In Re Washington Public Power Supply System Securities Litigation. Henry Puchall v. Houghton, Cluck, Coughlin & Riley

I.

Between 1977 and 1981, the Washington Public Power Supply System (WPPSS) sold bonds with a face value of $2.25 billion to finance construction of two nuclear power plants. In 1982 WPPSS ceased construction of these plants and thereafter defaulted on the bond payments. In 1983 plaintiffs-appellants, purchasers of WPPSS bonds, filed a class action, on behalf of themselves and all others who purchased the bonds between February 23, 1977 and June 15, 1983, against WPPSS and nearly 200 other defendants alleging that the bonds were sold “on false pretenses” in violation of both federal and state securities laws.

District Judge Richard Bilby denied a motion by the defendants to dismiss the plaintiffs’ claims under section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a). Thereafter, Judge Bilby noted that he must recuse himself. The case was then transferred to District Judge William Browning, who vacated Judge Bilby’s ruling on the section 17(a) claims. Judge Browning concluded that “in litigation as massive and complex as this, a record as unimpeachable as possible was essential.” In re Washington Public Power Supply System Securities Litigation, 623 F.Supp. 1466, 1470…

dissenting:

For thirty-eight years, the implied right of action under § 17(a) has helped protect the investing public from securities fraud and misrepresentation. 1 It has come under increasing attack recently, and today it suffers a mortal blow. The majority persuasively presents the case for reversing the law of this circuit. Other courts have questioned the § 17(a) implied remedy because they sense a Supreme Court trend towards restricting the standards for implying private remedies. Because the majority’s decision is neither mandated by precedent nor consonant with the fundamental purposes of securities law, I respectfully dissent.

The implied right of action under § 17(a) comports with the mandate of recent Supreme Court cases. The Court set forth a four-part test for measuring the permissibility of implying a private right of action in Cort v. Ash, 422 U.S. 66 , 95 S.Ct. 2080 , 45 L.Ed.2d 26 (1975). Section 17(a) clearly satisfies the first requirement. Bondholders and other members of the investing public are members “ ‘of the class for whose especial benefit the statute was enacted.’ ” Cort v. Ash, 422 U.S. at 78 , 95 S.Ct. at 2088 (quoting Texas & Pacific R. Co. v.…

823 F.2d 1349 56 USLW 2094 , Fed. Sec. L. Rep. P 93,330 In re WASHINGTON PUBLIC POWER SUPPLY SYSTEM SECURITIES LITIGATION. Henry PUCHALL, et al., Plaintiffs-Appellants, v. HOUGHTON, CLUCK, COUGHLIN & RILEY, et al., Defendants-Appellees. No. 86-3594. United States Court of Appeals, Ninth Circuit. Argued En Banc and Submitted April 21, 1987. Decided July 30, 1987. Leonard B. Simon, San Diego, Cal., for plaintiffs-appellants. Daniel R. Murdock, Herbert M. Wachtell, New York City, and Camden M. Hall, Michael Sandler, Foster, Pepper & Riviera, Seattle, Wash., for defendants-appellees. Before GOODWIN, KENNEDY, ANDERSON, TANG, NELSON, NORRIS, HALL, WIGGINS, BRUNETTI, KOZINSKI, and THOMPSON, Circuit Judges. Appeal from the United States District Court for the Western District of Washington. CYNTHIA HOLCOMB HALL, Circuit Judge: I. 1 Between 1977 and 1981, the Washington Public Power Supply System (WPPSS) sold bonds with a face value of $2.25 billion to finance construction of two nuclear power plants. In 1982 WPPSS ceased construction of these plants and thereafter defaulted on the bond payments. In 1983 plaintiffs-appellants, purchasers of WPPSS bonds, filed a class action, on…