added). Shearson was not a seller or a purchaser. As plaintiff's broker, it made purchases and sales for plaintiff's account. As discussed above, a broker is not liable under Section 12(2).
Finally, plaintiff argues that defendants are liable under Section 12(2) for their substantial aid and participation in the sale to Leonard. As discussed above, the third circuit has held that absent privity between the seller and buyer, or some special relationship, such as control over the seller, plaintiff cannot maintain an action under Section 12(2). Collins, 605 F.2d at 113. Plaintiff has not alleged that defendants had any control over the seller other than those activities which a broker traditionally performs.
Plaintiff cites a fifth circuit case which held that a broker not passing title to a security can, nevertheless, be a seller for Section 12(2) purposes if the injury to the purchaser flowed directly and proximately from actions of the broker. See Hill York Corp. v. American International Franchises, Inc., 448 F.2d 680 (5th Cir. 1971). The fifth circuit has, however, rejected the strict privity requirements which comprise the law of this circuit. I am not free to move from the third circuit's strict privity requirements towards a standard of "substantial participation."
b. Section 17
The third circuit has not yet addressed the issue, but this court has previously held that a private right of action cannot be implied under Section 17(a).
See In re Catanella and E. F. Hutton and Co., 583 F. Supp. 1388, 1419 (E.D. Pa. 1984); Kimmel v. Peterson, 565 F. Supp. 476, 483 (E.D. Pa. 1983); Mursau Corp. v. Florida Penn Oil & Gas, Inc., 638 F. Supp. 259, 261 (W.D. Pa. 1986).
As stated in Kimmel, Section 17(a) fails at least two prongs of the four prong test designed to devine Congressional intent under the teaching of Cort v. Ash, 422 U.S. 66, 45 L. Ed. 2d 26, 95 S. Ct. 2080 (1975). An implied private right of action under Section 17(a) would be inconsistent with the other sections of the Act and its legislative history, and with other federal securities laws, such as Section 10(b) of the Securities Exchange Act of 1934. In particular, Kimmel noted that a private right of action under Section 17(a) would allow plaintiffs to pursue Section 10(b) claims under Section 17(a) and avoid the scienter requirements of Section 10(b). In addition, use of Section 17(a) would overlap Sections 11 and 12 of the 1933 Act and effectively write them out of the statute. Kimmel, 656 F. Supp. at 487.
For these reasons, I hold that Section 17(a) does not provide for a private right of action.
II. COMMODITIES EXCHANGE ACT
Plaintiff's claim under the Commodities Exchange Act was dismissed because it appeared that the complaint did not allege the trading of any commodities, as required under the act. See Complaint, Ex. A. The Commodities Exchange Act covers only transactions involving commodities, such as wheat, cotton, rice, corn, oats, etc. 7 U.S.C. Section 2.
However, now plaintiff asserts that the claim should not have been dismissed because the defendants may have been speculating in "stock index futures", which may have been designated as commodities, rather than "stock index options," which, in turn, may have been designated securities. 7 U.S.C. Section 2a. Plaintiff alleges that the "puts, calls and straddles Shearson sold Leonard and wrote for his account were contracts of sale for future delivery of broad-based stock indices constituting stock index futures." Amended Complaint, para. 26. Defendants counter that plaintiff has not plead facts sufficient to bring his claim within the statutory requirements of the Commodities Exchange Act.
However, plaintiff's allegations do raise the issue of whether index futures were traded. An issue of material fact exists and the claim cannot be dismissed on this record. See 7 U.S.C. Section 2a. Accordingly, plaintiff's motion for reconsideration is granted, and that part of the order of December 19, 1986 dismissing Count III with prejudice is vacated.
Plaintiff's amended complaint does not specify whether plaintiff brings his RICO claim under Section 1962(a), 1962(b), or 1962(c). Therefore, the court must consider all of the possible claims.
a. Section 1962(a)
Section 1962(a) provides:
(a) It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt in which such person has participated as a principal within the meaning of section 2, title 18, United States Code, to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.
In order to state a claim, plaintiff must plead an injury which he suffered as a result of a violation of § 1962(a). Gilbert v. Prudential-Bache Securities, Inc., 643 F. Supp. 107, 109 (E.D. Pa. 1986). In the present case, it is clear that plaintiff did not suffer any injury under § 1962(a). Plaintiff's alleged injury was caused by the alleged pattern of racketeering activities, including the development and promotion of the strategy and the securities transactions thereunder, but "whether the defendant did or did not invest the proceeds in a business affecting commerce cannot have been causally related to any injury to [plaintiff]." Gilbert, 643 F. Supp. at 109. Therefore, plaintiff lacks standing to sue under § 1962(a).
b. Section 1962(b)
Section 1962(b) is not applicable to the case at hand. Section 1962(b) provides:
(b) It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.