168
Opinion of the Court
Central Bank retain an outside appraiser to conduct an independent review of the 1988 appraisal. After an exchange of letters between Central Bank and AmWest in early 1988, Central Bank agreed to delay independent review of the appraisal until the end of the year, six months after the June 1988 closing on the bond issue. Before the independent review was complete, however, the Authority defaulted on the 1988 bonds.
Respondents First Interstate Bank of Denver and Jack K. Naber had purchased $2.1 million of the 1988 bonds. After the default, respondents sued the Authority, the 1988 underwriter, a junior underwriter, an AmWest director, and Central Bank for violations of § 10(b) of the Securities Exchange Act of 1934. The complaint alleged that the Authority, the underwriter defendants, and the AmWest director had violated § 10(b). The complaint also alleged that Central Bank was "secondarily liable under § 10(b) for its conduct in aiding and abetting the fraud." App. 26.
The United States District Court for the District of Colorado granted summary judgment to Central Bank. The United States Court of Appeals for the Tenth Circuit reversed. First Interstate Bank of Denver, N. A. v. Pring, 969 F. 2d 891 (1992).
The Court of Appeals first set forth the elements of the § 10(b) aiding and abetting cause of action in the Tenth Circuit: (1) a primary violation of § 10(b); (2) recklessness by the aider and abettor as to the existence of the primary violation; and (3) substantial assistance given to the primary violator by the aider and abettor. Id., at 898-903.
Applying that standard, the Court of Appeals found that Central Bank was aware of concerns about the accuracy of the 1988 appraisal. Central Bank knew both that the sale of the 1988 bonds was imminent and that purchasers were using the 1988 appraisal to evaluate the collateral for the bonds. Under those circumstances, the court said, Central Bank's awareness of the alleged inadequacies of the updated,
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