This appeal from judgment on the verdict in a securities case raises questions concerning the applicable statute of limitations and the elements of scienter and reliance in so-called 10b — 5 actions.
Plaintiffs’ complaint was “based upon violation of laws of the United States and the State of Utah including the proscriptions of Section 17(a) of the Securities Act of 1933 (15 U.S.C. Sec. 77q), Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. Sec. 78j), Rule 10b — 5 promulgated pursuant thereto by the United States Securities and Exchange Commission (17 C.F.R. Sec. 240 10b — 5) . . . and the Utah Uniform Securities Act (Utah Code Ann. § 61 — 1—1 et seq. (1953)).”
There is little point in reciting the other allegations set out in plaintiffs’ pleadings since they were generally denied by the appellant Conk and the partial transcript of the evidence before us is insufficient to determine with precision any particular allegations that were supported by substantial evidence on the whole record. But from the partial transcript of the testimony of one of the plaintiffs, the exhibits .before us, and record statements of counsel during the trial indicating agreement as to certain circumstances, at least these structural facts emerge in view of inferences that may be drawn favorably to the verdict: 1
Defendant-appellant Conk in August, 1968, was granted a distributorship for car wash units by Hanna Enterprises, a nonincorporated out-of-state business. 2 *1353 In the late fall of that year Conk contacted John E. Olson, one of the plaintiff-appellees, and later there was a meeting, or meetings among appellant and appellees as part of a larger group of prospective investors, when an investment proposal was explained by Conk and his associate, Stewart, now deceased. Conk made untrue statements or omitted to state facts necessary to render what he said not misleading, and these statements and omissions were material to the investment judgment of the appel-lees who relied upon them in making investments in the car washing business being thereby promoted by appellant, to their several damages in the amounts found by the jury. 3
Appellant Conk’s answer did not plead the statute of limitations nor any other affirmative defense. It was agreed, however, at the final pre-trial conference, that limitations would be one of the issues to be tried. For some reason the pre-trial order included in the record does not so provide, but the transcript of discussions before the trial judge assumes such an agreement and understanding, as do we. The pre-trial order as filed recites that “[t]here are no contested issues of law” and that “[tjhere are no uncontroverted facts in addition to those established by the pleadings and discovery.”
Far from this being so as to the law, however, substantial trial time was consumed by arguments between the parties, which have to a degree been projected here, whether the issue of the statute of limitations had been waived, whether a motion to dismiss on the ground that the claims were barred was timely, whether the statute in the absence of pleading could be considered at all, whether the defendant had been guilty of sharp practice by delaying the pressing of that defense until the opening of the trial, whether on the assumption that a two-year state statute was applicable plaintiffs could successfully claim that they did not discover the alleged fraud until within two years of the commencement of their action in view of allegations in their complaints that they had discovered the fraud one month earlier, and whether the discovery of some elements of fraud that early was effective to start the running of the statute if the greater part of its circumstances and seriousness was not discovered until aft-erwards.
These problems may be shortly disposed of for the purposes of this case by our rejecting, as did the trial court ultimately, appellant’s basic contention that since plaintiffs had claimed under both the 1933 and the 1934 Acts,' and also had asserted a claim in reliance upon the Utah Blue Sky Law, 4 one of the shorter limitation periods should apply, rather than the three-year period provided by state statutes for fraud cases which this court has repeatedly held applicable to implied rights of action under the Securities Exchange Act of 1934. 5
*1354
The only serious problem in this case arises from appellant’s contention that the trial court erroneously eliminated from plaintiffs’ 10b — 5 action any requirements for scienter and reliance, and submitted the case to the jury on the basis of a restrictive view of the elements referred to in Stevens v. Vowell,
The question of whether some species of scienter should have been recognized in the instructions as an element of appellant’s 10b-5 action was squarely presented to the trial court in pre-sub-mission conferences.
7
The trial court in-dieated that it might give a modified negligence instruction in this area, and indeed did so as to the other defendant Hanna which was claimed to have been involved through publications furnished to the appellant Conk. But as to the latter, apparently its reading of Stevens v. Vowell,
Other courts have interpreted the language of Stevens as meaning that there is no requirement of scienter in this circuit more burdensome than a showing of negligence. 9 This court has rejected such an interpretation expressly, 10 which rejection undoubtedly survives any contrary inference that might be drawn from dicta in our latest opinion. 11
The emphasis in Stevens v. Vowell of the necessity of a flexible interpretation of the security laws to cover all conduct, schemes and contrivances within its scope independently of the rigid requirements of common law fraud has been often quoted. We reaffirm that essential principle as it constitutes the hallmark, genius and strength of modern securities legislation. Yet the *1356 facts and setting of Stevens v. Vowell do not permit the extrapolation of the view for which it sometimes is cited. The case involved an attack by appellant upon the jurisdiction of the trial court “for the reason that the evidence wholly fails to establish any of the elements required to make out a case under 15 U.S.C.A. § 78j and Rule X-10B-5.” It is rather clear from the opinion that the defendant knowingly made untrue statements and omissions of material facts which by their very nature and context were misleading. 12 There are two quotations which frequently have been applied out of context to indicate that this circuit in 10b — 5 cases recognizes neither any species of scienter nor reliance as essential elements. We have already quoted one. The other is as follows:
“It will be observed that neither the statute nor the rule requires that the manipulative or deceptive device or contrivance be a part of or actually transmitted in the mails or instrumentality of interstate commerce. All that is required is that such a device or contrivance be used or employed in connection with the use of the instruments of interstate commerce or the mails.”
This court concluded “that there is abundant evidence to establish each and every element required under the statute and rule. The trial court therefore had jurisdiction over the subject matter.”
The same year Judge Doyle, author of Trussell v. United Underwriters, Ltd.,
“We concluded in Trussed that these elements are essential in a 10b — 5 case. Our reasons are extensively articulated in that decision, and although the case at bar involves an allegedly defrauded seller rather than a purchaser, the rule applies nevertheless. Plaintiff argues that the decision of this Circuit in Stevens v. Vowell (10 Cir. 1965)343 F.2d 374 , dispenses with the mentioned requirements. However, Stevens does not specifically consider the question and the dicta which is the source of the plaintiff’s contention does not in our opinion require adoption of a ruling which is contrary to that expressed in Trussed.”
In Gilbert v. Nixon,
“Had appellants invoked Section 12(2) alone our task in formulating the proper legal standards for recovery would have been simplified. We note, however, that a private action under Rule 10b — 5 originated in the need for a sellers remedy where none had otherwise been provided. Once a remedy was implied for the seller, it was extended to include the buyer even though relief was already available to him under Section 12(2). Since in this case recovery is sought under both provisions, we resolve any conflict between them in favor of Section 12(2), where the statutory remedy is explicit, [footnotes omitted except to note that in footnote 14 the court says ‘[i]n reaching this conclusion we do not mean to say that buyers never have an action under 10b — 5 independent of Section 12(2).’].”
Later in the opinion it was commented:
“While the purchaser has been required to prove his reliance in an action under 10b-5 by some courts, [citing among others Trussell v. United Underwriters, Ltd.,228 F.Supp. at 773 , supra] we do not place the burden on appellants in this case as we have decided that in such circumstances the rules of Section 12(2) should prevail. We held in Woodward v. Wright, supra, 266 F.2d [108] at 116, that ‘to say that purchaser reliance is a prerequisite to seller liability is to import something into the statute which is not there.’ We do not think the result should be otherwise because appellants sought recovery under 10b — 5 as well as Section 12(2).
“One is not to be held liable, however, because of his misleading misrepresentation or omission of material fact, the truth of the matter being unknown to the purchaser, if the party responsible for the misrepresentation or omission sustains the burden of proving that he did not know, and in the exercise of reasonable care could not have known that it was a misrepresentation or omission. Once again, as in the case of reliance, the seller’s burden of proving lack of scienter, made necessary by the specific provisions of Section 12(2), see Woodward v. Wright, supra,266 F.2d at 116 ; Wil-ko v. Swan,346 U.S. 427 , 431,74 S.Ct. 182 ,98 L.Ed. 168 (1953), should not be affected in this case by different requirements in this regard under 10b— 5.”
In Mitchell v. Texas Gulf Sulphur Company,
“In civil actions instituted on the basis of 10b — 5 violations, the keynote of which is fraud, the full panoply of common law fraud elements — misrepresentation or nondisclosure, materiality, scienter, intent to defraud, reliance and causation — have crept in and played varying roles of significance. However, a number of these elements have diminished in importance in private actions, and we have stated in Stevens v. Vowell,343 F.2d 374 , 379 (10th Cir. 1965), that ‘[i]t is not necessary to allege or prove common law fraud to make out a case under the statute and rule. It is only necessary to prove one of the prohibited actions such as the material misstatement of fact or the omission to state a material fact.’ Notwithstanding, appellants urge that appellees have failed to establish the presence of most of the common law fraud ingredients, i. e., misrepresentation or nondisclosure of material facts, scienter, intent to defraud, reliance, and some semblance of privity. A full measure of our attention will be devoted to each of these constituent parts.”
After disposing of the claim of immateriality by holding that “[t]he trial court had little difficulty finding from the testimony of Fogarty and other corporate officers that the April 12 statement was made in a manner reasonably *1358 calculated to influence the investing public”, this court proceeded to examine the problem of scienter. Judge Hill, the author of Stevens v. Vowell, stated for the court:
“But while some degree of scienter is required, it does not equate with the intent to defraud required in a common law fraud action. Globus v. Law Research Service, Inc.,418 F.2d 1276 (2d Cir. 1969); Heit v. Weitzen, supra [402 F.2d 909 ]; Astor v. Texas Gulf Sulphur Company,306 F.Supp. 1333 (S.D.N.Y.1969). Contrariwise, in the Eighth Circuit, City National Bank of Fort Smith, Ark. v. Vanderboom,422 F.2d 221 (8th Cir. 1970), and the Ninth Circuit, Ellis v. Carter,291 F.2d 270 (9th Cir. 1961), the rule is that scienter is not required to maintain a private 10b-5 damage action. We have dealt with the issue under significantly different circumstances in Stevens v. Vo-well,343 F.2d 374 (10th Cir. 1965). But in Gilbert v. Nixon,429 F.2d 348 , 357 (10th Cir. 1970), we considered the identical issue in a ease involving Section 12(2) and Rule 10b-5. The rule there articulated is applicable here. ‘One is not to be held liable because of his misleading misrepresentation or omission of material fact, the truth of the matter being unknown to the purchaser, if the party responsible for the misrepresentation or omission sustains the burden of proving that he did not know, and in the exercise of reasonable care could not have known that it was a misrepresentation or omission.’
“Two times during his opinion the trial judge recited: ‘[T]he record here discloses that the press release issued by defendants was misleading, intentionally deceptive, inaccurate and knowingly deficient in material facts.’ Confronted with the abundance of evidence in the record, we cannot conclude that TGS sustained its burden of proving that it did not know of the misrepresentation, nor was it demonstrated that with due diligence TGS could not have known of the faultiness of the statement.”
In Reyos v. United States,
“In Stevens v. Vowell,343 F.2d 374 (10th Cir.), we considered a private action under Regulation 10b-5. The trial court had made findings that critical facts had been concealed from the plaintiff investor and misrepresentations were made to him. The court also specifically found that the plaintiff had there relied upon all the representations made to him by the defendants. These findings were supported by the record. There was no issue on appeal as to reliance, and little as to the fact of misrepresentations. We there stated that it was not necessary to prove common law fraud, but necessary to prove ‘one of the prohibited actions.’ This referred to one of the (a), (b) or (c) subsections of the rule. In the cited case the (b) subsection was relied upon and with the reliance established the case was proven. The opinion does not hold that reliance is not required, as the plaintiff urges. It is a basic element of a cause of this nature, and was there shown.”
In reversing in part and affirming in part the last mentioned decision sub nom., Affiliated Ute Citizens v. United States,
“Under the circumstances of this case, involving primarily a failure to disclose, positive proof of reliance is not a prerequisite to recovery. 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 this decision . . . This obligation to disclose and this withholding of a material fact establish the requisite element of causation in fact.” (Citing Chasins v. Smith, Barney & Co.,438 F.2d 1162 , at 1172.)
Richardson v. MacArthur,
Allen v. H. K. Porter Co.,
“We have also recognized that neither the Rule nor the Securities Exchange Act sets forth the elements necessary to establish civil liability under Rule 10b — 5. Reyos v. United States,431 F.2d 1337 , 1347 (10th Cir. 1970) . Nor has this court attempted to specify what forms of deception are prohibited; rather we have held that ‘all fraudulent schemes in connection with the purchase and sale of securities are prohibited.’ Richardson v. MacArthur,451 F.2d 35 (10th Cir. 1971) . Furthermore, ‘[i]t is not necessary to allege or prove common law fraud to make out a case under the statute and rule.’ Mitchell v. Texas Gulf Sulphur Company,446 F.2d 90 , 97 (10th Cir. 1971), citing Stevens v. Vo-well,343 F.2d 374 , 379 (10th Cir. 1965).”
Thus, Allen v. H. K. Porter Co., tends to put Stevens v. Vowell in context by demonstrating that the broad language of the latter does not mean necessarily that literal fulfillment of the three elements obviates the necessity of some proof of causation as well as some species of scienter. It is somewhat ironical that this basic and sound recognition is somewhat blurred by Affiliated Ute Citizens v. United States, supra, in its rejection of the requirement of proof of causation beyond proof of materiality in the case of omissions to state facts essential to render what was stated not misleading. But the implications of the Supreme Court’s opinion was that the element of causation in some form remained and that some degree of scienter is requisite.
Hadsell v. Hoover,
Financial Indus. Fund, Inc. v. McDonnell Douglas Corp.,
“There has been much written on the matter of scienter in actions under Rule 10b-5, and especially in the departure from the initial pure fraud concepts. The movement toward modified scienter requirements and the use of negligence language has been fully described. It would serve no useful purpose to analyze it further here. The change has taken place in many jurisdictions. See the decisions of this court hereinafter considered; also, Parrent v. Midwest Rug Mills, Inc.,455 F.2d 123 (7th Cir.); City National Bank of Fort Smith, Ark. v. Vanderboom,422 F.2d 221 (8th Cir.); Ellis v. Carter,291 F.2d 270 (9th Cir.).
“We have considered the arguments that to move the standards entirely into the negligence field may likewise move the statutory basis for Rule 10b — 5 out from under section 10b, which has no negligence language.
“This court in Gilbert v. Nixon,429 F.2d 348 (10th Cir.), considered an appeal which raised claims based on Rule 10b — 5 and also on section 12(2) [15 U.S.C. § 777(2)]. The court there referred to the statutory standards in section 12(2) and held a similar test to be applied in the combined claim. In Mitchell v. Texas Gulf Sulphur Co.,446 F.2d 90 (10th Cir.), a Rule 10b-5 case, we referred to the holding in Gilbert v. Nixon, and there said that the defendant, Texas Gulf Sulphur, did not sustain its burden of proving that it did not know the statement in issue was false, ‘. . . nor was it demonstrated that with due diligence TGS could not have known of the faultiness of the statement.’ See also Allen v. H. K. Porter Co.,452 F.2d 675 (10th Cir.). The Mitchell case was decided after the case before us now.
“To prevail the plaintiff in this silence case had the burden of proof to establish that it exercised due care in making its stock purchase, that the defendant failed to issue the special earnings statement when sufficient information was available for an accurate release (or could have been collected by the exercise of due diligence), and to show there existed a duty owed by the defendant to the plaintiff to so disclose as to do otherwise would be a violation of Rule 10b— 5, and upon inaction under such showing plaintiff relied to its detriment. The defendant as a separate defense could show either good faith or the exercise of good business judgment in its acts or inaction.
“Mention should be made of our decision in Mitchell v. Texas Gulf Sul-phur Co.,446 F.2d 90 (10th Cir.), where there was no direct holding as to the standard of care required of the defendant as to the contents of a statement actually issued because the statement there concerned was obviously and intentionally misleading, as the trial court and this court indicated. So we did not there expressly require that the defendant meet a burden of showing due care although such would have been a defense. The burden of showing lack of due care in such circumstances is part of the plaintiff’s case.”
This court recognized the significance of scienter of some kind in 10b — 5 cases in its opinion in Andrews v. Blue,
“We must also reject the defendants’ argument that the Rule 10b-5 claim fails for lack of proof of scien-ter. Certainly intent in the odious or malicious sense is not required. The requisite knowledge of falsity is adequately evidenced. See Mitchell v. Texas Gulf Sulphur Co.,446 F.2d 90 (10th Cir. 1971).”
In the case of In Re Four Seasons Securities Laws Litigation,
“This court concludes that the law of the transferor forum does not require proof of facts amounting to common law fraud before a plaintiff can *1361 recover under one or more of the Federal statutes upon which the first six claims in the complaint in the instant case are based, and under one or more of the Ohio statutes upon which the Seventh, Eighth, Ninth and Tenth claims are based. James v. Gerber Products Company,483 F.2d 944 , 946 (6 Cir. 1973). Tenth Circuit law is similar. Stevens v. Vowell,343 F.2d 374 , 379 (10 Cir. 1965); Mitchell v. Texas Gulf Sulphur Company,446 F.2d 90 , 97 (10 Cir. 1971).”
The latest decision touching upon the point is Kerbs v. Fall River Industries, Inc.,
“6. It will also be observed that, while the Courts of Appeals are divided on the question of the necessity of proving scienter to establish liability under Rule 10b — 5, the pronouncements of this circuit on the matter have been clear and consistent. As stated by Judge Hill in Stevens v. Vowell, supra,343 F.2d at 379: ‘. . . It is not necessary to allege or prove common law fraud to make out a case under the statute and rule. It is only necessary to prove one of the prohibited actions such as the material misstatement of fact or the omission to state a material fact.’ ”
Despite varying emphases, the strong strand of consistency and reason running through the decisions of this court on the subject under discussion beginning with Stevens v. Vowell is readily discernible when viewed as a whole; statements considered separately or out of context not infrequently have been subject to misinterpretation. For this reason we have been persuaded thus to review the decisions in this circuit insofar as they bear directly upon the necessity of scienter and reliance in Section 10(b) actions. 13 From their common principles and applications may be deduced the propositions that there is required something additional by way of scienter or conscious fault 14 than mere negligence, and something more by way of reliance or causation in fact 14 than some abstract wrong expending its force entirely upon itself.
In determining how much more, or the existence of other required elements in view of the circumstances of particular cases, there must be kept constantly in mind the teaching of Stevens v. Vowell that the federal securities acts are not frozen into the old common law patterns; and that they must be interpreted flexibly and progressively, not technically nor grudgingly, to fairly effectuate their remedial purpose. Thus this court has consistently resisted and surmounted common law obstacles against relief from schemes, artifices, and courses of conduct where conscious fault designed to cause damages to either buyers or sellers of securities has been perceivable. “Nor has this court attempted to specify what forms of deception are prohibited;
*1362
rather we have held that
‘all
fraudulent schemes
in connection
with the purchase and sale of securities are prohibited.’ ” Allen v. Porter,
If the trial court had charged the jury in effect that untrue statements or omissions resulting from mere negligence without any manner of scienter, conscious fault, intention or recklessness, would have justified a recovery against Conk, this would have been fundamentally or palpably wrong and subject to correction here despite question as to the sufficiency of exceptions below. 17
But for the very reason that the language of the Act tells us that such a charge would have represented a fundamental departure from its purpose and meaning, we believe that the use in the instructions of the language of the rule implied that simple negligence would not be enough. 18 To us there is an undoubtable implication of fault beyond mere carelessness in “engaging in any device, scheme, or artifice to defraud or the making of untrue statements of material fact or omitting to state any material fact necessary in order to make statements made in the light of the circumstances not misleading.” Laymen, in the context of the other instructions, would be likely to sense this, even though there is ground for dispute among lawyers that “untrue” statements and the “misleading” of others by omissions to state material facts could result simply from innocent though negligent oversight.
There is nothing in the record to suggest that the jury was misled in this case in any fundamental sense. On the contrary, even the partial record placed before us suggests that the nature of the conduct on which appellant’s liability must have been predicated, as distinguished from the type of conduct on the basis of which his codefendant was acquitted, was necessarily pursued knowingly and intentionally and with purpose to mislead. A party who claims plain error within the reach of Rule 51, Fed.R. Civ.P., cf. Rule 52, Fed.R.Cr.P., has the heavy burden of demonstrating fundamental injustice. This the plaintiff has not done.
We do not mean to suggest generally that submission of the issues in the statutory language is enough when a proper request to charge is submitted to the trial court or timely exception is taken to the instructions as given or to a failure to charge on the subject. Indeed the defendant protected by such a request or exception is entitled to have his theory of defense specifically submitted to the jury in the context of the particu *1363 lar record facts and consistently with the decisions of this court on the points under discussion.
We hold that the instructions sufficiently recognized the requirement of “scienter” or conscious fault to withstand an attack on the ground of fundamental error and that, beyond this, there was no request or exception preserving for review any technical deficiency. The instructions covering reliance or causation in fact were free from error. Appellant’s other contentions are without any merit.
No request to charge was submitted in this area by appellant, nor were timely and sufficient exceptions taken as to any instruction. It is true that at various points during the trial appellant’s counsel had urged the court to include an instruction on “scienter”. His approach initially was oblique, being largely in support of the argument that if Rule 10b — 5 scienter was to be omitted in view of the 1933 Act’s conditionally dispensing with this element, the shorter statute of limitations provided by the 1933 Act should be applied to bar plaintiffs’ recovery. Losing on his major premise, counsel did press the independent requirement of scienter before the case was argued and the instructions were given.
But despite adequate opportunity to do so, he did not furnish any request to charge and, indeed, failed to supply any help whatever to the trial court in actually framing a proper instruction on the point. After the instructions were given the only statement even resembling an exception was “I would just have a general exception, your Honor, as I indicated earlier, that I think there should have been more scienter in the instruction as a whole, and I understand the Court’s position.” This fell far short of a timely or effective exception to preserve the point in view of the absence of any fundamental error as we have seen. 19
Affirmed.
Notes
. To formulate a statement of background facts against which abstract instructions can be tested and weighed for any fundamental effect upon the verdict is not an easy matter. The pre-trial order under the heading “Uncon-troverted Facts” merely recites that “[t]here are no uncontroverted facts in addition to those established by the pleadings and discovery.” But the defendant-appellant in the pleadings generally denied the allegations of the First Amended Complaint on which the parties went to trial, and there is nothing to show that the products of discovery and particularly the responses to interrogatories included in the file were offered or received in evidence.
. Hanna Enterprises, together with Hanna Marketing Company and Daniel C. Hanna, in addition to the original defendant Conk, were *1353 named as parties defendant by the First Amended Complaint. The Executor of the Estate of Darryl M. Stewart, also an original defendant, was dropped as such by the Amended Complaint. The added defendants by consent of the parties were in the instructions of the trial court treated essentially as one entity under the name “Hanna”, received a “no cause of action” verdict in their favor and for this reason do not appear as appel-lees in this case, although so designated in “appellants’ ” brief.
. The amount of damages — $5,000 for each plaintiff — was stipulated subject to a determination of liability.
. Th" state Blue Sky Law claim was dismissed by the trial court. The case was submitted to the jury on the basis of the Section 10(b) Securities Exchange Act of 1934 and Rule 10b-5.
. Richardson v. MacArthur,
. “It is not necessary to allege or prove common law fraud to make out a case under the statute and rule. It is only necessary to prove one of the prohibited actions such as the material misstatement of fact or the omission to state a material fact.”
. Before instructions were formulated, and in connection with the statute of limitations problem the trial judge stated: “I think I find that in the Mitchell case and in the Chiodo case the 3-year statute applies and has been applied in this circuit. And it seems to the Court that the Court’s view in this should be that the 3-year statute should apply in view of that ruling by the Court. It does present the problem of scienter. But I was thinking that we don’t have to really decide that question right now (Tr. 36).
“Now, I confess that Mr. Stubbs has stimulated me on this question of the seeming illogic that is presented by adopting the 3-year rule . . . [a]nd this would seem to justify in the minds of some courts the requirement of scienter. And I presently have the feeling that the other cases we have from the circuit setting out elements in the securities case, such as in the Vowell case, and other cases in which this court has given instructions on securities cases, we have not given scienter.
“So I have doubts presently that I would put scienter in. But I’m still open to persuasion on that.” Later the following occurred (Tr. 99):
“Mr. Christensen (for plaintiffs): But the case which was relied upon, the Trussell case, by the defendant Conk this morning, your Honor, has been discussed in Bromberg on Securities, page 50, and the author points out — and it’s speaking now not of limitations, but of the requirement for scienter, which is a key point in the argument which is made by Mr. Stubbs the author in that work, your Honor, points out that:
“ ‘Among the cases requiring scienter is Trussell v. United Underwriters.’
“And it states as to the contrary the case of Stevens v. Vowells at343 F.2d 374 from the Tenth Circuit (1965), which, of course, is a later case than the Trussed case and a case which is controlling on the District Court for the District of Colorado.
“The Court: I’ll think about it overnight
“I would say that I have looked at the case of Judge Doyle, and you have to read further into the decision to determine how he construes scienter. It isn’t all that easy just to accept that, because he does qualify it from the standpoint of the meaning of specific intent and so on. It isn’t all that clear.
“So these subsequent decisions, I think have a bearing. And we have looked at Bromberg; and Bromberg cites the Texas Gulf case, too, as an indication that scienter in the usual sense is not perhaps required.
“In a section in Bromberg it lists all of the circuits on this point. They list the Tenth Circuit in the category that Mr. Christensen has argued for.”
. “14. In order for you to find for any of the plaintiffs and against the defendant Conk upon the federal claim, you must find by a preponderance of the evidence each of the following enumerated elements:
“1. That in connection with or in furtherance of the transaction involving DeKater Corporation, there was use of some means or instrumentality of interstate commerce. . [The remainder of this statement is not pertinent to any point on this appeal since such use was not contested.]
“2. That the transaction involved the sale or purchase of a security. . . [The trial court properly instructed the jury that a security was involved.]
“3. That in connection with the transaction, or in order to effect or perpetuate it, the defendant Conk did any one or more of the following:
*1355 “a. Engaged in any device, scheme, or artifice to defraud any or all of the plaintiffs, or
“b. Made any untrue statement of material fact, or
“c. Omitted to state any material fact necessary in order to make any statement made, in the light of the circumstances in which they were made, not misleading.
“4. That with regard to the misstatement of a material fact, such misstatement was a substantial factor in the investment decision.
“But with regard to the omission of a material fact, as distinguished from a misstatement, it is not necessary to plaintiffs’ recovery for you to find that such omission was a substantial factor in plaintiffs’ investment decision.”
In general instructions the jury was told that “[a]n undisclosed material fact is a fact which would have influenced a reasonable man to act differently had he not been informed of the fact”, that “ ‘material’ or ‘material fact’ as I have used these terms means of significance to a person in exercising his investment judgment”, and that “[tjhe fact of reliance by a plaintiff upon particular statements or omissions, if you find such to be the fact, is persuasive evidence that the particular statement or omission relied upon is material.”
. E. g., Rochez Bros., Inc. v. Rhoades,
In Lanza v. Drexel & Co.,
“Yet the rule-making power granted to the Securities and Exchange Commission by Section 10(b) authorizes rules making it unlawful ‘[t]o use or employ . . . any manipulative or deceptive device or contrivance . . .’ (emphasis added.) These words negate liability for a mere negligent omission or misrepresentation. Rather, ‘proof of fraud is required in suits under § 10(b) of the 1934 Act and Rule X-10 B-5
Citing Fischman v. Raytheon Mfg. Co.,
A hint of the confusing nature of this subject generally is indicated by headnote 1 of the West advance sheets reporting United States v. Jones,
. Mitchell v. Texas Gulf Sulphur Co.,
. Kerbs v. Fall River Industries, Inc.,
. See Kohn v. American Metal Climax, Inc.,
“Stevens v. Vowell,
. We have been able to cover only the major thrusts of the opinions with reference to these limited aspects and with little reference to the circumstances individually involved. Hence for any more particular focus the cases themselves must be analyzed. Especially is this true with reference to the interrelationship ■ between the 1933 and the 1934 Acts and the problem of burden of proof when submissions involve reliance upon the provisions of both Acts. We have not been concerned here with burden of proof, criminal cases, expressly authorized causes of action, enforcement proceedings as distinguished from private civil actions, nor with other unraised problems in this complicated field.
. Perhaps part of the difficulty with the elements of “scienter” and “reliance” in application stems from the words themselves rather than broad concepts. From the common law these words have been transported by name into an environment inhospitable to at least part of what they meant in their old one. It may be that “reliance” and “scienter” at length will have carried the load long enough in the securities context so that as faithful but over-strained and superannuated work horses they may be put out to pasture while their more adaptable offspring “causation in fact”, Affiliated Ute Citizens v. United States,
. See footnote 5.
. Financial Indus. Fund, Inc. v. McDonnell Douglas Corp.,
. Cf. Fed.R.Cr.P. 52(b). See Hormel v. Hel-vering,
. See footnote 8 for the trial court’s charge as to Conk.
. Radio Corporation of America v. Radio Station KYFM, Inc.,