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April 7, 1971

Elias M. PINTO, Nina Pinto, Maurice E. Pinto, Camila Pinto and Joseph J. Pinto, Plaintiffs,

Frankel, District Judge.

The opinion of the court was delivered by: FRANKEL

FRANKEL, District Judge.

Plaintiffs have moved for a remand of this case to the state court whence it was brought here by defendant. Both sides have the court's appreciation for skillful and learned presentations. On the less aesthetic level of result, the decision must be for plaintiffs.

 The case began in the State Supreme Court, New York County, with the service of a summons alone. The complaint, served on November 17, 1970, and followed in the next month by the petition for removal, alleged four causes of action relating to an agreement of 1966 under which plaintiffs had agreed to accept stock in defendant corporation in exchange for their stock in a company called Chanslor & Lyon ("C & L"). Under the agreement there was a "first closing" in December 1966 at which plaintiffs exchanged all but 20% of the stock of C & L for designated amounts of defendant's common and preferred shares. The agreement provided that if the Maremont common stock plaintiffs received at this closing did not rise to an average price of $30 per share for six consecutive months during the ensuing three years, plaintiffs would be entitled to receive additional shares from defendant sufficient to make up the difference between $30 and the highest average closing price during such a period. The agreement went on to give plaintiffs an option to put to defendant, at any time during the three years after December 1966, their remaining 20% of the C & L stock. A formula was agreed upon for determining the price of this remaining stock upon the basis of C & L earnings during the three-year period preceding exercise of the option. The option was exercised in October, 1970.

 Briefly but sufficiently summarized, the first count of the complaint alleges that defendant, through improper press releases, false financial statements and other fraudulent means, caused its stock to reach artificially high prices, of close to $30 per share, in 1967, thus defrauding plaintiffs of additional compensation to which the agreement, lawfully followed, entitled them. The second cause of action charges defendant with breaches of promises to protect C & L earnings, thus diminishing the price to be realized by plaintiffs from the 20% remainder of C & L's stock put to defendant under the agreement. These first two counts rest, it is agreed, upon state law theories.

 The third cause of action repeats the factual allegations of the first two, charges a false representation by defendant in 1966, and asserts a resulting wrong under the Securities Act of 1933. This alleged cause, as will appear, is the center of the problem before the court at this time.

 The fourth and last cause of action realleges the earlier charges and invokes a provision of the underlying agreement according to which plaintiffs claim defendant must bear half the tax burden of plaintiffs' exercise of their option and of any recovery they may obtain in this suit.

 The petition for removal shows that defendant is incorporated and has its principal place of business in Illinois. Plaintiffs are citizens of other states or foreign countries. It is then stated that the action is one over which the federal court has "original jurisdiction under 28 U.S.C. § 1332 [diversity] and other statutes [not specified]."

 The arguments for and against remand proceed through a series of thrusts and parries. It will be simplest to follow them to what the court has judged to be their proper conclusion.

 Plaintiffs rely at the outset (and in the end) upon § 22(a) of the Securities Act of 1933, 15 U.S.C. § 77v(a), which says in pertinent part:

"* * * No case arising under this subchapter and brought in any State court of competent jurisdiction shall be removed to any court of the United States." *fn1"

 They argue that "Korber v. Lehman, 221 F. Supp. 358 (S.D.N.Y. 1963) is directly in point." The court agrees with the argument and will follow the cited decision. *fn2"

 As its first line of defense against remand, defendant argues that the quoted anti-removal statute cannot apply because plaintiffs purport to rely in their third cause of action upon § 17 of the 1933 Act, 15 U.S.C. § 77q, and that section "does not expressly provide a private damage claim for its violation." Korber v. Lehman is said to be distinguishable on this ground (among others) since it involved a claim upon the expressly provided right under § 12(2) of the 1933 Act, 15 U.S.C. § 77 l (2). In response to the two branches of this contention, there are two fairly short answers. First, while the existence of a private right of action under § 17 must still be deemed an open question, the claim of such a right is substantial, far from frivolous, see, e.g., Globus v. Law Research Service, Inc., 418 F.2d 1276, 1283-1284 (2d Cir. 1969), cert. denied, 397 U.S. 913, 90 S. Ct. 913, 25 L. Ed. 2d 93 (1970); Securities and Exchange Com'n v. Texas Gulf Sulphur Co., 401 F.2d 833, 867-868 (2d Cir. 1968) (Friendly, J., concurring), cert. denied, Coates v. Securities and Exchange Commission, 394 U.S. 976, 89 S. Ct. 1454, 22 L. Ed. 2d 756 (1969); Fischman v. Raytheon Mfg. Co., 188 F.2d 783, 787 n. 2 (2d Cir. 1951); Weber v. C.M.P. Corporation, 242 F. Supp. 321 (S.D.N.Y. 1965); Dack v. Shanman, 227 F. Supp. 26 (S.D.N.Y. 1964); 3 Loss, Securities Regulation 1785-86 (1961); 6 Loss, Securities Regulation 3913-14 (Supp. 1969), and thus plainly sufficient to launch a "case arising under" the 1933 Act. *fn3" Here, as in Korber v. Lehman, supra, 221 F. Supp. at 360, the proper issue is not as to the ultimate "merits of the claim," but whether there is enough of substance in it to have those merits adjudicated in the state forum where Congress said cases arising under the 1933 Act should remain. That formulation, supported by cogent analogies, cf. Montana-Dakota Utilities Co. v. Northwestern Public Service Co., 341 U.S. 246, 249, 71 S. Ct. 692, 95 L. Ed. 912 (1951); Romero v. International Term. Operating Co., 358 U.S. 354, 359, 79 S. Ct. 468, 3 L. Ed. 2d 368 (1959); The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25, 33 S. Ct. 410, 57 L. Ed. 716 (1913), puts the correct question and yields a prompt answer.

 There is shorter work in defendant's argument that a case cannot be one "arising under" § 17 where the private claim is not given expressly by the statute, but must be found to have been implied. A host of cases "arising under" the Constitution and federal statutes rest upon asserted rights similarly implied rather than expressed. E.g., Bell v. Hood, 327 U.S. 678, 66 S. Ct. 773, 90 L. Ed. 939 (1946); Tunstall v. Brotherhood of Locomotive Firemen & Enginemen, 323 U.S. 210, 213, 65 S. Ct. 235, 89 L. Ed. 187 (1944); see Reitmeister v. Reitmeister, 162 F.2d 691, 694 (2d Cir. 1947); McFaddin Express, Incorporated v. Adley Corporation, 346 F.2d 424, 425-426 (2d Cir. 1965), cert. denied, 382 U.S. 1026, 86 S. Ct. 643, 15 L. Ed. 2d 539 (1966). The analogy may be imperfect, but not in any respect that warrants further worry here.

 We are brought to a somewhat more abstruse subject by defendant's reliance upon the third subsection of the removal statute, 28 ...

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