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Herman & MacLean v. Huddleston

459 U.S. 375 (1983)

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Herman & MacLean v. Huddleston

United States Supreme Court
459 U.S. 375 (1983)

KS

Facts

In 1969, Texas International Speedway, Inc. (TIS) filed a registration statement and prospectus with the Securities and Exchange Commission. TIS intended to offer securities valued at over $4 million for public sale in order to finance the construction of an automobile racetrack. The entire issue of securities was sold on its offering date in October 1969. A little over a year later, TIS filed for bankruptcy. Ralph Huddleston along with other investors (collectively, Huddleston) (plaintiffs) filed suit against most of the participants in the TIS offering, including Herman & MacLean (defendant), the accounting firm for the offering. Huddleston alleged that Hermann & MacLean and others had fraudulently misrepresented material facts regarding TIS, the company’s financial condition, and the costs of building a raceway. The district court found for Huddleston, determining that Herman & MacLean and others had violated § 10(b) of the Securities Exchange Act of 1934 (the 1934 act) and SEC Rule 10b-5. On appeal, the United States Court of Appeals for the Fifth Circuit held that an implied cause of action under SEC Rule 10b-5 could be maintained even if the fraudulent conduct was also prescribed by the express provisions of § 11 of the Securities Act of 1933 (the 1993 act). Herman & MacLean appealed.

Rule of Law

Issue

Holding and Reasoning (Marshall, J.)

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