transactions which comprise no more than internal corporate mismanagement," but went on to note that in this case there was a sale of securities (the bond sale) and that § 10(b) bars "deceptive devices and contrivances in the purchase and sale of securities whether conducted in the organized markets or face-to-face". 404 U.S. at 12, 92 S. Ct. at 169.
It thus becomes apparent that the purchaser-seller rule must be complied with. The continued vitality of the Rule has been recently reaffirmed by the Second Circuit Court of Appeals in Drachman v. Harvey, 453 F.2d 722 (2d Cir. 1971). Recent cases in other Circuits which have followed the Birnbaum rule include, inter alia, Herpich v. Wallace, 430 F.2d 792 (5th Cir. 1970); Erling v. Powell, 429 F.2d 795 (8th Cir. 1970). See also, Vanderboom v. Sexton, 422 F.2d 1233 (8th Cir. 1970).
Though much criticized, Entel v. Allen, supra, and distinguished ("forced sellers", Vine v. Beneficial Finance Co., 374 F.2d 627 (2d Cir. 1967), cert. denied, 389 U.S. 970, 88 S. Ct. 463, 19 L. Ed. 2d 460 (1967); "aborted sellers", Voege v. American Sumatra Tobacco Corp., 241 F. Supp. 369 (D. Del. 1965) and M.L. Lee & Company v. American Cardboard & Packaging Corp., 36 F.R.D. 27 (E.D. Pa. 1964); "merger", SEC v. National Securities, Inc., 393 U.S. 453, 467-468, 89 S. Ct. 564, 21 L. Ed. 2d 668 (1969); "injunction", Mutual Shares v. Genesco, supra, the Birnbaum rule still stands.
We feel that the massive weight of authority cited above "comprise an impressive list and we would be loathe to oppose them". Frohmann v. United States, 380 F.2d 832, 836 (8th Cir. 1967). See, United States v. Jaskiewicz, 278 F. Supp. 525 (E.D. Pa. 1968).
In summary, the plaintiff has not demonstrated to the satisfaction of this Court that there has been any fraud "in connection with the purchase or sale of any security", and thus there is no standing to maintain an action under Section 10(b) or Rule 10B-5. Rather, the plaintiff's remedy for the alleged "fraudulent mismanagement of corporate affairs", Birnbaum v. Newport Steel Corp., supra, 193 F.2d at 464, lies in the State Courts.
ALLEGED SECTION 14(a) VIOLATION
The plaintiff's complaint alleges a violation of Section 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a) because of the issuance of a false and misleading proxy statement.
Section 14(a) provides:
"It shall be unlawful for any person, by use of the mails or by any means or instrumentality of interstate commerce or of any facility of a national securities exchange or otherwise, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, to solicit or to permit the use of his name to solicit any proxy or consent or authorization in respect of any security (other than an exempted security) registered pursuant to section  of this title".