Keating
First Baptist Church of Santa Ana v. Keating
Opinion
Lead Opinion
Scannlain, J.
We must decide whether a corporation’s transfer of stock to a trust in partial satisfaction of the corporation’s obligation to fund the trust constitutes a “purchase” and a “sale” under the securities laws.
I
First Executive Corporation Trust (“Trust”) seeks to participate in the enormous class action settlement stemming from the American Continental Corporation (“ACC”)/Lincoln Savings and Loan Securities litigation. The class has been defined as “all persons who purchased any and all types of securities of American Continental Corporation between January 1, 1986 and April 14, 1989 including stocks and debentures, and including the Employee Stock Ownership Plan of ACC.” The class definition excluded various parties, none of whom are at issue here.
First Executive Corporation (“FEC”) created the Trust on December 31, 1988 to hold assets to secure contractual indemnification obligations to certain directors, officers and key employees of FEC. First Interstate Bank of California was named as Trustee (“Trustee”): In its letter brief requesting inclusion in the class, the Trustee asserted that the Trust is irrevocable and by its terms is to continue at least until January 1, 2009.…
Dissenting Opinion
Rymer, J.
dissenting:
I dissent, because the majority answers a question of law when I think the question is one of fact. As I read the district court’s order, the court was making a factual determination based on the record before it that the trustee’s claims do not fall within the class definition. The court acknowledged that the law which the majority’s opinion lays out is the correct legal standard for purposes of the securities laws, but that isn’t the issue it faced; rather, the issue was whether the Trustee’s acquisition of the shares it held entitled it to participation in the class recovery. Participation was limited to actual purchases as compared with transfers, roll-overs or cash-outs. The court found that the ACC “shares were not acquired in a manner or at a time that they are logically a part of this case.” As Judge Bilby had lived with this litigation for years, and knew what the common proof for the class was, I cannot say that he clearly erred.
The original claim filed by the trustee asserted that First Executive Capital purchased 91,500 shares of $3.44 Exchangeable Preferred Stock on February 5, 1988, during the class period. However, that claim was withdrawn and an…