Fed. Sec. L. Rep. P 95,513 Reuben P. Hughes v. Dempsey-Tegeler & Co., Inc., a Delaware Corporation

This is an appeal from the judgment of the district court below dismissing plaintiff’s action following trial to the court. Plaintiff-appellant is Reuben P. Hughes (“Hughes”), a businessman and private investor whose business activities include serving as a director and officer of Reynolds Industries and as a director of El Camino Bank in Anaheim, California. Defendant-appellee Dempsey-Tegeler & Co., Inc. (“Dempsey”) was a Delaware corporation engaged in the general business of a broker-dealer in securities as a member organization of the New York Stock Exchange. Defendant-appellee Lewis Whitney (“Whitney”), was an officer of Dempsey during the period relevant to this action. Defendant-appellee New York Stock Exchange, Inc. (“Exchange”) is a New York nonprofit corporation registered as a national securities exchange with the Securities and Exchange Commission.

Hughes sued defendants below in an attempt to recover losses he sustained when securities subordinated by him in favor of Dempsey were sold for the benefit of Dempsey’s creditors when that firm was liquidated. He alleged that he had been induced to enter into the subordination agreement because of various…

I reach the same conclusion as Judge Renfrew but by a somewhat different route.

*178 The district court in my view was correct in holding that the Exchange did not violate its duty to Hughes in lifting in March, 1970 the restrictions which it had imposed in 1969. 1 Under the circumstances which *179 the Exchange confronted in March, 1970 the lifting of the restrictions was within what Judge Renfrew describes as a “permissible degree of discretion or flexibility in choosing a response.” See p. 174, supra. Lifting the restrictions is not made inappropriate merely because imposing them in 1969 was proper. The possibility of acquiring the subordinated capital of King and Hughes in 1970 placed before the Exchange new circumstances. The reasonableness of the Exchange’s response thereto in the light of its Section 6 responsibilities must be determined by reference to these new circumstances. What was a proper response in the absence of such circumstances may be improper in the light of changed conditions. The Exchange, in defending both the imposition and removal of restrictions, is not, in my opinion, having it both ways as Judge Renfrew suggests. It is defending a response made…

(concurring in the opinion in part but dissenting from the judgment):

I concur with the opinion of the majority in deciding that the acts and failures to act of the Exchange were violations of its section 6(b) responsibilities under the Securities Exchange Act of 1934, 15 U.S.C. § 78f(b), which would entitle a plaintiff if injured by them to a private action for damages. 1 It is clear also to me that those *180 derelictions of the Exchange were a proximate cause of the loss sustained by Hughes. 2 I am unable to join with the majority’s holding that Hughes is barred by the doctrine of waiver from recovering for the losses incurred as a result of a breach by the Exchange of its section 6 duty. I find this portion of the majority’s opinion analytically unsound and predicated upon a series of assumptions which do not fit the facts of this ease. Even were the facts otherwise, however, I would entertain serious doubts concerning the appropriateness of the waiver doctrine in a section 6(b) action against an exchange.

The majority’s view is that by bargaining for the lifting of restrictions which he knew had been imposed for the protection of the investing public as a condition…

534 F.2d 156 Fed. Sec. L. Rep. P 95,513 Reuben P. HUGHES, Plaintiff-Appellant, v. DEMPSEY-TEGELER & CO., INC., a Delaware Corporation, et al., Defendants-Appellees. No. 73-3591. United States Court of Appeals, Ninth Circuit. March 29, 1976. Rehearing and Rehearing En Banc Denied June 4, 1976. 1 Angelo J. Palmieri (argued), of Kindel & Anderson, Los Angeles, Cal., for plaintiff-appellant. 2 Irwin F. Woodland (argued), of Gibson, Dunn & Crutcher, Los Angeles, Cal., Edward J. Reilly (argued), of Milbank, Tweed, Hadley, & McCloy, New York City, Don F. Tyler (argued), of Wlaker, Wright, Tyler & Ward, Los Angeles, Cal., for defendants-appellees. OPINION 3 Before TRASK and SNEED, Circuit Judges, and RENFREW, * District Judge. RENFREW, District Judge: 4 This is an appeal from the judgment of the district court below dismissing plaintiff's action following trial to the court. Plaintiff-appellant is Reuben P. Hughes ("Hughes"), a businessman and private investor whose business activities include serving as a director and officer of Reynolds Industries and as a director of El Camino Bank in Anaheim, California. Defendant-appellee Dempsey-Tegeler & Co., Inc.…