Thursday, November 7, 2013

Akerman v. Oryx Communications, Inc. case brief

Akerman v. Oryx Communications, Inc. case brief summary
810 F.2d 336 (1987)

Plaintiffs appealed an order of the United States District Court for Southern District of New York granting summary judgment for defendants, a securities issuer and underwriters, on plaintiffs' claims under § 11 of Securities Act of 1933, 15 U.S.C.S. § 77k, and for defendant issuer on a § 12(2) claim, 15 U.S.C.S. § 77l(2).

Defendant issuer had incorrectly posted a substantial transaction by its subsidiary to the wrong month. The prospectus, therefore, overstated earnings for a one-month period. The issuer's price subsequently declined, and, after a public disclosure of the mistake, the price rose. Plaintiffs alleged that the error rendered defendant issuer liable for the stock price decline.

  • The court dismissed parts of the appeal for lack of appellate jurisdiction, affirmed summary judgment for defendants on the Securities Act claims, and remanded. 
  • Defendants established that the error in the prospectus did not cause the stock price decline. 
  • The misstatement was an innocent bookkeeping error, and the prospectus had expressly stated that the issuer expected the subsidiary's sales to decline. 
  • Plaintiffs lacked privity to maintain an action against defendant issuer because § 12(2) of the Securities Act granted standing only to the person who purchased securities from the seller. 
  • Title to the securities had passed from defendant issuer to defendant underwriters and then from defendant underwriters to plaintiffs. 
  • Thus, defendant issuer was not in privity with plaintiffs for purposes of § 12(2).


The court dismissed parts of the appeal for lack of jurisdiction. The court affirmed the judgment for defendants on plaintiffs' Securities Act claims where defendants established that an error in the prospectus did not cause a stock price decline and where plaintiffs lacked privity to maintain the action against defendant communications company as a securities issuer. Finally, the court remanded case.

Suggested Study Aids For Securities Regulation Law
Securities Regulation in a Nutshell, 10th (Nutshell Series)
Securities Regulation: Examples & Explanations, 5th Edition
Securities Regulations: The Essentials

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