against the direct defendant and is paid by him." Id. at *16.
Odyssey urges that Judge Sweet did not properly read Lampf in conjunction with Musick, Peeler to arrive at the conclusion that federal law has displaced common law principles with respect to contribution and limitations questions under section 10(b). In Musick, Peeler, the Supreme Court held that there was an implied right of action for contribution under section 10(b). 113 S. Ct. at 2092. The Supreme Court found support for its conclusion in sections 9 and 18 of the 1934 Act. Odyssey argues that the one year after discovery/three years after violation limitation in section 9(e) -- the limitation period applied in Lampf -- must therefore apply to contribution claims under section 10(b).
Odyssey may be correct that Lampf displaced common law principles with respect to limitations questions involving direct section 10(b) claims, and that Musick, Peeler ruled that there is an implied federal right of action for contribution arising out of section 10(b). That does not mean, however, that these cases displaced common law principles with respect to limitations questions as they relate to section 10(b) contribution claims. The Lampf Court chose to apply the language of section 9(e) rather than that of section 18(c) (three years after violation, not three years after such cause of action accrued), Lampf, 113 S. Ct. at 364 & n.9, but that Court addressed only the statute of limitations applicable to section 10(b) direct claims, not section 10(b) contribution claims. The Musick, Peeler Court inferred a cause of action for contribution from both sections 9 and 18 of the 1934 Act; the Court did not reach the question whether one section or the other would control the applicable statute of limitations for contribution claims.
The section 18(c) rule that begins the limitations period upon accrual is consistent with the long-standing rule governing the accrual of contribution claims. In the absence of any authority supporting the idea that Lampf alters the long-standing rule governing the accrual of contribution claims, we decline to change that rule. Ades, 1993 U.S. Dist. LEXIS 12901, 1993 WL 362364, at *16. We agree with Judge Sweet that Lampf, even when read in conjunction with Musick, Peeler, does not compel a conclusion that the applicable statute of limitations for a section 10(b) contribution claim is the one-year/three-years from the time of violation rule of section 9(e).
The Division Presidents seem to think that the facts that the plaintiffs (1) dismissed their action as to Ward and Zipp and (2) never named Levine a defendant somehow affect the statute of limitations issue. These facts do not change the outcome as to them. For the reasons just discussed, BDO's right to contribution has not yet accrued so that the statute of limitations has not yet begun to run on BDO's section 10(b) contribution claim. Furthermore, "the goal of the securities laws is not just to compensate persons who have been defrauded but also to deter violations of those laws. This goal is advanced by a recognition of liability for contribution among joint offenders and by a recognition that liability does not depend on the plaintiff's having elected to proceed against all those who have offended." Ades, 1993 U.S. Dist. LEXIS 12901, *29, 1993 WL 362364, at *9 (citing Tucker v. Arthur Andersen & Co., 646 F.2d 721, 727 n.7 (2d Cir. 1981)).
II. Section 10(b) and Rule 10b-5 Contribution
Rule 10b-5, promulgated under section 10(b), makes it unlawful "for any person, directly or indirectly . . . to employ any device, scheme, or artifice to defraud, . . . to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made . . . not misleading, or . . . to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security." 17 C.F.R. § 240.10b-5. This provision provides an implied cause of action where defendants made a knowing misrepresentation or omission of material fact in connection with the purchase or sale of a security which caused plaintiffs' loss. To state a claim under section 10(b), a plaintiff must allege acts indicating an intent to deceive, manipulate, or defraud. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 192 n.7, 47 L. Ed. 2d 668, 96 S. Ct. 1375 (1976). Furthermore, a claimant must show scienter by proving either actual knowledge or recklessness. Aaron v. S.E.C., 446 U.S. 680, 696, 64 L. Ed. 2d 611, 100 S. Ct. 1945 (1980); Sirota v. Solitron Devices, Inc., 673 F.2d 566, 575 (2d Cir.), cert. denied, 459 U.S. 838, 74 L. Ed. 2d 80, 103 S. Ct. 86 (1982).
It is well established that the right of contribution for violations of the federal securities laws exists among "joint tortfeasors." See Greene v. Emersons, Ltd., 102 F.R.D. 33, 36 (S.D.N.Y. 1983), aff'd sub nom. Kenneth Leventhal & Co. v. Joyner Wholesale Co., 736 F.2d 29 (2d Cir. 1984); see also Tucker, 646 F.2d at 727 n.7 ("Under the securities laws, a person who has defrauded the plaintiff in violation of those laws may be liable for contribution to another person who has similarly defrauded the plaintiff."). Considerably less well-settled, however, is the question of how to define "joint tortfeasor" in this context. The Second Circuit has expressly declined to reach this issue in at least one opinion. See Kenneth Leventhal & Co., 736 F.2d at 31 n.1.
A. Joint Tortfeasors
District court cases have defined "joint tortfeasors" in one of two ways. According to Connecticut National Bank v. Reliance Insurance Co., 704 F. Supp. 506 (S.D.N.Y. 1989), the majority view among the district courts in the Second Circuit appears to be that contribution among "joint tortfeasors" under the federal securities laws is limited to "joint participants" in the fraud alleged by plaintiff. 704 F. Supp. at 509; see also Advanced Magnetics Inc. v. Bayfront Partners, Inc., 1993 U.S. Dist. LEXIS 16152, *14, 1993 WL 478115, *5 (S.D.N.Y. Nov. 12, 1993) ("The standard for contribution under § 10(b) requires that the defendants allege that [the third-party defendant] 'knowingly participated' in the fraud against the plaintiff."); In re Crazy Eddie Securities Litigation, 740 F. Supp. 149, 152 (E.D.N.Y. 1990) ("The courts in this circuit have interpreted [the joint tortfeasor] requirement to limit contribution to 'joint participant[s] in the fraud alleged by plaintiff,' and not to embrace also concurrent, independent actors.") (citing Connecticut Nat. Bank, 704 F. Supp. at 509; Greene, 102 F.R.D. at 36; Stratton Group, Ltd. v. Sprayregen, 466 F. Supp. 1180, 1185 (S.D.N.Y. 1979)). Several courts outside this Circuit also have concluded that contribution in section 10(b) cases is only available among parties who knowingly participate in the same fraud. See Stowell v. Ted S. Finkel Investment Servcs., Inc., 641 F.2d 323, 325-26 (5th Cir. 1981) (for contribution under federal securities laws there must be allegations of joint securities act wrongdoing); Alexander Grant & Co. v. McAlister, 669 F. Supp. 163, 166 (S.D. Ohio 1987) (allegation of independent and concurrent action not sufficient under federal securities laws for contribution).
Other district courts, including this court, have applied a more expansive definition, holding that contribution among "joint tortfeasors" under the federal securities laws is available among independent tortfeasors so long as the parties are concurrently liable for damages. See, e.g., Ades, 1993 U.S. Dist. LEXIS 12901, 1993 WL 362364; McCoy v. Goldberg, 778 F. Supp. 201 (S.D.N.Y. 1991) (Conner, J.); Marrero v. Abraham, 473 F. Supp. 1271, 1277-78 (E.D. La. 1979). These courts reason that there is no logical distinction between joint participants and parties who concurrently but independently cause damage by violating section 10(b). Of course, TPDs urge this court to adopt the more restrictive definition, and BDO the more expansive.
In Greene, 102 F.R.D. 33, a case often cited for the more restrictive definition of "joint tortfeasors," Judge Haight reasoned that since the wrong contemplated by the securities laws is fraud, then contribution would lie only between knowing participants in the same fraud. 102 F.R.D. at 36. This situation is distinguishable, he asserted, from those involving common law tort cases of property damage where independent or concurrent acts of negligence may have contributed to a party's ultimate injury. Id. Consequently, Judge Haight concluded that "there is no place for this broader concept of contribution in anti-fraud securities cases." Id.
On the other hand, in Marrero, 473 F. Supp. at 1277-78, the court concluded that contribution under federal securities laws was available among independent, concurrent tortfeasors. It reasoned that since the purpose of contribution is to allow a fair allocation of damages among wrongdoers, a distinction between joint participants working on a common scheme and those who concurrently and independently cause damage to a party made no logical sense. 473 F. Supp. at 1277-78. See also Jordan v. Madison Leasing Co., 596 F. Supp. 707, 711 (S.D.N.Y. 1984) (a finding of "joint liability" under the federal securities laws is based "on common liability to the injured party and not necessarily upon the same tort").
We do not disagree with Judge Haight's analysis that a purpose of the federal securities laws is to deter the commission of fraud in connection with the sale and purchase of securities. We therefore agree that an expansive definition of "joint tortfeasor" under the federal securities laws to include independent tortfeasors who are unconnected to the underlying fraudulent securities scheme is inappropriate. The more expansive definition adopted in Marrero and its progeny, however, do not conflict with Judge Haight's analysis.
In Marrero, unlike the cases applying the more restrictive definition of "joint tortfeasors," the third-party complaint alleged a violation of the federal securities laws by the third-party defendants. Marrero, 473 F. Supp. at 1276.
The court held that these concurrent though independent violations of federal securities laws merited a more expansive definition of "joint tortfeasors" than one requiring joint participation. It was the allegation that two independent violations of Rule 10b-5, one alleged in the complaint and one alleged in the third-party complaint, had combined to produce a single injury to the plaintiff which formed the basis for the district court's reasoning. Marrero, 473 F. Supp. at 1277. Allowing contribution in such circumstances is consistent, we believe, with Judge Haight's concern that contribution under the federal securities laws be limited to those engaged in the kind of fraud that the securities laws contemplate. Cf. Tucker, 646 F.2d at 727 n.7 (contribution available from one who "similarly defrauded" plaintiff).
As this court noted in McCoy, at least one court in the Southern District of New York has interpreted Tucker to mean that the definition of "joint tortfeasor" for the purpose of a claim for contribution under the federal securities laws does not necessarily require joint participation. In Department of Economic Development v. Arthur Andersen & Co., 747 F. Supp. 922 (S.D.N.Y. 1990), Judge Stewart explained Tucker as follows:
In stating that the securities law contribution claim in Tucker was proper, Judge Kearse implicitly had to have also concluded that an independent securities law violation committed by the Tucker third-party defendants against the plaintiff was also adequately alleged.
747 F. Supp. at 934.
Thus interpreting Tucker, Judge Stewart lent his support to the view, originally articulated in Marrero, 473 F. Supp. at 1277-78, that the existence of two alleged independent violations of Rule 10b-5, one alleged in the complaint and one alleged in the third-party complaint, combining to produce a single injury to the plaintiff, may form the basis for a contribution claim under the federal securities laws. In Department of Economic Development, no such allegations were made, and thus the third-party plaintiffs' contribution claim was dismissed. Relying in part on Judge Stewart's well reasoned analysis, we thus adopted in McCoy a definition of "joint tortfeasors" which includes independent tortfeasors who concurrently cause the same injury to plaintiff. TPDs in the instant case, as did third-party defendants in McCoy (citing Stratton, 466 F. Supp. at 1187, and Greene, 102 F.R.D. at 36), argue that BDO had failed to allege that TPDs knowingly participated in the underlying fraud. As stated in McCoy, both these cases are distinguishable; in each, third-party plaintiffs failed to allege that the third-party defendants had violated the securities laws and had participated in the underlying fraud:
The Third-Party Complaint clearly alleges that 'Third-Party Defendants, in connection with plaintiff's purchase of the units . . . employed devices, schemes or artifices to defraud, made untrue statements of material facts and omitted to state other material facts . . . all in violation of Section 10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder.' T.P.C. P 39. The Third-Party Complaint also alleges that Phoenix Leasing 'had actual knowledge' of its allegedly false and misleading statements and that 'plaintiff's losses were proximately caused by third-party defendants' representations and omissions.' Id.
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