In an opinion dated yesterday, Judge Castel dismissed a suit challenging the proposed merger between a Chilean bank (Itau) and a Brazlian bank (CorpBanca) because the plaintiff, Cartica, was not a “purchaser” or “seller” in relation to the alleged fraud. It was merely a stockholder. In doing so, he took one side of an issue that has divided the lower courts:
In Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975), the Supreme Court examined the text of section 10(b) and Rule 10b-5 and concluded that a claim could not be asserted by a shareholder who was neither a “purchaser” nor “seller” in relation to the alleged fraud. Blue Chip was decided in the context of a money damages claim and, since then, neither the Supreme Court nor the Second Circuit has decided whether a claim for injunctive relief is subject to the same rule. This Court accepts the District of Columbia Circuit’s reasoning that“[w]hile it may be possible to discern differences between an action for damages and a suit for an injunction, most of the Supreme Court’s argument in Blue Chip applies quite as much to the latter as to the former.” Corwin v. Bresler, 741 F.2d 410, 424 (D.C. Cir. 1984). As will be explained, this Court applies the purchaser or seller rule to Cartica’s section 10(b) claim and dismisses that claim.
Judge Castel’s followed a 1999 decision from Judge Cote on the question (see here), and disagreed with a 1996 decision from Judge Sand reaching the opposite conclusion (see here). Our prior post on the case is here.