Musick, Peeler Garrett v. Employers Insurance of Wausau

• Decision Date: 01 June 1993
• Docket Number: No. 92-34,92-34
• Citation: 124 L.Ed.2d 194,113 S.Ct. 2085,508 U.S. 286
• Parties: MUSICK, PEELER & GARRETT, et al., Petitioners, v. EMPLOYERS INSURANCE OF WAUSAU et al
• Court: U.S. Supreme Court

508 U.S. 286

113 S.Ct. 2085

124 L.Ed.2d 194

MUSICK, PEELER & GARRETT, et al., Petitioners,

v EMPLOYERS INSURANCE OF WAUSAU et al.

No. 92-34.

Argued March 1, 1993.

Decided June 1, 1993.

Syllabus ^*

Respondents insured most of the named defendants in a suit that, inter alia, was based on an implied private right of action under § 10(b) of the Securities Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission (a 10b-5 action), and that eventually was settled by the parties. After funding $13 million of the settlement, respondents brought this lawsuit seeking contribution from petitioners, who were the attorneys and accountants involved in the stock offering that prompted the 10b-5 action. Both the District Court and the Court of Appeals, consistent with binding Circuit precedent, recognized that respondents had a right to seek contribution for the 10b-5 liability. Shortly after the latter court ruled in respondents' favor, however, the Court of Appeals for the Eighth Circuit held that there can be no implied cause of action for contribution in a 10b-5 action.

Held: Defendants in a 10b-5 action have a right to seek contribution as a matter of federal law. Pp. ____.

(a) Federal courts have authority to imply a right to contribution in a 10b-5 action. Northwest Airlines, Inc. v. Transport Workers, 451 U.S. 77, 101 S.Ct. 1571, 67 L.Ed.2d 750, Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 101 S.Ct. 2061, 68 L.Ed.2d 500, and the precedents on which they are based, distinguished. The 10b-5 action was not created by Congress, but was implied by the judiciary. The courts having implied the underlying liability in the first place, it would be most unfair to those against whom damages have been assessed for the courts to now disavow authority to allocate that liability on the theory that Congress has not addressed the issue directly. Congress has recognized a judicial authority to shape, within limits, the 10b-5 cause of action when, in enacting the Insider Trading and Securities Fraud Enforcement Act of 1988 and a statute respecting 10b-5 limitations periods, it included provisions acknowledging the 10b-5 action without expressing any intent to define it. Congress has left that task to the courts. Pp. ____.

(b) A right to contribution is within the contours of the 10b-5 action. In order to ensure that the rules established to govern such actions are symmetrical and consistent with the 1934 Act's overall structure and objectives, the Court must attempt to infer how the 1934 Congress would have addressed the issue of contribution had it included the 10b-5 private right of action as an express provision in the Act. See, e.g., Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. ----, ----, 111 S.Ct. 2773, 2781, 115 L.Ed.2d 321. Two sections of the 1934 Act containing express private rights of action, §§ 9 and 18, are close in structure, purpose, and intent to the 10b-5 action, and each explicitly provides for a right of contribution. See 15 U.S.C. §§ 78i(e) and 78r(b). Consistency and coherence therefore require that a like contribution rule be adopted for 10b-5 actions. Moreover, there is no evidence this rule will impede the purposes of the 10b-5 action; in the more than 20 years since the federal courts first recognized a right to contribution for 10b-5 defendants, there has been no showing that the right detracts from the effectiveness of the 10b-5 implied action or interferes with the effective operation of the securities laws. Pp. ____.

954 F.2d 575, affirmed.

KENNEDY, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and WHITE, STEVENS, SCALIA, and SOUTER, JJ., joined. THOMAS, J., filed a dissenting opinion, in which BLACKMUN and O'CONNOR, JJ., joined.

Charles A. Bird, San Diego, CA, for petitioners.

Theodore B. Olson, Washington, DC, for respondents.

Robert A. Long, Jr., Washington, DC, for U.S. as amicus curiae by special leave of the Court.

Justice KENNEDY delivered the opinion of the Court.

Where there is joint responsibility for tortious conduct, the question often arises whether those who compensate the injured party may seek contribution from other joint tortfeasors who have paid no damages or paid less than their fair share. In this case we must determine whether defendants in a suit based on an implied private right of action under § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission (a 10b-5 action) may seek contribution from joint tortfeasors. Without addressing the merits of the claim for contribution in this case, we hold that defendants in a 10b-5 action have a right to seek contribution as a matter of federal law.

I

Cousins Home Furnishings, Inc., made a public offering of its stock in December 1983. The stock purchasers later brought a class action against Cousins, its parent company, various officers and directors of Cousins, and two lead underwriters. The plaintiffs alleged the stock offering was misleading in material respects, in violation of §§ 11 and 12 of the Securities Act of 1933 (the 1933 Act), 48 Stat. 82, 84, 15 U.S.C. §§ 77k and 77l, § 10(b) of the Securities Exchange Act of 1934 (the 1934 Act), 48 Stat. 891, 15 U.S.C. § 78j(b), and certain state laws. The named defendants settled with the plaintiffs for $13.5 million. Respondents, who insured most of the named defendants, funded $13 million of the settlement. Subrogated to the rights of their insureds, respondents brought this lawsuit seeking contribution from petitioners, who were the attorneys and accountants involved in the public offering. Respondents' complaint alleged these professionals had joint responsibility for the securities violations and were liable for contribution under various theories, including a right to contribution based on the 10b-5 action central to the complaint in the original class suit.

In proceedings before the United States District Court for the Southern District of California and the United States Court of Appeals for the Ninth Circuit, the parties disputed the principles for determining whether the insureds had paid more than their fair share of liability in the class settlement, with scant attention being paid to the underlying issue whether liability in a 10b-5 action is accompanied by any right to contribution at all. This lack of attention is understandable, for the existence of the 10b-5 right to contribution is well established in the Ninth Circuit, Smith v. Mulvaney, 827 F.2d 558, 560 (CA9 1987), as well as in a number of other Circuits. In re Jiffy Lube Securities Litigation, 927 F.2d 155, 160 (CA4 1991); Sirota v. Solitron Devices, Inc., 673 F.2d 566, 578 (CA2), cert. denied, 459 U.S. 838, 103 S.Ct. 86, 74 L.Ed.2d 80 (1982); Huddleston v. Herman & MacLean, 640 F.2d 534, 557-559 (CA5 1981), aff'd in part, rev'd in part on other grounds, 459 U.S. 375, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983); Heizer Corp. v. Ross, 601 F.2d 330, 331-334 (CA7 1979).

Some three months after the Court of Appeals ruled in favor of respondents, the United States Court of Appeals for the Eighth Circuit created a conflict on the basic issue whether defendants in a 10b-5 action have a right to contribution. In light of our decisions on contribution in other areas of federal law, the Eighth Circuit ruled that there can be no implied cause of action for contribution in a 10b-5 action. Chutich v. Touche Ross & Co., 960 F.2d 721, 724 (CA8 1992). Petitioners requested that we resolve the conflict among the Circuits. We granted their petition for a writ of certiorari on the sole question presented: "Whether federal courts may imply a private right to contribution in Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities & Exchange Commission." 506 U.S. ----, 113 S.Ct. 54, 121 L.Ed.2d 23 (1992).

II

Requests to recognize a right to contribution for defendants liable under federal law are not unfamiliar to this Court. Twice we have declined to recognize an action for contribution under federal laws outside the arena of securities regulation. In Northwest Airlines, Inc. v. Transport Workers, 451 U.S. 77, 101 S.Ct. 1571, 67 L.Ed.2d 750 (1981), we held that an employer had no right to contribution against unions alleged to be joint participants with the employer in violations of the Equal Pay Act of 1963 and Title VII of the Civil Rights Act of 1964. Later that same Term, in Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981), we determined that there is no right to contribution for recovery based on violation of § 1 of the Sherman Act.

On the other hand, we endorsed a nonstatutory right to contribution among joint tortfeasors responsible for injuring a longshoreman in Cooper Stevedoring Co. v. Fritz Kopke, Inc., 417 U.S. 106, 94 S.Ct. 2174, 40 L.Ed.2d 694 (1974). We have been careful to note that Cooper does not stand for the proposition that there is a general right to contribution under federal law. Northwest Airlines, supra, at 96-97, 101 S.Ct., at 1583-84. Indeed, the rule announced in Cooper represented an exercise of our authority to provide just and equitable remedies for cases within our admiralty jurisdiction, a jurisdiction in which the federal courts have had historic, well-recognized responsibility for the elaboration of legal doctrine. See United States v. Reliable Transfer Co., 421 U.S. 397, 409, 95 S.Ct. 1708, 1714, 44 L.Ed.2d 251 (1975). For our purposes, therefore, Cooper is less instructive than our decisions in Texas Industries and Northwest Airlines. But the instruction we receive from the latter two cases is that they are distinguishable from, rather than parallel to, the matter now before us.

The federal interests in both Texas Industries and Northwest Airlines were defined by statutory provisions that were express in creating the substantive damages liability for which contribution was sought....