remedy would serve to vindicate that purpose.

The standing requirement rests in part upon other considerations, however.

. Cases allowing private suits for injunctive relief make it clear that the “purchaser-seller” prerequisite to standing to sue for damages rests largely on the assumption that if plaintiff does not allege that he purchased or sold the stock involved in the fraud it is evident at the outset that his claim must fail “both on proof of loss and the causal connection with the alleged violation of the Rule.” Mutual Shares Corp. v. Genesco, Inc., 384 F.2d 540, 547 (2d Cir. 1967). See also Britt v. Cyril Bath Co., 417 F.2d 433, 435-436 (6th Cir. 1969); cf. Rekant v. Desser, 425 F.2d 872, 881 (5th Cir. 1970); Boone & McGowan, Standing to Sue under SEC Rule 10b-5, 49 Texas L.Rev. 617, 646 (1971); Kellogg, The Inability to Obtain Analytical Precision Where Standing to Sue under Rule 10b-5 Is Involved, 20 Buffalo L. Rev. 93, 114-116 (1970).

This assumption is usually justified. Ordinarily there will be little proof (other than the non-purchaser’s own opinion, after the loss) that the non-purchaser would in fact have purchased but for the fraud, and, if so, how much, when or at what price; also, generally, the potential number of non-purchasers will be without definable limit.

But this is not invariably true.

As we noted in Mount Clemens Industries, Inc. v. Bell, supra, a “common link” among many of the cases allowing non-purchasers or non-sellers to sue for damages under the statute and rule is “the existence of a contractual relationship between the parties.” 464 F.2d at 345. Such contracts often furnish objective evidence of the reality of á plaintiff’s intention to purchase or sell but for the fraud, and thus of causation. They may also fix the price, quantity, and time of sale, thus making it possible to calculate damages. And the existence of such contracts permits a reasonable circumscription of a defendant’s potential liability by identifying from among the limitless number of possible non-purchasers those few that the defendant chose to deal with himself. See Commerce Reporting Co. v. Puretec, Inc., supra, 290 F.Supp. at 719.

Under the allegations of this complaint, the consent decree involved here serves the same function as did the contractual relationship referred to in Mount Clemens. According to the complaint, the consent decree required defendant-appellees to offer particular securities to a specific, identifiable group of non-stockholding retail users of Blue Chip Stamps, including plaintiff-appellant, and plaintiff-appellant had a right to buy those securities at a fixed price and in a fixed amount. The complaint alleges an objective measure of the amount of loss, based on subsequent sales by defendants. As to causation, the complaint alleges that the consent decree offer was intended to be and was a bargain; that units of securities having a market value of $315 were to be offered to plaintiff-appellant for $101 — a difference so great as to provide, prima facie, an objective basis for a factual inference that users properly informed rather than misled would have accepted the offer. It is also alleged that 60 per cent of those non-stockhold-ing users who did purchase the units offered thém had information as to value not made available by defendant-appel-lees in the prospectus.

The facts foreshadowed by plaintiff-appellant’s allegations may not be forthcoming, or the suggested inferences may be shown to be untenable. If such deficiencies become apparent in pretrial proceedings, they will justify judgment short of trial. Walling v. Beverly Enterprises, supra, 476 F.2d at 397. We hold only that dismissal on the face of the complaint was premature.

This holding does not undermine Mount Clemens. The allegations of the present complaint describe a highly unusual situation in which an unyielding insistence upon the existence of a contract to purchase as a prerequisite to relief would subordinate substance to form.

Reversed and remanded for further proceedings.

HUFSTEDLER, Circuit Judge

(dissenting) :

The majority confers standing to bring private damage actions under section 10(b) and Rule 10b-5 upon persons who neither bought nor sold securities and who never contracted with anyone to do so. I cannot reconcile this result with existing authority in our circuit and elsewhere or with the legislative scheme of which the section and the rule are a part. The majority’s justification for the result is that these nonpurchas-ing appellants, as members of a class benefited by a consent divestiture decree in an action to which they were not parties, had a special status that was equivalent to the status of an investor who had a contract to buy or to sell securities. I perceive no analogy between the two and no sound reason to create a fiction to expand the reach of section 10(b) damage actions.

The result reached by the majority is inconsistent with the holding and reasoning of this court’s recent decision in Mount Clemens Industries, Inc. v. Bell (9th Cir. 1972) 464 F.2d 339. Mount Clemens held that the purchaser-seller rule governs standing to bring section 10(b) damage actions in the courts of this circuit. The court then concluded that the noncontractual status of the Mount Clemens nonbuyer was fatal to the maintenance of his section 10(b) claim. Similarly, the noncontractual status of the nonbuyer appellants herein should be held to bar their suit.

The majority, however, attempts to bring appellants within the class of protected investors by saying that the consent decree serves the same function as did the contractual relationship referred to in Mount Clemens. The majority means that appellants’ status under the consent decree is analogous to that of purchasers or sellers whose contracts to buy or to sell aborted because of deceptive practices forbidden by section 10(b) and who were given standing to sue in cases that were cited and distinguished in Mount Clemens.

The functions of a contract and of the consent decree are, however, not the same. A contract to purchase or to sell a security is the equivalent of a purchase or a sale because the statute by definition makes them equivalent. As Mount Clemens explained, the unifying link among the cases granting. standing to persons who did not buy or sell “is the existence of a contractual relationship between the parties which elevated the plaintiffs to the status of statutory purchasers or sellers.” (464 F.2d at 345.) A consent divestiture decree cannot function similarly because it is not a “contract” within the meaning of the statute and because no statutory provision equates “purchase” and “offer pursuant to a consent decree.” The essential statutory link between the appellants and “purchasers” is missing.

The gap cannot be filled by saying, as does the majority, that a contract and the consent decree render causation and damages equally provable. Assuming that this similarity exists, it is nonetheless irrelevant. The court in Mount Clemens concluded that the speculativeness of a cause of action was not a ground for denying standing. (464 F.2d 346 n. 11.) .If speculativeness will not impair standing, a want of speculativeness cannot support standing. The ability of a plaintiff to prove causation and damages is relevant to the disposition of the merits, not to a determination of whether or not a certain plaintiff is properly before the court.

Furthermore, the appellants’ ability to prove causation and damages cannot be likened to that of parties who have contracted to buy or sell. Their situations are dissimilar because a contract creates legal rights between the parties. Appellants had no duties and no rights created by the consent decree. The decree could not have been enforced against them, and they could not have enforced it, even if the parties to the action resulting in the decree had intended to benefit them specifically. (E. g., Buckeye Co. v. Hocking Valley Co. (1925) 269 U.S. 42, 46 S.Ct. 61, 70 L.Ed. 155; United States v. ASCAP (2d Cir. 1965) 341 F.2d 1003; Control Data Corp. v. IBM Corp. (D.Minn.1969) 306 F.Supp. 839, aff’d sub nom. Data Processing Financial & General Corp. v. IBM Corp. (8th Cir. 1970) 430 F.2d 1277. See Dahl, Inc. v. Roy Cooper Co. (9th Cir. 1971) 448 F.2d 17, 20. Because the consent decree creates no rights or duties in appellants, their commitment and ability to purchase the offered securities are far less definite than in a case in which a contract binds the parties. This want of definiteness renders appellants far less able to prove causation and damages than those who have contracted to buy securities and negates the “same function” conclusion that is the basis for the majority’s grant of standing.

The foregoing analysis suggests that the majority does not succeed in bringing appellants within the ambit of the standing rule established in Mount Clemens-, indeed, it does not really attempt to do so. To state that the consent decree serves the same function as a contract masks the majority opinion’s real purport, which is the creation of an exception to the purchaser-seller rule.

The opinion attempts to justify the exception by (1) implying that the purchaser-seller rule is grounded solely on a policy of denying standing where either causation or damages is dubious, and (2) arguing that appellants should have standing because they could prove both elements. Neither proposition withstands scrutiny.

Although the purchaser-seller rule is occásionally buttressed by observations about the difficulties of proof that would accompany an abandonment of the rule, no authority purports to say that the potential for proving causation and damages is the essence of the rule. On the contrary, a person who is either a purchaser or seller and who alleges deception, causation, and damages can bring the action even if his ability to prove his ease is nil. (Cf. Mount Clemens Industries, Inc. v. Bell, supra, at 346 n.11.) He may promptly lose on a motion for summary judgment, but his action cannot be dismissed for lack of standing. The majority opinion’s effort to find sustenance for its view of the purpose of the purchaser-seller requirement in suits seeking only injunctive relief is unavailing. The purchaser-seller rule has only peripheral relationship to suits for an injunction. A rule that no one could obtain preventive relief who could not prove that the fraud had already been consummated would be quixotic. Moreover, expansion of standing to bring suits for injunctive relief does not entail the risk of strike suits or of exposure to imponderable liability that expanded standing in damage actions threatens.

The assertion that appellants are peculiarly able to prove causation and damages and thus are separable from all other nonbuyers is also faulty. The quantity of shares offered, the price, and the time of sale are generally fixed in a securities offering. These factors, therefore, do not distinguish the offer to appellants from an offer of the same securities to the general public. Although the majority opinion says that the appellants’ expectations are “rights,” they are not legally cognizable rights. If the offer were withdrawn or the decree not complied with, appellants could not complain. The susceptibility of appellants’ expectations to being so frustrated renders appellants’ damages as difficult to prove as those of a plaintiff whose acceptance of an offer is “thwarted by the intervention of an earlier or higher bidder.” Nor is it the case that causation is more easily proven by appellants than by a nonpurchasing public offeree. The majority opinion states, “ordinarily there will be little proof (other than the non-purchaser’s own opinion, after the loss) that the non-purchaser would in fact have purchased but for the fraud . . . The majority’s position is reasonable, but irrelevant. One who has the opportunity to purchase securities may let the opportunity pass for want of ability to take it, for failure to notice the opportunity, or for mis judgment of the market. These considerations apply as strongly to appellants’ case as they do to the case of public of-ferees. Appellants were as free to decline the bargain for the same reasons as any other nonbuyers. Appellants are in no better position than the public of-ferees to claim that if they had known the truth, they would have snapped up the bargain. The argument that a person not only adequately alleges damages, but also prima facie proves causation by stating a marked disparity between the value of the security and the offering price is startling. Any nonbuyer or nonseller could easily leap the causation hurdle if that proposition were true.

Appellants are therefore in the same legal position as were the nonbuying members of the general public to whom the same securities were subsequently made available by the consent decree and who, as appellants concede, have no standing to bring a section 10(b) damage action. Appellants cannot explain why their own situation is essentially different from other nonbuyers, except that they are a more discrete group than the general public and their disappointment can be assuaged for no more than $21,000,000, rather than many times that amount. Absent such a difference, the exception to the purchaser-seller rule that the majority seeks to establish is unjustifiable.

At the heart of the majority’s inability to justify its exception to the purchaser-seller rule is what I believe to be a basic misunderstanding of the role of a standing requirement in the context of securities litigation. The majority apparently believes that any plaintiff who can credibly allege the substantive elements of a cause of action sould be granted standing. However, even if litigants can allege and even prove all of the elements of a section 10(b) damage claim, they nonetheless may lack standing. The standing doctrine is not designed to thwart actions by persons who have not suffered any injury from a wrong. It is a means of foreclosing actions by persons who have been hurt by wrongs, but who, for reasons of legislative, judicial, or social policy, are outside of the class of persons who are given a particular kind of remedy for the injury. A federal standing requirement insures that litigants are sufficiently adverse to satisfy the case or controversy requisite of Article III of the Constitution, and it confines the persons who may bring suit to those whom Congress intended to provide the remedy invoked in a particular controversy. Appellants do not have standing because they are outside the class to whom Congress intended to extend the right to bring federal damage actions when it enacted section 10(b).

Congress could have preempted state law controlling deceptive practices in the marketing of these securities, and it would have given anyone injured by the practices condemned by section 10(b) a private federal damage remedy. It did neither. Instead, Congress created a scheme of private and public remedies superimposed upon state statutory and common law remedies. When confronted with-a complex legislative scheme of this kind, the judiciary must be extremely careful not to upset the balances built into the scheme by lightly implying federal remedies or by diluting princi-. pies of standing. (Cf. SEC v. National Securities, Inc. (1969) 393 U.S. 453, 465, 467 n.9, 89 S.Ct. 564, 21 L.Ed.2d 668; Holloway v. Bristol-Myers Corp. (1973) 158 U.S.App.D.C. 207, 485 F.2d 986.)

An expansive definition of the class given standing to pursue section 10(b) damage actions promises some incremental benefit in preventing deceptive practices in the marketing of securities, one of the principal purposes of the section. Expanding the class, however, entails costs as well as benefits. Incautious loosening of the purchaser-seller rule will generate federal litigation, increase the cost of marketing securities, inject into securities marketing new risk factors that defy accurate assessment, expose offerors to draconian damage claims, and invite strike suits. Securities markets are complex and sensitive institutions. Opening the valve, even a little, that controls the flow of section 10(b) damage actions can so far unsettle the market as to defeat, rather than to promote, the benevolent purposes of Congress in enacting the statute. (Cf. Herpich v. Wallace (5th Cir. 1970) 430 F.2d 792, 804.)

The purchaser-seller rule has maintained the balances built into the congressional scheme by permitting damage actions to be brought only by those persons whose active participation in the marketing transaction promises enforcement of the statute without undue risk of abuse .of the litigation process and without distorting the securities market.

The majority implies that its exception to the purchaser-seller rule does no real harm because few litigants will be situated exactly as were these appellants. In my view, the majority underestimates the ingenuity of counsel, but, even if it did not, the position is juris-prudentially unsound because it does not create neutral principles of law. In drawing the standing line between deceived nonbuyers given closed-end opportunities to purchase securities pursuant to a consent decree (appellants) and deceived nonbuyers given opportunities to purchase securities on a while-they-last basis pursuant to the same consent decree (nonbuyer public investors), the majority has not supplied a rationale keyed to the statute and rule to support its conclusion. Without such an underlying rationale, there are no neutral principles preventing the majority’s “causation and damages” or “same function” terminology from being extended to all passive “investors”.

To expand standing to nonsellers or to nonbuyers, like appellants, who have taken no affirmative action of any kind in reliance upon alleged deceptive statements invites litigation that has nothing to do with protecting the integrity of the marketing of securities. The passive investor could always await market developments without any risk, claiming deception caused nonbuying if the value of the securities proved more promising than the offerors’ glum predictions and deception caused nonselling if a rosier prospectus was followed by a market decline. Meanwhile, securities offerors would be hard pressed to find language for prospectuses that would be sufficiently neutral to avoid potential damage suits from bystanders.

I would affirm.

      . Section 10(b) of the Act provides:
      It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—
      (b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. (Emphasis added.)

      . The Rule provides:
      It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
      (a) To employ any device, scheme, or artifice to defraud,
      (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to malee the statements made,, in the light of the circumstances under which they were made, not misleading, or
      (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person in connection with the purchase or sale of any security. (Emphasis added.)

      . This court adopted the Birnbaum rule in Mount Clemens Industries, Inc. v. Bell, 464 F.2d 339 (9th Cir. 1972). See also Lanning v. Serwold, 474 F.2d 716 (9th Cir. 1973); Walling v. Beverly Enterprises, 476 F.2d 393 (9th Cir. 1973).

      . Some minor .details are drawn from material submitted by plaintiff-appellant to this court. They are appropriately considered as reflecting the nature of the facts that might have been established under the allegations of the complaint. See Herpich v. Wallace, 430 F.2d 792, 809 (5th Cir. 1970); Shell v. Hensley, 430 F.2d 819, 822 n. 8. (5th Cir. 1970).

      . Defendant-appellees are Thrifty Drug Stores Co., Inc., seven of the eight grocery chains that were defendants in the antitrust suit, the old Blue Chip Stamp Company, the new Blue Chip Stamp Corporation, and the members of the board of directors of the latter.

      . Ono sucli item was the pendency of claims against the company said to “aggregate approximately $29,000,000.” Defendant-appel-lees allegedly knew the claims “were of insignificant merit”; tiiey were settled for less than $1,000,000.
      In addition to reference to the “Items of Special Interest,” the complaint alleges otlier misleading statements, including an estimate that 97%% of the Blue Chip stamps issued by the new company would he redeemed when historically less than 90% were redeemed. This alleged misrepresentation “resulted in an understatement of earnings on stamp sales for the year prior to the offering of Six Million Dollars ($6,000,000) or about eighty per cent (80%).”

      . It is unclear from the complaint whether the unsold shares originally offered to non-stockholding users were eventually sold, and at what price. The complaint mentioned sales by defendants of “their own” shares, although plaintiff-appellant’s brief indicates that the same shares offered to them “were offered to the general public one year later.” The facts may be resolved in further proceedings.

      . Affiliated Ute Citizens v. United States, 406 U.S. 128, 151, 153, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972); Superintendent of Insurance v. Bankers Life & Cas. Co., 404 U.S. 6, 12, 92 S.Ct. 174, 30 L.Ed.2d 209 (1971); Tcherepnin v. Knight, 389 U.S. 332, 336, 88 S.Ct. 548, 19 L.Ed.2d 564 (1967); Herpich v. Wallace, 430 F.2d 792, 801, 805-806 (5th Cir. 1970); Kahan v. Rosenstiel, 424 F.2d 161, 173 (3d Cir. 1970); SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 851-852, 858 (2d Cir. 1968).

      . See, e. g., Travis v. Anthes Imperial Ltd., 473 F.2d 515 (8th Cir. 1973); Crane Co. v. Westinghouse Air Brake Co., 419 F.2d 787 (2d Cir. 1969).

      . Private parties may maintain an action to enjoin anticipated or continuing violations of § 10(b) and Rule 10b-5 though they could not sue for damages. See Kahan v. Rosenstiel, 424 F.2d 161, 173 (3d Cir. 1970); Britt v. Cyril Bath Co., 417 F.2d 433, 436 (6th Cir. 1969); Mutual Shares Corp. v. Genesco, Inc., 384 F.2d 540, 546 (2d Cir. 1967).

      . Affiliated Ute Citizens v. United States, 406 U.S. 128, 151, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972); Superintendent of Insurance v. Bankers Life & Cas. Co., 404 U.S. 6, 12, 92 S.Ct. 165, 30 L.Ed.2d 128 (1971); SEC v. National Sec. Inc., 393 U.S. 453, 466-467, 89 S.Ct. 564, 21 L.Ed.2d 668 (1969). See also Kern County Land Co. v. Occidental Petroleum Corp., 411 U.S. 582, 594, 93 S.Ct. 1736, 36 L.Ed.2d 503 (1973).

      . See, e. g., Note, The Purchaser-Seller Requirement of Rule 10b-5, Reevaluated, 44 U.Colo.L.Rev. 151, 154-55 (1972); Boone & McGowan, Standing to Sue under SEC Rule 10b-5, 49 Texas L.Rev. 617, 631, 647 (1971); Ruder, Current Developments in the Federal Law of Corporate Fiduciary Relations-Standing to Sue under Rule 10b-5, 26 Bus.Law 1289, 1296 (1971); Whitaker, The Birnbaum Doctrine: An Assessment, 23 Ala.L.Rev. 543, 571 (1971); Note, Inroads on the Necessity for a Consummated Purchase or Sale under Rule 10b-5, 1969 Duke L.J. 349, 362-63 (1969).

      . A suggestion that additional considerations may exist that give different meanings to “purchase” and “sale” as these words are used to define coverage in the statute and rule, and as they are employed in connection with the Birnbaum “purchaser-seller” doctrine of standing, appears in SEC v. National Sec., Inc., 393 U.S. 453, 89 S.Ct. 564, 21 L.Ed.2d 668 (1969). The Court stated that in defining “purchase” and “sale” as these terms are used in the statute and rule to determine coverage, the question to be asked is “whether [the] alleged conduct is the type of fraudulent behavior which was meant to be forbidden by the statute and the rule” (466-467, 89 S.Ct. 572). In a footnote at this point (467 n. 9, 89 S.Ct. 572) the Court added:
      “This case presents none of the complications which may arise in determining who, if anyone, may bring private actions under § 10(b) and Rule 10b-5. This is a suit brought by the Commission; the terms ‘purchase’ and ‘sale’ are relevant only to the question of statutory coverage. Therefore there are no ‘standing’ problems lurking in the case.” (Citations omitted.)

      . As defendant-appellees point out, plaintiff-appellant could not have directly enforced the decree. See Dahl, Inc. v. Roy Cooper Co., 448 F.2d 17, 20 (9th Cir. 1971). Indeed, the district court dismissed a claim based upon the theory that plaintiff-appellant’s damage arose out of a violation of the consent decree, and that ruling was not appealed.
      The rule referred to does not bar the claim before us, however. This claim rests upon the theory that plaintiff-appellant was damaged by a violation of the Securities Exchange Act of 1934 and Rule 10b-5 prohibiting fraud in connection with the purchase or sale of securities. The fact that the securities transaction that is the subject matter of the claim was mandated by the consent decree does not immunize defendant-appellees from the statutes and rules regulating securities transactions. Plaintiff-appellant relies upon a breach of a duty imposed by these statutory anti-fraud provisions, not upon a breach of a duty imposed by the consent decree.

      . An informed decision by j)laintiff-appellant to purchase these shares could not have been thwarted by the intervention of an earlier or higher bidder, as in Mount Clemens Industries, Inc. v. Bell, 464 F.2d 339, 346 n. 11 (9 Cir. 1972).

      . Unless some relevant distinction between the nonpurchasers in this case and the nonpurcliasers in Mount Clemens can be asserted, appellants herein must, on authority of Mount Clemens, be denied standing. To be significant, the distinction must be one which would have made a difference in outcome under the reasoning of Mount Clemens.

      The majority opinion explicitly suggests only one distinguishing feature between the two cases: “An informed decision by plaintiff-appellant to purchase these shares could not have been thwarted by the intervention of an earlier or higher bidder, as in Mount Clemens . . . This disitnction, however, is irrelevant.
      The Mount Clemens court made it clear that the difficulty that plaintiffs therein would have had in proving that they could have purchased the securities in question was not of governing significance in that case: “While we agree with the District Court that the claim of the appellants is highly speculative, that circumstance alone could not necessarily deprive them of the opportunity to prove a set of facts entitling them to relief.” 464 F.2d 346 n. 11. The court then went on to indicate the factor that was of governing significance: “The lack of an agreement, however, does distinguish the present case from those decisions which permit aborted imrchasers and sellers to maintain an action for damages.” Id.

      The distinction through which the majority in this case seeks to avoid the result in Mount Clemens, therefore, is irrelevant, for even if the claim of the plaintiffs in Mount Clemens had been less speculative than the appellants’ claim in this case, the result in Mount Clemens would have been the same. Because plaintiffs therein would nonetheless have been neither actual buyers nor contractual “purchasers”, they would have been denied standing. Similarly, if the outcome in this case is to be in accord with the reasoning in Mount Clemens, appellants must be denied standing because appellants in this case neither actually acquired shares nor entered into contracts for their acquisition.

      . Securities Exchange Act of 1934, § 3(a), 15 U.S.C. 78c(a): («
      “(13) The terms ‘buy’ and ‘purchase’ each include any contract to buy, purchase, or otherwise acquire.
      “(14) The terms ‘sale’ and ‘sell’ each include any contract to sell or otherwise dispose of.”

      . A persuasive rationale for refusing to accord nonparties standing to enforce a consent decree is that the potential exposure to litigation and to liability that a contrary rule would engender would seriously impair the settlement of litigation. The public interest in obtaining consent decrees outweighs the interest of the nonparty litigants in obtaining direct vindication of their pirivate interests. Control Data Corp. v. IBM Corp. (D.Minn.1969) 306 F.Supp. 839, 846. If administration of the antitrust laws would be ill served by allowing direct enforcement of consent decrees by third parties, it is difficult to understand how it would be better served by the creation of “rights”, like that created by the majority opinion, that permit indirect enforcement of the decrees.

      . The purchaser-seller rule has heretofore been understood to dictate that if a plaintiff in a section 10(b) private damage action is neither a purchaser nor a seller, he does not have standing to sue. To justify its conclusion that appellants have standing, therefore, the majority either must conclude that appellants are purchasers or sellers or must seek to modify the previously established meaning of the purchaser-seller requirement. The former conclusion cannot be sustained. The majority opinion, therefore, must be viewed as arguing for the latter conclusion.
      The majority in essence establishes a second basis upon which to claim standing. Under the logic of the majority opinion, a plaintiff may bring suit if either he is a purchaser or seller or he is able to prove causation and damages. The purchaser-seller rule ceases to be operative in all cases; its applicability becomes conditional upon the plaintiff’s inability to prove his cause of action.
      The majority apparently believes that this is no departure from prior precedent, for it writes of “the cases allowing non-purchasers or non-sellers to sue for damages under the statute and rule.” No cases allowing such plaintiffs to' sue are cited. Concededly, the majority cites several cases in which the strict purchaser-seller rule was relaxed somewhat. The relaxation that those cases countenance, however, is of a different sort altogether than that which the majority proposes. The majority proposes to uncouple the standing requirement from the purchaser-seller rule. The “forced seller” and “aborted purchaser-seller” cases to which the majority refers suggest only that the words “purchaser” and “seller” be liberally defined. They do not suggest that the words become altogether irrelevant and the rule of which they are a part become inoperative in certain contexts.

      . If the majority were to fail to assert that this policy is the sole basis for the purchaser-seller rule, the logic of the opinion would fail. Even though some policies underlying-the standing requirement were satisfied in a given case, if there were also other purposes to be met, standing would not properly be granted unless the majority were to show that the other policies also were not ill served by allowing appellants to sue.

      . Of the three cases cited by the majority, none explicitly discussed the purchaser-seller requirement, and two involved plaintiffs who were in fact purchasers or sellers. Britt v. Cyril Bath Co. (6th Cir. 1969) 417 F.2d 433, 435. Compare Rekant v. Desser (5th Cir. 1970) 425 F.2d 872, 876-879 with id. 879-882.

      . The Supreme Court has described the law of standing as a “complicated specialty of federal jurisdiction, the solution of whose problems is in any event more or less determined by the specific circumstances of individual situations.” United States ex rel. Chapman v. Federal Power Comm’n (1953) 345 U.S. 153, 156, 73 S.Ct. 609, 612, 97 L.Ed. 918.

      . Under the majority’s rule, securities traders would not only have to insure against potentially crippling damages, they would also have to bear increased compliance costs. The accuracy of a representation with regard to a security is usually judged by hindsight; if the price of the security rises substantially, prior representations may seem unduly conservative; if it falls, too optimistic. Under the purchaser-seller rule, offer-ors can protect themselves against unforeseen impositions of liability by acting with judicious restraint when dealing with others; they need merely avoid inaccuracies that induce others to act. If passive “investors” were also allowed to sue, such self-protective conservatism might prove suicidal, for an offeror would have to be micrometrically accurate. If securities traders are to be held responsible for lapses in such exactitude, the costs of accumulating, verifying, and presenting the necessary data would soar.

      . The great ease with which plaintiffs can allege the requirements for the majority’s standing rule and the greater difficulty that plaintiffs are going to have proving the allegations suggests that the majority’s rule will allow a relatively high proportion of “bad” cases into court. The risk of strike suits is particularly high in such cases; although they are difficult to prove at trial, they are even more difficult to dispose of before trial.

      . The majority opinion would allow standing to sue if the misled nonbuyer were one of 10 offerees who could buy no more than 10,000 shares each of a 100,000-share offering, but it would deny standing if the nonbuyer were identically misled as to the same shares, but he was one of 11 offerees of 10,000 shares of the same offering to be sold on while-they-last terms. Why?


author: PER CURIAM.

text:
    Francis C. UPTON, Plaintiff-Appellant, v. WESTERN LIFE INSURANCE COMPANY, Defendant-Appellee.
    No. 73-1540.
    United States Court of Appeals, Sixth Circuit.
    Argued Jan. 30, 1974.
    Decided Feb. 20, 1974.
    Robert D. Simmons, Bowling Green, Ky., for plaintiff-appellant; Jon Goodman, Munfordville, Ky., on brief.
    Whayne C. Priest, Jr., English, Lucas, Pries & Owsley, Bowling Green, Ky., for defendant-appellee.
    Before McCREE and LIVELY, Circuit Judges, and McALLISTER, Senior Circuit Judge.
   PER CURIAM.

This is the appeal of the widow of a deceased insurance policy holder from a judgment entered on a verdict for the insurance company in a diversity action to recover under two $25,000 life insurance policies. In the district court, the insurance company stipulated to a prima facie case for appellant, and defended on the grounds that, in applying for the life insurance, appellant’s deceased husband, who was a practicing physician, had made fraudulent misrepresentations and omissions about the state of his health. Specifically, the company asserted that he answered “no” to an inquiry whether he “ever had or been treated for epilepsy, fainting or dizzy spells, any nervous or mental disorder” and that this answer was false and fraudulent. Because of the stipulation, the district court, reversing the usual order of proof, permitted appellee, upon its motion, to present evidence first because it had the burden of proving fraud and misrepresentation to defeat recovery under the insurance contracts. At the close of appellee’s proof on the fraud issue, appellant moved for a directed verdict, and the motion was overruled. After appellant closed her proof, she moved again for a directed verdict, and this motion, too, was overruled. The case was submitted to the jury and it returned a verdict in favor of the insurance company.

On appeal, appellant contends that the district court erred in overruling her motions for directed verdict and that the court erred in instructing the jury that an intentional misstatement of truth on the part of appellant's decedent would void the policy even if the misstatement was not material to the insurance company’s issuance of the policy.

Because our jurisdiction is based upon diversity of citizenship, the law of our circuit requires us to apply the state test for the sufficiency of evidence, and here we must apply the law of Kentucky. Moskowitz v. Peariso, 458 F.2d 240 (6 Cir., 1972). In Moskowitz, we explicated the proper standard under Kentucky law for reviewing, on appeal, a claim that the trial court erred in ruling on a motion for directed verdict. We stated:

The same considerations which govern a proper decision on a motion for a directed verdict also govern in the consideration of a motion for a judgment notwithstanding verdict. Cassinelli v. Begley, 433 S.W.2d 651 (Ky. 1968). In ruling on either a motion for a directed verdict or on a motion for judgment notwithstanding verdict, the Court must consider the evidence in the light most favorable to the party against whom the motion is made, and on appeal the appellate court is to consider the evidence in the same light. Sutton v. Combs, 419 S.W.2d 775 (Ky.1967). 458 F.2d at 244.

Accordingly, we must consider the evidence here in the light most favorable to appellee insurance company. And our examination of the record discloses evidence that the insured had experienced a grand mal seizure before he applied for the policies and that the company would not have issued them if this fact had been disclosed. We are convinced that there was sufficient evidence as a matter of law for the case to be submitted to the jury on the issue of the affirmative defense.

The Kentucky courts have made it clear that fraudulent misrepresentation made by an insured in order to obtain insurance will void the policy even if the misrepresentations were not material to the company’s issuance of the policy. Equitable Life Assur. Soc. of U. S. v. Phillips, 283 Ky. 479, 141 S.W.2d 861 (1940); The Maccabees v. Covert, 302 Ky. 481, 194 S.W.2d 498 (1946). As the Kentucky Court of Appeals stated in Phillips:

The law is definitely established in this state in cases of this character by a long line of decisions. The rule is (1) that where a misrepresentation is fraudulently made by the insured to procure a policy of insurance the element of materiality is unnecessary and (2) that the element of fraud is unnecessary when the false representation is material to the risk. 141 S.W.2d at 862.

Accordingly, we hold that the challenged jury instruction was correct under Kentucky law.

Affirmed.