588
OCTOBER TERM, 2000
Syllabus
certiorari to the united states court of appeals for the tenth circuit
No. 00-347. Argued March 21, 2001—Decided May 21, 2001
Petitioner The Wharf (Holdings) Limited orally granted respondent
United International Holdings, Inc., an option to buy 10% of the stock in Wharf's Hong Kong cable system if United rendered certain services, but internal Wharf documents suggested that Wharf never intended to carry out its promise. United fulfilled its obligation, but Wharf refused to permit it to exercise the option. United sued in Federal District Court, claiming that Wharf's conduct violated, inter alia, § 10(b) of the Securities Exchange Act of 1934, which prohibits using "any manipulative or deceptive device or contrivance" "in connection with the purchase or sale of any security." 15 U. S. C. § 78j(b). A jury found for United, and the Tenth Circuit affirmed.
Held: Wharf's secret intent not to honor the option it sold United violates
§ 10(b). Pp. 592-597.
(a) The Court must assume that the "security" at issue is not the cable system stock, but the option to purchase that stock, because Wharf conceded this point below. That concession is consistent with the Act's language defining "security" to include both "any . . . option . . . on any security" and "any . . . right to . . . purchase" stock. § 78c(a)(10). Pp. 593-594.
(b) Wharf's claim that § 10(b) does not cover oral contracts of sale is rejected. This Court held in Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723, that the Act does not protect a person who did not actually buy securities, but who might have done so had the seller told the truth. But United is not a potential buyer; by providing Wharf with its services, it actually bought the option that Wharf sold. And Blue Chip Stamps did not suggest that oral purchases or sales fall outside the Act's scope. Neither is there any other convincing reason to interpret the Act to exclude oral contracts as a class. The Act itself says that it applies to "any contract" for a security's purchase or sale, §§ 78c(a)(13), (14), and oral contracts for the sale of securities are sufficiently common that the Uniform Commercial Code and statutes of frauds in every State consider them enforceable. Pp. 594-596.
(c) Also rejected is Wharf's argument that a secret reservation not to permit the exercise of an option falls outside § 10(b) because it does
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