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Keywords

plaintiffliabilityrescissionrespondent

appealtrialleaserescissionrespondentbench trial

Related Cases

Pinter v. Dahl, 486 U.S. 622, 108 S.Ct. 2063, 100 L.Ed.2d 658, 56 USLW 4579, Fed. Sec. L. Rep. P 93,790

Facts

Petitioner Pinter, an oil and gas producer and registered securities dealer, sold unregistered securities to respondent Dahl, a real estate broker and experienced investor. Dahl promoted the venture to his friends and family, assisting them in completing subscription agreements, but did not receive a commission. When the venture failed, the investors sued Pinter for rescission under § 12(1) of the Securities Act of 1933, claiming the sale of unregistered securities was unlawful. The District Court ruled in favor of the investors, rejecting Pinter's in pari delicto defense.

Petitioner Pinter, an oil and gas producer and registered securities dealer, sold unregistered securities consisting of fractional undivided interests in oil and gas leases to respondent Dahl, a real estate broker and investor who was experienced in oil and gas ventures.

Issue

Whether the common-law in pari delicto defense is available in a private action under § 12(1) of the Securities Act of 1933, and whether one must intend to confer a benefit on himself or a third party to qualify as a seller under § 12(1).

The questions presented by this case are (a) whether the common-law in pari delicto defense is available in a private action brought under § 12(1) of the Securities Act of 1933 (Securities Act), … and (b) whether one must intend to confer a benefit on himself or on a third party in order to qualify as a 'seller' within the meaning of § 12(1).

Rule

The in pari delicto defense is available in a § 12(1) private rescission action, and a nonowner must solicit the purchase motivated by a desire to serve his own financial interests or those of the securities owner to qualify as a seller under § 12(1).

1. The in pari delicto defense is available in a § 12(1) private rescission action. Pp. 2070–2075.

Analysis

The Court determined that the in pari delicto defense applies to § 12(1) actions, allowing for the possibility that a plaintiff could be equally responsible for the illegal sale of unregistered securities. The Court also clarified that a person must be motivated by a financial interest to be considered a seller under § 12(1), rejecting the notion that mere substantial participation in the transaction suffices for liability.

We do not share the Court of Appeals' narrow vision of the applicability of Bateman Eichler. Nothing in this Court's opinion in that case suggests that the in pari delicto defense is limited to § 10(b) claims.

Conclusion

The Supreme Court vacated the lower court's decision and remanded the case for further proceedings to determine the applicability of the in pari delicto defense and whether Dahl qualifies as a seller under § 12(1).

Vacated and remanded.

Who won?

Investors prevailed in the case as the court ruled in their favor, affirming that the in pari delicto defense was not applicable in this context.

The District Court, after a bench trial, granted judgment for respondent-investors.

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