*2 roughly SCHNACKENBERG, approximate Before CASTLE counts for a claim Judges. FAIRCHILD, and Circuit rescission and seek a return of the cash 25,000 paid for the shares. The district Judge. them, FAIRCHILD, Circuit court decided it has they directly and are not on before us of de- This action concerns securities appeal. this Amalgamated Life In- fendant Labor Company. I, II, Allico Na- surance Plaintiff III the same Counts and contain (formerly Corporation tional The Gold averments as to the formation of the agreed America) Company contract, allegedly Star Life representa- and false buy they in 1965 to Life from defend- Labor tions. ments, In addition aver- contain Amalgamated substance, and ant Meat Cutters in as follows: America, Butcher of North Workmen by Union extended the time which agreed 400,- buy labor union. Allico to purchased the debenture note must be to $750,- of common stock and a shares September 15, August 31, 1966. On Al- 000 debenture from Union. note purchase it, lico offered to “but buy $750,000 Allico to was note for having Union, learned that notwithstand- give for 1966 and to five notes ing Amalgamated its fraud the shares of $150,000 each, payable July 1 of each substantially Labor Life had in increased succeeding years. of the five When the value, plaintiffs refused to sell said signed contract Allico was $750,000 400,000 Note and said shares bought 25,000 from Life for shares Labor they agreed stock as and to do note, $250,000 cash. The debenture wrongfully possession obtained 425,000 (all shares the stock outstand- 25,000 tiffs’ of stock.” The Union shares ing), and Allico’s were de- five notes agreed later all the sell shares and posited in escrow. default Al- Until debenture note to Missouri for National lico, right to have to vote was $2,000,000, price by $500,000. a better stock. count, In each seek agreed July, After the Union to following types (1) injunc of relief: 425,000 sell all shares and the debenture against tion the sale to Na Missouri note to defendant Missouri National Life (2) tional, a decree for return of the Company. Insurance 25,000 specific perform and for shares Jurisdiction, any, Allico, (3) is founded ance if of the contract with and brought proposition damages compensatory action is $1,000,000, as damages. punitive to enforce and under the duties well liabilities I Count exchange act and act. securities characterizes conduct in connection with the sale to Missouri National as The amended six contains defraud, operating device fraud as a allege IV, V, and counts. Counts VI upon plaintiffs, 10(b) in violation of see. 1965, the formation of contract in exchange 10-b-5, of the act1 and Rule of the mails and instrumentalities use and Count II terms conduct a vio such commerce, reliance and interstate 17(a) lation of sec. of the act.2 plaintiff Woike, president, Allico and its Count III that the sale avers is a breach representations false unjustly of contract and de will enrich Labor Life. Count IV claims vio- fendants. exchange 10(b) lation of sec. 10-b-5; of sec. and Rule Count V The district court concluded (a) (3) (2) I, Counts II and III amounted ac- act; 12(2) of the and Count VI of sec. tions to enforce a contract or recover judg- damages for breach, Each securities act. count asks en- rather than to against Life ment Union and Labor force liabilities or duties under the se- damages, $250,000 compensatory to- far curities act or act. He directed gether damages. punitive dismissing These with be entered 78j(b). 77q(a). 1. 15 U.S.C. sec. 2. 15 U.S.C. see. agreed possession” jurisdiction, them, counts for tained want just party. The other there no rea- to sell them to a third
determined that was delay. appealed. is that the Union in deal- Plaintiffs was motivated son ing plaintiffs’ and the The Union and Labor ask Life us promised shares and note it sell arguing appeal, it was dismiss the plaintiff by its realization that value dis- an abuse of discretion make the *3 profit had increased that it could and of a final missal these counts plaintiffs’ expense. 54(b). under Rule purchase Two and sale transactions not, however, dismiss We would brought by involved, the use each about appeal any event, in the order because of mails and instrumentalities refusing effect, case, in a has the this wrong- allegedly commerce. Union’s preliminary injunction, appealable, and is quite clearly “in ful occurred conduct such, interlocutory.3 if There even as connection transaction with with” its was, moreover, in no of discretion abuse plaintiffs and Mis- transaction with its making judgment. Al the order a final oc- souri The conduct also National. though the some two sets of have counts curred “in” the with Mis- transaction II, I, common, in and III are facts Counts clear, souri but suf- National. is less It large part predicated in outside on facts ficiently so, the conduct occur- that also They scope IV, of Counts andV VI. plain- red “in” the sale transaction with legal present questions, seek dif distinct tiffs. relief, parties ferent not and involve 17(a) act4 Sec. securities makes IV, VI, concerned and in V and Counts * * * any person it “unlawful for in the appears develop probability there no that * * * device, employ any (1) sale subsequent in the ments of Counts course * * * scheme, defraud, or artifice or IV, V and court VI district before * * * (3) engage any in transaction compel suggest would of the or revision operates or or course of business which dismissing II, I, order III. Counts and operate upon would as a or deceit fraud Apparently court ana- the district purchaser.” lyzed claims the dismissed counts as 10(b) exchange act5 makes Sec. of the they that had a contract any person “in unlawful to use buy Union, from the had securities purchase or connection with the sale” performance tendered the due any deceptive device in contravention period 1966 within the of an extension a commission Rule 10-b-5 forbids rule. granted by equity Union, and that employment device, scheme, “any or by preventing aid sale should them engaging “any artifice to defraud” and in the identical securities a third act, practice, or of business which course party compelling per- and Union to operates operate or or would as a fraud Following analysis form. in sim- this upon person.” any deceit plest terms, the decision cor- would be rect. question becomes: our Thus wrongfulness suggest, Two averments Whether the averments wrongdoing conduct, place true, there is of the if and bad faith Union’s sufficiently Union, part is not such conduct in the area this defraud, good scheme, solely dispute device, ex- in faith or artifice over operating interpretation or deceit istence or of contractual a fraud as they obligations upon plaintiffs. performance thereof. We conclude 25,000 in order do. if a of contract averment were Even breach One is that shares though by plaintiffs, pledged as to make a more favorable contract would owned security, “wrongfully sufficient, more ob- not itself be we have in 1292(a) (1). 78j(b). sec. sec. 15 U.S.O. 3. 28 U.S.C. 77q(a). see.
4. 15 U.S.C. conspiracy to con- in sold were is said to were not The motivation here. plaintiff. In reach- the securities of the vert to sell of contract induce a breach note, ing on the decision, relied its 400,000 the debenture violate view of the that brokers SEC induce the conversion but also to money they en- if 10-b-5 convert pledged Rule shares. tiffs’ purchases, or trusted to them for stock considered, A. T. in circuit The second pro- and divert sell customers’ stock Perlow,6 an action Brod & Co. v. ceeds to themselves.9 against recover customers to its broker Exchange Commis- In Securities and when broker loss suffered Lawson,10a conversions sion broker’s pay refused customer his and funds of customers ordered, but which customers of business held to be a course dropped were The broker in value. operated practice to a fraud or deceit which it a customers made that the purchasers, of section in- violation fraudulent order securities with the *4 only (a) (3) of the act. paying if the value for them tent of payment was increased the date support in the find for our views We due. just reasoning cited. of decisions complaint that The court concluded We conclude that the district “device, scheme, sufficiently or claimed a jurisdiction of I and II. What of Counts Rule 10-b-5. defraud” under artifice to contain iden- III All these Count ? counts rejected objection “no that The court fact, including those tical of averments alleged to investment fraud is jurisdic- to federal which are essential any fraud nor value 'usually the securities They only I tion. differ in that Counts pur- or the sale associated with aof and II each assert that a violation ” chase securities.’ involved, Count while federal statute is recognize plaintiff’s “Indeed, terms of III claim in we states The court said: unjust to every restitution for enrichment. Since failure a customer not that up identical, a are it pay to all the factual ordered adds claims for securities appropriate hold the dis- But that laws. seems violation jurisdiction of fraud or a trict court also has there is actionable whether though may pure III, depends sur- on Count be contract breach of mere pass plaintiff’s plusage. developed at the We do not facts and circumstances theory jurisdiction summary judgm pendent that there is for or on motion trial 7 in Count of a non-federal cause action ent.” imagine It a set III. most difficult to is York of New The district southern recovery support of facts which would a in a 10-b-5 violations Rule found at the in the context of Count III without involving conspiracy a course business right establishing re- same time awas Plaintiff convert securities.8 to purchaser cover under Counts I and II. He borrowed of securities. money purchases from First Dis- directly for his with We are concerned Corporation pledged secur- jurisdiction. count do note that defendants We supported Co. as secur- Trust ities with defendant to dismiss their motion Co., ity. showing copies the Trust that on It was of documents wrongfully Discount, acknowledged request 1966 at shares, causing performance a loss that Allico in the sold defaulted Discount, tiff; Co., 1, July joined Trust in a direction due through the shares whom the entire the broker eserowee deliver p. (1967), 9. F.2d 393. Id. at 6. 375 978. p. 7. Id. 398. (D.C.Md.1938), F.Supp. 10. 24 360. Company Jersey Cooper Trust North F.Supp. Ridgewood, 226 N. J. 716, 410, the Union. S.Ct. 57 L.Ed. But [33 717]. note to and debenture Templeton, supra docu- explanation, cf. Swafford v. [185 these In absence of L.Ed. averments U.S. S.Ct. that the
ments tend show wrongful taking by and of 1005].” the time the Union of the extension room, deciding If there is note are purchase of the debenture for motion to dismiss a for lack very aver- Of course false. subject matter, over the determining rely in we ments on which determination, for a basis jurisdiction. there was affidavits or other complaint, outside the material de- Jurisdiction, of fact is be averments stating which are essential to claim face of basis termined under the securities act or the complaint.11 clearly false, so are' or frivolous sham will be of dismissal The they may disregarded, be record for remanded the cause reversed and provide before us does not a clear and proceedings. further satisfactory basis which to make so Judge, CASTLE, SCH- Before Chief drastic a determination. FAIRCHILD, Cir- NACKENBERG petition rehearing is denied. Judges. cuit Rehearing. On Petition
PER CURIAM. existence called to the Our attention is statement, exceptions “Juris- our from of diction, however, be determined is to complaint.” of the face basis PETERS, Dean Appellant, Rene here, not concerned We are juris- required for such facts RUTLEDGE, Jack T. Sheriff and Jailer diversity. case, Muscogee County, In this Georgia, Appellee. diction based depends jurisdiction federal No. 25075. action, an ac- e., is character i. Appeals United States Court of and duties tion to enforce liabilities Fifth Circuit. under the act or the June Taking value ? at face action. we held that it is such Supreme
The has said: Court excep- previously out carved “The may be are that a suit sometimes
tions jurisdiction dismissed for want
where the claim under clearly Constitution or federal statutes
appears made immaterial and be obtaining solely purpose for the is a claim or where such
wholly and frivolous. insubstantial calling accuracy dis- ques- jurisdictional been
missals has Die &
tioned. The Kohler Fair v.
Specialty
Co.
supra,
228 U.S.
[22]
678, 682,
(1946),
678, 682,
1. Bell
v. Hood
U.S.
Bell v.
Hood
U.S.
773, 776,
773, 776,
66 S.Ct.