566
Opinion of the Court
were inaccurate, rendering untrue the representations and warranties contained in the contract. The buyers further alleged that the contract of sale was a "prospectus," so that any misstatements contained in the agreement gave rise to liability under § 12(2) of the 1933 Act. Pursuant to the adjustment clause, the defendants remitted to the purchasers $815,000 plus interest, but the adjustment did not cause the purchasers to drop the lawsuit.
Relying on the decision of the Court of Appeals for the Third Circuit in Ballay v. Legg Mason Wood Walker, Inc., 925 F. 2d 682 (1991), the District Court granted Gustafson's motion for summary judgment, holding "that section 12(2) claims can only arise out of the initial stock offerings." App. 20. Although the sellers were the controlling shareholders of the original company, the District Court concluded that the private sale agreement "cannot be compared to an initial offering" because "the purchasers in this case had direct access to financial and other company documents, and had the opportunity to inspect the seller's property." Id., at 21.
On review, the Court of Appeals for the Seventh Circuit vacated the District Court's judgment and remanded for further consideration in light of that court's intervening decision in Pacific Dunlop Holdings Inc. v. Allen & Co. Inc., 993 F. 2d 578 (1993). In Pacific Dunlop the court reasoned that the inclusion of the term "communication" in the Act's definition of prospectus meant that the term "prospectus" was defined "very broadly" to include all written communications that offered the sale of a security. Id., at 582. Rejecting the view of the Court of Appeals for the Third Circuit in Ballay, the Court of Appeals decided that § 12(2)'s right of action for rescission "applies to any communication which offers any security for sale . . . including the stock purchase agreement in the present case." 993 F. 2d, at 595. We granted certiorari to resolve this Circuit conflict, 510 U. S. 1176 (1994), and we now reverse.
Page: Index Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 NextLast modified: October 4, 2007