Walsh v. Butcher & Sherrerd, Civ. A. No. 74-835.

• Decision Date: 30 May 1975
• Docket Number: Civ. A. No. 74-835.
• Citation: 395 F. Supp. 597
• Parties: Katharine C. WALSH, on behalf of herself and all others similarly situated, Plaintiff, v. BUTCHER & SHERRERD and Butcher & Singer, Defendants, and Provident National Bank, Nominal Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

395 F. Supp. 597

Katharine C. WALSH, on behalf of herself and all others similarly situated, Plaintiff, v. BUTCHER & SHERRERD and Butcher & Singer, Defendants and Provident National Bank, Nominal Defendant.

Civ. A. No. 74-835.

United States District Court, E. D. Pennsylvania.

May 30, 1975.

Cletus P. Lyman, Lyman & Ash, Philadelphia, Pa., for plaintiff.

Edward C. Mengel, Jr., White & Williams, Philadelphia, Pa., for defendants Butcher & Sherrerd and Butcher & Singer.

William S. Rawls, Philadelphia, Pa., for Provident Natl. Bk.

MEMORANDUM

JOSEPH S. LORD, III, Chief Judge.

Plaintiff brought this action seeking to enforce an agreement reached between defendant Butcher & Sherrerd and the Securities and Exchange Commission. The complaint alleges that on or about November 26, 1971, the S.E.C. initiated hearings into whether Butcher & Sherrerd, a partnership acting as broker in the purchase and sale of securities, had violated the securities laws in connection with the "sale" of Penn Central stock. Under the settlement agreement between Butcher & Sherrerd and the S.E.C., Butcher & Sherrerd agreed to establish an escrow fund in the minimum amount of $350,000 with nominal defendant Provident National Bank to reimburse Butcher & Sherrerd's customers for the alleged failure to notify them that Butcher & Sherrerd had recommended that certain of its customers sell their Penn Central stock. This action seeks to force Provident National Bank to distribute the escrow fund to a class consisting of all those entitled to share in the S.E.C. settlement fund.

Defendants have moved to dismiss the complaint on three bases: first, that we lack jurisdiction of the subject matter of the action; second, that the complaint fails to state a claim upon which relief can be granted; and third, that plaintiff lacks standing to maintain the action. Since we have concluded that we lack subject matter jurisdiction and that, therefore, the complaint must be dismissed, we find it unnecessary to consider the latter two claimed grounds for dismissal.

In her original complaint, plaintiff asserted two bases for jurisdiction. First, jurisdiction is claimed under section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa et seq. That section provides in relevant part:

"The district courts of the United States * * * shall have exclusive jurisdiction of violations of this chapter or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by this chapter or the rules and regulations thereunder." 15 U.S.C. § 78aa.

It is apparent that plaintiff may not rely on this section as a basis for jurisdiction. Plaintiff does not seek to enforce any liability or duty created by the securities laws or by any S.E.C. rule or regulation. Rather, plaintiff asks us to enforce an order embodying the settlement agreement reached between the Commission and Butcher & Sherrerd. This agreement cannot possibly be considered a Commission rule or regulation. Indeed, section 21(f) of the 1934 Act, 15 U.S.C. § 78u(f), provides that the district courts shall have jurisdiction to command compliance with any order of the Commission upon application of the Commission. Nowhere in the act has Congress given the right to a private party to enforce an S.E.C. order, even though that party may be a contemplated beneficiary of that...