Joseph v. Farnsworth Radio & Television Corp.
Citation | 198 F.2d 883 |
Decision Date | 30 June 1952 |
Docket Number | No. 252,Docket 22310.,252 |
Parties | JOSEPH v. FARNSWORTH RADIO & TELEVISION CORP. et al. |
Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
Barney Rosenstein and Leo Praeger, New York City, for appellants; Bernard S. Kanton, New York City, of counsel.
Davis, Polk, Wardwell, Sunderland & Kiendl, New York City, for appellees; S. Hazard Gillespie, Jr., and Francis W. Phillips, New York City, of counsel.
Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for defendant Gilmour; Samuel J. Silverman, New York City, of counsel.
Before SWAN, Chief Judge, and AUGUSTUS N. HAND and FRANK. Circuit Judges.
The order is affirmed on the opinion below, D.C., 99 F.Supp. 701, and the subsequent decision in Birnbaum v. Newport Steel Corp., 2 Cir., 193 F.2d 461 wherein we concluded "that Rule X-10B-5 extended protection only to the defrauded purchaser or seller", 193 F.2d page 464.
1
The pertinent sections of the complaint may be summarized thus: The defendants, directors of the Farnsworth Company, published false statements of material facts concerning the financial condition of the company. This the defendants did to induce purchases of shares of stock in that company owned by them. Soon after defendants had sold all their shares of stock, the plaintiffs, misled by the false statements, purchased some Farnsworth shares on the stock exchange where Farnsworth stock was listed. When, later, the true facts about the company's financial condition were disclosed, the price of the stock fell. Plaintiffs sold at the lower price, with resultant damage.2 On motion by the defendants, the trial judge dismissed the complaint. His basic reason was the absence of any "semblance of privity" between plaintiffs and defendants.
His decision has been excellently discussed and criticized in a Comment in 4 Stanford Law Review (1952) 308, from which I quote as follows:
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