Holmes v. Eddy
| Citation | 341 F.2d 477 |
| Decision Date | 18 January 1965 |
| Docket Number | No. 9511,9543.,9511 |
| Parties | John V. HOLMES and Hydramotive Manufacturing Corporation, Appellants, v. Jay EDDY, Harris, Upham & Company, John Doe, Martin V. Miller, Thomas W. Rae, M. David Hyman, Walter C. Johnson, William Lucius Cary, and United States Securities and Exchange Commission, Appellees. John V. HOLMES, Durward E. Willis, Solo Tire Company, Hydramotive Corporation, Hydramotive Manufacturing Corporation, Hydramotive Engineering Corporation et al., Appellants, v. UNITED STATES of America, United States Securities and Exchange Commission, William Lucius Cary, Manuel F. Cohen, Thomas W. Rae, Martin V. Miller et al., Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (4th Circuit) |
John V. Holmes, appellant pro se.
John A. Dudley, Atty., Securities and Exchange Commission (Philip A. Loomis, Jr., Gen. Counsel, Walter P. North, Assoc. Gen. Counsel, and Martin D. Newman, Atty., Securities and Exchange Commission, on brief), for appellee Securities and Exchange Commission.
Henry James, Jr., Charlotte, N. C. (William R. Cooper, Charlotte, N. C., on brief), for appellees Jay Eddy and Harris, Upham & Co. No. 9543:
John A. Dudley, Special Counsel, Securities and Exchange Commission (Philip A. Loomis, Jr., Gen. Counsel, Walter P. North, Assoc. Gen. Counsel, and Martin D. Newman, Atty., Securities and Exchange Commission, and William Medford, U. S. Atty., on brief), for appellee Securities and Exchange Commission.
Before SOBELOFF, Chief Judge, BRYAN, Circuit Judge, and GORDON, District Judge.
As both of these cases, i. e. Nos. 9511 and 9543, arose from substantially the same facts, and were argued at the same time before the Court, the cases are consolidated for decision by the Court.
The plaintiffs named in both of the subject actions were engaged either directly or indirectly in the development of an automobile and tire. In order to promote their endeavors, the plaintiff sought to market stock. The Securities and Exchange Commission (hereinafter referred to as S.E.C. or Commission) in September, 1961, authorized its staff to conduct an investigation to determine whether the plaintiffs herein and others were violating the registration and anti-fraud provisions of the Federal Securities laws in the sale of the stock. During the course of this investigation, Jay Eddy, a stock broker in the employ of Harris, Upham & Company, voluntarily informed the Commission that he had received a letter from Hydramotive Corporation through the mails and that he felt the Company's venture might "bilk the public." Specifically, in this respect, Jay Eddy mailed to the S.E.C. the letter received by him from Hydramotive Corporation and prior to mailing the letter wrote thereon the following: "This company looks like an attempt to bilk the public via the securities market — it has a smell similar to all such."
The Commission requested the defendant Eddy to execute an affidavit as evidence that the alleged misleading letter or literature was being sent through the mails in connection with the sale of stock. The S.E.C. thereafter on December 12, 1961, brought a suit in the United States District Court for the Western District of Oklahoma under Section 20(b) of the Securities Act of 1933, as amended, 15 U.S.C. § 77t(b), and Section 21(e) of the Securities Exchange Act of 1934, against among others, John V. Holmes, Hydramotive Manufacturing Corporation, Hydramotive Corporation and Durward E. Willis, being four of the plaintiffs named in the suits in this appeal, to enjoin defendants from future sales of unregistered stock and the use of false and misleading sales literature. The letter and affidavit from Jay Eddy, which had been kept confidential prior to the Oklahoma action, were introduced as evidence in the Oklahoma action. The United States District Court for the Western District of Oklahoma granted the relief requested by the S.E.C. and held that there had been a violation of the Federal Securities law, and accordingly, enjoined the sale of the stock. This case is now on appeal and reported at CCH Fed.Sec.L.Rep. Section 91,354 (W.D.Okla.).
After the institution of the Oklahoma action, the plaintiffs instituted the suits which are the subject of this appeal in the United States District Court for the Western District of North Carolina.
In one of the subject actions (No. 9511), plaintiffs, Hydramotive Manufacturing Corporation and John V. Holmes, in their complaint filed April 2, 1963, named as defendants the United States Securities and Exchange Commission; William Lucius Cary, Chairman of the Commission; Martin V. Miller, Thomas W. Rae, M. David Hyman, Attorneys employed by the Commission; Walter C. Johnson, Investigator with the Commission; John Doe, an unknown official of the Commission; Harris, Upham & Co., a securities broker-dealer and Jay Eddy, an employee of Harris, Upham & Co. The complaint seeks (1) injunctive relief permanently restraining the individual defendants from "Further circulation of harmful untruth," (2) $20,000.00 in damages to plaintiff Holmes and (3) $500,000.00 in damages to the plaintiff Hydramotive Manufacturing Corporation. In essence, the allegations of the complaint allege that the defendants have conspired to circulate and have circulated publicly untruths about the plaintiff which constitute an "attractive public nuisance" with consequent damage to the plaintiffs. The District Court upon motion of the defendants granted summary judgment for the defendants.
and (2) damages of $22,750,000.00 from the United States of America by reason of wrongful acts of the agents, servants and employees of the Securities and Exchange Commission. The allegations of the complaint in effect state that the defendants, by and through the named individual defendants, unlawfully disclosed and divulged confidential information that was obtained during an investigation by the Securities and Exchange Commission of the plaintiffs' business and securities practices. The District Court, on motion of the defendants, granted summary judgment for the defendants in this action also.
First, with reference to No. 9511, the plaintiffs in paragraphs 5 and 13 of their complaint allege that the acts of which the plaintiffs complain were committed by the Chairman of the S.E.C. and its employees, who are named defendants, "within the scope of their employment." A careful study of the entire record on appeal reveals nothing that was done by the defendants, except Jay Eddy and Harris, Upham & Company, other than acts wholly within the scope and course of carrying out their official duties as authorized by 15 U.S.C. § 77t and 78u in carrying out the investigation of plaintiffs' business. The allegations of plaintiffs' complaint, together with other pertinent portions of the record, bring the plaintiffs' action clearly within the established principle of law that "public officers when acting within the scope of their official authority are immune from suits for damages." Jones v. Kennedy, 73 App.D.C. 292, 121 F.2d 40, 42, cert. den. 314 U.S. 665, 62 S.Ct. 130, 86 L.Ed. 532 (1941); Barr v. Matteo, 360 U.S. 564, 79 S.Ct. 1335, 3 L.Ed.2d 1434 (1959); Gregoire v. Biddle, 2 Cir., 177 F.2d 579, cert. den. 339 U.S. 949, 70 S.Ct. 803, 94 L.Ed. 1363 (1950); Cooper v. O'Connor, 69 App.D.C. 100, 99 F.2d 135, 118 A.L.R. 1440, cert. den. 305 U.S. 643, 59 S.Ct 146, 83 L.Ed. 414 (1938); Ove Gustavsson Contracting Co. v. Floete, 2 Cir., 299 F.2d 655, cert. den. 374 U.S. 827, 83 S.Ct. 1862, 10 L.Ed.2d 1050 (1962).
In Jones v. Kennedy, supra, the plaintiff instituted a suit against members of the Securities and Exchange Commission and several of its employees. As in the subject suits, the precise nature of the claims was not set out clearly by the plaintiff but suggest slander, libel, malicious prosecution and interference with the business relationship of the plaintiff by carrying out investigations, issuing press releases, forwarding information to authorities, etc. The Court, in affirming a decision dismissing the complaint, held that since the acts came within the authorized duties of the defendants the complaint failed to state a claim upon which relief could be granted.
With reference to the Securities and Exchange Commission as a party defendant, Section 4 of the Securities Exchange Act, 15 U.S.C. § 78d, establishes the Commission as an agency of the United States, and as such government agency, the...
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