*1 Hobbs; Brix; Dyer; Peter J. is W. C.D. use well clearly the non-eharitable then Harrison; Knudson; De Ken L. Calvert should de minimis and beyond point Kidder, Peabody Co.; Touche; & loitte & exemption.” an preclude unquestionably Jaffray Hopwood, Inc., Piper, at 263. Hanifen, Inc., Defendants, Appel Imhoff proper- used the It true that the Church lees, Cross-Appellants. only two hours religious purposes for ty for No. 940306. for which the purpose The other year. each development. The was future land was held Supreme Court Utah. nonexempt pur- for that property use We con- clearly not de minimis. pose was July therefore, property’s exclusive clude, develop- a site held for future use Moose, # Loyal Order But see
ment. P.2d 257 County Equalization, 657 Bd. of 1982). Accordingly, Church years exemption
entitled receive question. above, the Commis- stated
For reasons ruling is affirmed.
sion’s JJ., RUSSON, concur.
DURHAM J.,
ZIMMERMAN, C.J., HOWE, in the result.
concur GOHLER, IRA; John C. Suth
Gerhard W. Catherwood;
erland; David Barbara Gaffney; Paden; Joseph Stevens M.
W.J. Nouwens, Frink; behalf
D. Jeff similarly and all others
of themselves Plaintiffs, Appellants,
situated,
Cross-Appellees, Call, Isom, A R. K. Scott Thomas David City, F. Hixson; Karrenberg, Edward Ha- WOOD; Raymond Lake L. Salt L. Robert Schubert, Boston, Mass., Johnson; ber, San Pratt; Wynn Robert C. L. Robert N. Francisco, Cal., Monson; Harper, M. Theodore Blake Dunlop; Gerald C. John T. Cal., Fischer, Pintar, Diego, Nadauld; San Justine Stephen D. Portland General J. Berman, Seattle, Or., Portland, and Steve W. Corporation; Hold General Portland Wash., Reiten; plaintiffs. ings, Inc.; Richard Richard G.
562 Mitchell, Burbidge, facts,
Richard D. Stephen B. The relevant which we have extract- Hixson, Wood, City, Salt Lake ed from defendants the district court’s or- certification Johnson, der, and are as follows: Plaintiffs filed a Monson. class complaint action in federal district court Douglas Parry, City, J. Salt Lake for de- against various defendants. Plaintiffs al- Dunlop. fendant leged they purchased thаt had common Wilson, Bohling, William B. Randon W. shares and convertible subordinated deben- Walker, Jeffrey City, N. Salt Lake for defen- bankrupt now tures Bonneville Pacific Later, dant Nadauld Michael M. Clark Wad- (“Bonneville”), Corporation that defendants doups, City, Rubin, Salt Lake and Bruce A. promote myth intended to that Bonne- Portland, Or., for defendants Portland Gen- company was a ville sound financial condi- eral. by engaging tion in a series of sham transac- releases, issuing misleading press tions and Berman, Gaufin, Daniel L. 0. Samuel Salt records, public-оffering financial and docu- City, Reiten, Brix, Lake Dyer, for defendants ments, misrepresenta- and that defendants’ Hobbs, Harrison, and Knudson. 61-1-1(2) tions violated sections and -22 of Gary F. Bendinger, Casey, Richard W. the Utah Act. Williams, Jeffery Agnoli, S. Catherine Ste- plain- Certain defendants moved to dismiss Waldron, phen City, R. Salt Lake and Bar- Act, tiffs’ arguing claims the Utah that Mentz, City, bara A. York New for defendant plaintiffs pleaded they actually had not Deloitte Touche. alleged misrepresenta- relied defendants’ Peterson, Sullivan, A. Robert Alan L. Ka- Although plaintiffs pleadеd tions. had not thryn Snedaker, A. City, for Salt Lake Kid- reliance, actual pleaded had that defen- Peabody, Piper Hanifen, der Jaffray, and dants’ actions constituted “fraud-on-the-mar- Imhoff. The ket.” district court certified the follow-
ing questions
impression
of first
to this court:
(i)
ZIMMERMAN,
whether
is an
private
Chief
element
Justice:
61-1-1(2)
cause of action under sections
This case is before the court on certifica-
-22,
(ii)
element,
and
if reliance is an
tion from the United States District Court
whether
of “fraud-on-the-market” can
pursuant
for the
District Utah
to rule 41
satisfy
Appellate
the Utah Rules of
Procedure.
pres-
The district court’s
ease,
certification
dispositive
order
The
issue in this
following
ents the
two issues of state law for whether
private
reliance is an element
aof
(i)
our
61-1-1(2)
determination:
whether reliance
cause of action under sections
an alleged
-22,
untrue
misleading
statement or
presents
question
statutory
private
omission is an essential element of a
primary objective
construction. This court’s
61-1-1(2)
cause of action
construing
under sections
give
enactments
tois
effect to
Code,
and -22 of
legislature’s
the Utah
the antifraud
intent. West
v.
Jordan
provisions
Morrison,
(Utah 1982).
the Utah Uniform Securities
656 P.2d
(“Utah
(ii)
Act”);
if reliance is an
plain language
We look first to the
of the
element,
proving
whether
“fraud-on-the-mar-
legislative
statute to discern the
intent.
ket”
requirement.1
satisfies that
We hold Chris & Dick’s Lumber & Hardware v. Tax
Comm’n,
(Utah
provisions
these antifraud
do
1990);
see
therefore,
proof of
Am., Inc.,
we need not
Schurtz
BMW N.
1991). “Thus,
decide
whether
could be P.2d
we will
by proof
satisfied
interpret
according
“fraud-оn-the-market.”
plain
a statute
to its
lan-
put:
“Succinctly
purchasers
defraud
pur-
of stock
if
even
theory
directly rely
fraud on market
is based on the
chasers do not
on the misstate-
that,
hypothesis
open
developed
in an
se-
ments.”
market,
Levinson,
224, 241-42,
price
company’s
curities
stock
Basic Inc. v.
485 U.S.
978, 988-89,
(1988) (altera-
is determined
the available material infor-
S.Ct.
the
(iii)
(2)
61-1-22(3);
§
knew or in
any
of a
defendants
make
untrue statement
care could have
to
to
a mate-
the exercise
reasonable
material fact or
omit
state
untruth or
Id. The
necessary
to make the
learned of the
omission.
fact
in order
rial
made,
only
relates
light
the
of the
second element
the
one which
statements
mind,
plaintiffs
requires
it
to
state
which
are
circumstances under
made,
not know of the
the
did
misleading[.]
not
omission;
says nothing
untruth or
the statute
61-1-1(2).
§
61-1-
Ann.
Utah Code
legislature
The fact that the
about reliance.
22(1)
liability
imposes
upon
civil
those who
plaintiffs required
plainly articulated a
state
61-1-1(2),
61-1-
while section
violate
mind but was silent as to whether the
22(3)
liability
to
provides
defense
untruth or
plaintiff must have relied on the
part,
sec-
certain circumstances.
relevant
clearly
omission to recover
indicates
provides:
tion 61-1-22
legislature
adopt
not
a relianсe
intend
offers, sells,
(l)(a)
person
A
who ...
or
security in
purchases a
violation
Subsec-
61-1-1(2)
selling
tion
is liable to the
Defendants, however, ask us to look be-
security
buying
security
1—1(2)
to or
from
plain
yond
language
of sections 61—
him,
may
at
law or in
sue either
-22
and to read
equity
paid
(i)
for
to recover
consideration
argue
They
that in S
into the Utah Act.
security....
Hunter,
(Utah 1974),
interpreted
pre-
this court
quoted
of reasonable care could not have
of section
in the
the exercise
2. The version
61-1-22
omission,
known,
clarifying
hable to
аmendment made in
of the untruth or
text reflects
security
buying
person selling
See Utah Uniform Securities Act Amend-
1990.
ments,
133, 15,
him,
§
Laws
ch.
1990 Utah
at
sue either
law
Prior to
section 61-1-22 read in relevant
equity
paid
the consideration
recover
part as follows:
security....
for the
parties
§
Code Ann.
offers, sells,
pur-
Any person who
agree
amend-
in the instant case
that the 1990
security by
any
state-
chases
means
untrue
alter,
clarify,
their
ment
intended
any
to state
ment of material fact or
omission
rights
version of the
substantive
under the earlier
necessаry
a material fact
in order make the
merely
statute. Because amendments which
made,
light
of the circum-
statements
retroactively,
existing
applied
clarify
law are
they are
not mis-
stances under which
State,
Higgs,
Department
Social Servs.
leading,
knowing of
untruth
(Utah 1982),
omission,
current version
P.2d
and who does not sustain the
know,
governs
dispute.
and in
of section 61-1-22
that he did not
burden
interest,
requiring
1990 version of section 61-1-22 as
that it would serve his
assert
purchaser
legislature
reliance and the
mani-
falsity
representation
claim
about
adopt
Supply’s
fested its intent to
S
concern,
previously
which he
had no
when amended section 61-1-
upon
placed
which he
no
as a
portion
22 in
but left
intact the
of the
avoiding
basis
his contract. This is
S & F
statute
deducible from the ... clause
inferring
requirement;
relied in
a reliance
liability
[exempting
sellers from
if
(ii)
alternatively
that section 61-1-22’s
purchaser
knew of the untruth or omis-
express private
cause of action
violation
sion].
interpreted
of section
should be
Id. at 221.
including the same elements as the federal
*4
implied private cause of action for violation of
passage
Defendants characterize this
as
10(b)
Exchange
section
of the Securities
reading
requirement
reliance
into the earli-
(“1934 Act”)
of 1984
Securities
Ex-
disagree.
er
of
version
section 61-1-22. We
(“SEC”)
10b-5(b)
change Commission
rule
acknowledge
While we
that the court’s refer-
reject
promulgated thereunder. We
both ar-
purchaser
ence to
reliance is
con-
somewhat
guments.
fusing, we must read that reference in the
argue
legislature
Defendants first
that the
larger
surrounding
context
its
paragraphs.
of
presumed
adopted
should be
to have
& F
S
paragraph
passage
The
from which this
was
Supply’s interpretation of section 61-1-22
provides
taken
the basis for the
later
court’s
legislature
because the
that
amended
section
unreasonably pur-
conclusion that one who
in 1990
did not
its requirement
but
alter
that
regard
chases
for
securities without
the truth
purchaser
of
know the untruth or
cannot recover under
61-1-22.
section
In
which,
contend,
omission
defendants
was the
conclusiоn,
reaching this
the court mentioned
Supply’s imposition
basis for S & F
reliance, apparently
affirmatively
not to
es-
requirement.
reliance
See American Coal
requirement,
tablish a reliance
but simply to
Sandstrom,
1984)
v.Co.
purchases
illustrate that one who
stock with-
(“Where
legislature
portion
amends
of
out
logically
concern for the truth cannot
be
statute, leaving
unamended,
portions
said to have
upon
relied
an untruth or omis-
... absent substantial
evidence
the con-
Nothing
sion.
opin-
remainder
trary,
legislature
presumed
to have
suggests
ion
that the court
affir-
intended to
judicial
prior
been satisfied with
construc- matively adopt
a reliance
portions
tions of the unaltered
Our
F
adopted
Supply
and to have
of S &
those constructions as
intent.”).
supported by
recognition
consistent with its own
In
making
court’s
in that
however,
argument,
this
case
materiality
defendants
that section 61-1-22’s
mischar-
quirement
Sup-
import
acterize this court’s
F
objective
decision
S &
“seems to
some
ply.
added).
The court’s ultimate conclusion in S & standard of
(emphasis
reliance.” Id.
buyer
was
explained
that
The
only misrepresenta-
securities could
court
that
pre-1990
buyer
recover under the
version
tions which
ordinary
“a
or seller of
buyer
section 61-1-22 unless the
intelligence
prudence
exercised
would think to be
prudence
“reasonable care and
importance
under the
in determining
some
whether
Supply,
circumstances.” S & F
527 P.2d at
buy
or sell”
provide the
for
basis
conclusion,
222. In reaching this
the court
recovery under section 61-1-22.
In con-
reasoned:
trast, however, the сourt
silent
as
purchaser
[T]he statute
whether a
subjectively
cannot
must
understood
meaning
as
naively
that a
relied
such misrepresentation
can
on
to recov-
blindly purchase stocks without concern
er. We will not infer an intent to establish a
truth
repre-
requirement
reasonableness
reliance
court’s
from the
silence
develops
sentations
if it
then
later
that
on
issue.3
we conclude
Because
Supply's
dissent
prove
misunderstands S & F
court to
she reason-
“objective
reference to
misrepresеntations
an
standard
reliance”
ably
relied
the defendant's
concluding
illogical
requiring
"[i]t would be
without also
she
actually
relied on
its
have had to define
plied, federal courts
did not establish a
court
S &
elements, at
reject
and have derived these
defendants’
elements
requirement, we
tacitly
law fraud.
adopted
part,
from the common
legislature
least
argument that
section
983. One of these
amended
Id. at
108 S.Ct. at
such a
when
elements,
judicially
an
but left intact
crafted
element
fraud,
requires
know the untruth
the defrauded
did not
of common law
purchaser
prove
upon the
party to
that it relied
omission.
243, 108-
at
misrepresentation.
Id. at
S.Ct.
alternative,
argue that
defendants
In the
contrast,
action under
a cause of
989-90.
interpreted to in-
61-1-22 should be
provisions
ex
Act’s antifraud
has
judicially imposed
element
clude the
Consequently,
press elements.
cause
action
implied private
of the federal
In
has no need to define these elements.
10(b)
Act4
the 1934
of section
for violation
deed,
to do
inappropriate
it would be
so when
argument
rule 10b-5.5 Defendants’
and SEC
already
so.
legislature
has
done
Federal
appears
proceed
follows:
implied private
have created an
courts
expand
if
the ex-
Even we were to
10(b) and
violation of section
of action for
in sections 61-1-
press elements contained
10b-5;
of this
reliance is
element
rule
*5
1(2)
-22,
a
to establish
we see no reason
61-1-1(2)
action;
of
implied
section
cause of
Inc.,
Basic
10(b)
after section
Act was modeled
noted,
Supreme
“Reli-
Court
United States
10b-5;
section 61-1-22 creates
and rule
connection
provides
requisite
ance
causal
of action for viola-
express private
cause
misrepresentation
between
defendant’s
61-1-1(2);
therefore, section
section
tion of
However,
injury.”
plaintifPs
interpreted to include the
61-1-22 should
recognized,
is ... more
Court also
“There
pri-
implied
of the federal
reliance element
way
the causal con-
than one
to demonstrate
argument
action. We find
vate cause of
embraces one
nection.” Id. Section 61-1-22
unpersuasive.
only
by
remedy
providing a
such alternative
fundamentally
plaintiffs
privity
are in
with the defen-
different
61-l-22(l)(a)
§
Ann.
Code
private
of action for
dant. See Utah
from the federal
cause
(“A
10(b)
offers, sells,
purchases
...
or
and rule 10b-5.
violation of section
61-1-1(2)
security
implied.
in violation of Subsection
cause of action is
See
The federal
Levinson,
230-31,
security to
224,
person selling
485
is liable
Inc. v.
U.S.
Basic
him_”).
978, 982-83,
buying
or
al
establishes
It that the statute follows al” be made the frame of can meaning that a сan understood mate- reference of the definition what a naively blindly purchase stocks without is, something rial is: that it must be fact the truth reasonableness concern *7 buyer ordinary which a or seller intelli- if it later representations then de- prudence gence would think to be and interest, velops serve his that would determining importance in whether some falsity representation claim of a assert a buy or sell. concern, previously about he had no which upon placed no as a and which he (footnote F аt 221 Supply, S avoiding his basis for contract. added). omitted) il (emphasis It would be added). continued, plaintiff to logical the a (emphasis The court court Id. reasonably the parentheti prove she relied on defen “This is deducible from the (the quoted misrepresentations without also re above dant’s cal clause mis quiring actually relied on such buyer knowing not of the untruth or omis that she sion).” Thus, I the legislature representations. depart the Utah by majority’s Supply the S & F does interpreted S & conclusion that amended the statute so, and, doing import a under the court retained the not Accordingly, bring a buyer not know of the Act. cause Utah Act, language plaintiff Utah a must untruth or cit action under the omission recover — (1) actually by support that she relied on ed S &F establish (2) misrepresentations, alleged and the mis imposition of a There fore, representations of the kind legislature endorsed the S & were ordinary intelligence pru this lan a “of and Supply court’s deciding buy rely in or sell guage. v. dence” would See American Coal Co. Sand (Utah 1984) (“Where strom, Geisenberger John P.2d securities. Accord Distribs., Inc., statute, F.Supp. portion a Hancock legislature amends Alex, (S.D.Miss.1991); Foster v. leaving portions unamended absent offer, sale, Ill.App.3d purchase 157 Ill.Dec. N.E.2d involved or a 1242, 1245 security. Finally, although majority opinion im- plain language On the of the sec- basis plicitly acknowledges the for a causal need tions 61-1-1 and 61-1-22 Utah case law and plaintiffs injury connection between the and statutes, interpreting can these one conclude misrepresentations, it mis- defendant’s plaintiff brings that who a cause оf
takenly require- privity concludes that (1) action under must establish 61-l-22(l)(a) ment satisfies the alleged misrepresentations were However, need for a causal connection. sale, offer, made in connection with the or argument ignores fact securities, actu- and she bring against action ally reasonably misrepre- and relied on privity. defendant with whom there was no sentations. 61-l-22(4)(a) provides:
Every person directly indirectly who J., HOWE, concurs Justice RUSSON’s buyer controls seller or liable under opinion. dissenting (1), officer, every partner, Subsection themselves, Having disqualified buyer, every director of such a seller or STEWART, C.J., DURHAM, Associate and person occupying per- a similar status or J., herein; participate do not GLENN K. functions, forming every employee similar MEDLEY, and IWASAKI TYRONE materially of such a seller or who Judges, District sat. purchase, every aids in the sale or agent materially broker-dealer aids jointly
in the sale are also liable and sever-
ally with and to the extent same as the purchaser,
seller or unless the nonseller
nonpurchaser is so liable sustains the know,
burden of that he
in exercise of reasonable care could not known, of the existence of the facts Joseph minor, NELSON, By liability reason which the Through guard- his natural mother to exist. Cynthia STUCKMAN, ian Plaintiff and added.) (Emphasis Thus, privity Appellant, 61-l-22(l)(a) quirement of section alone does satisfy for a need causal connection CITY, body politic, SALT LAKE plaintiffs injury between the and the defen- Utah, By Through State of the Utah misrepresentations. dant’s *8 Recreation, State Division of Parks and Not is the need for a causal connec- Appellees. Defendants and requirement, tion satisfied the reliance additionally, but explicitly Utah No. 940543. quires alleged misrepresentations Supreme Court of Utah. offer,
made “in with” connection sale security. aof Ann. Utah Code July acknowledged by § 61-1-1. As Appeals, broadly Court federal courts
interpreted the “in with” require- connection
ment, “determining encompasses any that it
sale of a where fraud ‘touches’ the Harry,
transaction.” State v. Thus, Ct.App.1994). an essential
element of a cause of action under the Utah
Act is that a al- establish that the
leged misrepresentations “touched” or were