Richard L. Zweig and Muriel Bruno v. The Hearst Corporation, a Corporation, Alex N. Campbell, H. W. Jamieson, E. L. Oesterle

Plaintiffs appeal from a judgment denying recovery in their action for damages against a financial columnist who, they allege, purposely used his column to elevate the price of stock in a small company for his own benefit.

Richard Zweig and Muriel Bruno sued Alex Campbell, a financial columnist for the Los Angeles Herald-Examiner; the Hearst Corporation, Campbell’s employer; and H. W. Jamieson and E. L. Oesterle, directors of American Systems, Inc. (ASI). Zweig and Bruno alleged violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and of Rule 10b-5, 17 C.F.R. 240.10b-5, as well as common-law fraud and negligence.

Campbell wrote and the Herald-Examiner published a column that contained a highly favorable description of ASI. The plaintiffs alleged that the directors of ASI had made material misrepresentations and *1263 omissions in an interview with Campbell and hoped that he would publish false information “puffing” ASI shares. This is essentially what he did, but only after first buying 5,000 shares from the company at a substantial discount below their market price.

Zweig and Bruno claimed that Campbell’s column about ASI caused the price of…

(Dissenting):

I respectfully dissent. I agree that causation and reliance may, in certain circum *1272 stances, be inferred from materiality. Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 153-54 , 92 S.Ct. 1456 , 31 L.Ed.2d 741 (1972). But it is also clear that “affirmative evidence of non-reliance may defeat this inference.” Crocker-Citizens National Bank v. Control Metals Corp., 566 F.2d 631 , 636 n. 3 (9th Cir. 1977). The record plainly shows that the appellants’ decision to acquire ASI stock, embodied in the merger agreement between ASI and RGC, predated the publication of Campbell’s column by several months. Thus, it is, as I see it, impossible that a causal relationship could exist between Campbell’s wrongful conduct and the appellants’ decision to invest. There was not even the possibility of reliance upon Campbell’s column in connection with the execution of the merger agreement by the appellants. In these circumstances, we surely have compelling “affirmative evidence of nonreliance”, evidence that should thoroughly negate any inference of causation and reliance.

While I agree that Campbell’s alleged conduct was reprehensible, the District Court rightly…

594 F.2d 1261 Fed. Sec. L. Rep. P 96,851, 4 Media L. Rep. 2616 Richard L. ZWEIG and Muriel Bruno, Appellants, v. The HEARST CORPORATION, a corporation, Alex N. Campbell, H. W. Jamieson, E. L. Oesterle, Appellees. No. 76-1647. United States Court of Appeals, Ninth Circuit. April 9, 1979. Philip M. Brown, David Pick, Alton I. Leib, Beverly Hills, Cal., for appellants. Wixon Stevens, Los Angeles, Cal., for appellees. Appeal from the United States District Court for the Central District of California. Before ELY and GOODWIN, Circuit Judges, and SOLOMON * , District Judge. GOODWIN, Circuit Judge: 1 Plaintiffs appeal from a judgment denying recovery in their action for damages against a financial columnist who, they allege, purposely used his column to elevate the price of stock in a small company for his own benefit. 2 Richard Zweig and Muriel Bruno sued Alex Campbell, a financial columnist for the Los Angeles Herald-Examiner; the Hearst Corporation, Campbell's employer; and H. W. Jamieson and E. L. Oesterle, directors of American Systems, Inc. (ASI). Zweig and Bruno alleged violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and of Rule 10b-5,…