The opinion of the court was delivered by: GOETTEL
On July 8, 1983, there was a public offering of one million shares of common stock of Computer Devices, Inc., at $11.25 per share. The value of these shares declined and Computer Devices, Inc., subsequently filed for bankruptcy. Purchasers of the stock filed complaints
alleging violations of the securities laws by the officers and directors of Computer Devices, Inc., and by Becker Paribas Incorporated ("Becker"),
the lead underwriter of the public offering.
The defendants moved to dismiss the complaints on various grounds. The motions were granted in part and denied in part. See Klein v. Computer Devices, Inc., 591 F. Supp. 270 (S.D.N.Y. 1984) (the "Opinion").
Becker now moves for reargument of the Opinion with respect to the denial of Becker's motion to dismiss the plaintiffs' claims under section 12(2) of the Securities Act of 1933 (the "Securities Act") for lack of privity between the plaintiffs and Becker.
In the alternative, Becker moves for an order pursuant to 28 U.S.C. § 1292(b) certifying the Court's order for interlocutory appeal.
Becker argues that the Court failed to consider the unique statutory status of an underwriter with respect to its liability under section 12(2).
Becker argues that this section unambiguously requires privity between the buyer and the seller. Although it acknowledges that the courts have sidestepped the privity requirement by utilizing such theories as participation, aiding and abetting, and conspiracy, Becker contends that such theories are not applicable to an underwriter because of the statutory limitations that Congress articulated in sections 11 and 12.
Section 12(2) provides that
[a]ny person who . . . offers or sells a security . . . by means of a prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading, . . . shall be liable to the person purchasing such security from him. . . .
[i]n case any part of the registration statement, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring such security . . . may . . . sue . . . every underwriter with respect to such security.
15 U.S.C. § 77k(a) (1982). In 1934, Congress amended section 11, adopting section 11(e), to provide that
[i]n no event shall any underwriter (unless such underwriter shall have knowingly received from the issuer for acting as an underwriter some benefit, directly or indirectly, in which all other underwriters similarly situated did not share in proportion to their respective interests in the underwriting) be liable in any suit . . . for damages in excess of the total price at which the securities underwritten by him and distributed to the public were offered to the public.
15 U.S.C. § 77k(e) (1982). See 78 Cong. Rec. 8709 (1934) (statement of Rep. Rayburn) ("There has been a question ever since the adoption of the Securities Act of 1933 with reference to the underwriter. We make it clear in these amendments that hereafter under no circumstances shall an underwriter be held responsible for any more of the issue than he himself personally underwrites.").
Becker argues that section 12 must be read in conjunction with section 11. Such a reading, contends Becker, demonstrates Congress' intent to limit the liability of an underwriter to what that underwriter underwrote and sold as illustrated by the privity requirement of section 12 and the specific damage limitations for underwriters in section 11. Thus, argues Becker, Congress precluded judicial imposition of unlimited liability on underwriters which the Court's Opinion has expanded.
The plaintiffs agree that the two sections are to be read together. They argue, however, that Congress never intended to limit the liability of a managing underwriter, like Becker, as indicated by the parenthetical provision in section 11(e) which provides that an underwriter's liability is not limited if the underwriter received preferential treatment from the issuer. They contend that lead underwriters now evade the effect of section ...