Securities — No Private Right of Action for Money Damages under § 13(d) — Damages Remedy Provided by § 18(a)

From Motient Corp. v. Dondero, 2008 U.S. App. LEXIS 11380 (5th Cir. Mary 27, 2008):

No other Circuit has found a private right of action for money damages under Section 13(d) [15 U.S.C. § 78m(d)]. The Second Circuit held that Section 13(d) does not provide a damages remedy to issuers. Hallwood Realty Partners, L.P. v. Gotham Partners, L.P., 286 F.3d 613, 620 (2d Cir. 2002). The Eleventh Circuit also dismissed Section 13(d) claims brought by an issuer seeking money damages. See Liberty Nat. Ins. Holding Co. v. Charter, 734 F.2d 545, 564 n.41 (11th Cir. 1984) ("[T]he Exchange Act provides for private rights of action expressly in several other places . . . . We may infer from this that when it chose to do so, Congress knew how to create explicitly a private right of action on behalf of the issuer.").

The Williams Act was enacted to protect shareholders who are forced to make decisions between bidders and management. Since any material misstatement or omission to an investor who purchases or sells the security and actually relies on that information gives rise to a private cause of action under Section 18(a) of the Exchange Act, 15 U.S.C. § 78r(a), Section 18(a) provides the sole basis for a private right of action for damages resulting from a violation of Section 13(d). Hallwood Realty Partners, L.P., 286 F.3d at 620. Motient provides no compelling reason for recognizing a private right of action in favor of issuers for money damages.

We agree with the district court that there is no private cause of action for money damages under Section 13(d). Accordingly, the district court's judgment is affirmed insofar as it denies Motient's claim for "actual and compensatory damages."

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