GAF Corp. v. Milstein case brief

GAF Corp. v. Milstein case brief summary
453 F.2d 709 (1971)

CASE SYNOPSIS

Plaintiff corporation appealed the decision of the United States District Court for the Southern District of New York dismissing its complaint that alleged that defendant investors violated §§ 13(d) and 10(b) of the Securities Exchange Act, 15 U.S.C.S. § 78m(d), by failing to file required statements, by filing false statements, and by market manipulation of the corporation's stock.

CASE FACTS
Plaintiff filed suit alleging defendants violated the Securities Exchange Act, 15 U.S.C.S. § 78m(d), first, by failing to file required statements and, then, by filing false ones and violating Rule10(b) based on the same false statements and by market manipulation of plaintiff's stock. Defendants moved for dismissal of the complaint, and the motion was granted. Plaintiff appealed.

DISCUSSION

• The appeals court reversed because organizing a group of stockholders owning more than ten percent of a class of equity securities with a view to seeking control must be reported under § 78m(d). 
• Moreover, the obligation to file such a statement is implicitly included the requirement that such a filing be truthful. 
• Therefore, plaintiff's complaint stated a claim upon which relief could be granted. 
• However, the court affirmed the dismissal of plaintiff's claim based upon violations of Rule 10(b) because plaintiff, an issuer, had no standing to sue under Rule 10(b).

CONCLUSION

The judgment was reversed regarding the claim under the Securities Exchange Act because the applicable section required that defendants file a truthful statement disclosing the fact that they owned more than ten percent of plaintiff's equity securities. The judgment was affirmed regarding the Rule 10(b) claim because plaintiff, as an issuer, had no standing under 10(b).

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