Acts, and the Pennsylvania and Massachusetts consumer protection laws.
Leave to file an amended complaint is to be "freely given." Fed. R. Civ. P. 15(a). When, however, the proposed amendments would not withstand a motion to dismiss, the court should decline to allow the amendments. See, e.g., Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 292 (3d Cir. 1988) (affirming the trial court's denial of a motion to amend because the amendment would be futile because it would not survive a motion to dismiss); Massarsky v. General Motors Corp., 706 F.2d 111, 125 (3d Cir.) (same), cert. denied, 464 U.S. 937, 78 L. Ed. 2d 314, 104 S. Ct. 348 (1983); Glaziers and Glass Workers Union Local No. 252 Annuity Fund v. Janney Scott Montgomery, Inc., 155 F.R.D. 97 (1994) (same).
Under the standard for evaluating a motion to dismiss, the court must "accept as true all allegations in the complaint and all reasonable inferences that can be drawn from them after construing them in the light most favorable" to the plaintiffs. Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994) (citing Rocks v. Philadelphia, 868 F.2d 644, 645 (3d Cir. 1989)). The standard is not met unless it appears beyond doubt that plaintiffs can prove no set of facts in support of his proposed claims which would entitle them to relief. Hishon v. King & Spalding, 467 U.S. 69, 73, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984); Jordan, 20 F.3d at 1261; Robb v. Philadelphia, 733 F.2d 286, 290 (3d Cir. 1984). A motion to amend the complaint may be denied, then, when the facts pled and the reasonable inferences therefrom are legally insufficient to support the amended claims and the relief sought. Pennsylvania ex. rel. Zimmerman v. Pepsico, Inc., 836 F.2d 173, 179 (3d Cir. 1988).
For the reasons that follow, the court will deny plaintiffs' motions in part and grant them in part, finding that, as to all plaintiffs a § 17 claim would not survive a motion to dismiss, and as to defendant Drinker Biddle & Reath none of the proposed state law claims would survive a motion to dismiss.
I. Section 17 of the Securities Act: All Defendants
First, plaintiffs urge this court to find an implied private right of action under § 17 of the Securities Act of 1993. Although the Supreme Court has not yet found that there is no such implied cause of action, the great majority of courts of appeals have so held. See, e.g., Finkel v. Stratton Corp., 962 F.2d 169, 175 (2d Cir. 1992) (citing supporting decisions by the Fourth, Fifth, Seventh, Eighth, Ninth, and Eleventh Circuits in finding that § 17(a) does not support an implied private right of action); see also Berk v. Ascott Inv., Corp., 759 F. Supp. 245, 250-51 (E.D. Pa. 1991) (noting that most district courts within the Third Circuit have declined to recognize an implied right of action under § 17(a)). In light of the weight of persuasive authority counselling against recognition of a private right of action, and the dearth of authority supporting plaintiffs' contrary position, this court finds that plaintiffs' claims under this section would not survive a motion to dismiss. Plaintiffs therefore will not be permitted to amend their complaint to assert such a cause of action.
II. State Statutory Claims: Coleman
Defendant Coleman suggests that plaintiffs' claims against him under the Pennsylvania statutes must be dismissed because both require a showing of privity between the plaintiff and defendant. The court's memorandum and order of May 5, 1996 disposed of this objection for purposes of the Pennsylvania Securities Act. Therein, the court noted that the complaint alleged Coleman actually and actively "sold" securities to plaintiffs and that such allegations established the kind of buyer-seller relationship the Pennsylvania Act targeted. For the same reasons, with regard to Pennsylvania's consumer protection law ("CPL"), the court also now finds Coleman's opposition meritless. Any lack of technical privity--due to the fact that Coleman did not own the securities he sold--is not fatal to their claims; Coleman sold the securities to plaintiffs and the CPL targets the buyer-seller relationship. See, e.g., Valley Forge Towers South Condo v. Ron-Ike Foam Insulators, 393 Pa. Super. 339, 574 A.2d 641, 645 (Pa. Super. 1990), aff'd without opinion, 529 Pa. 512, 605 A.2d 798 (Pa. 1992).
III. State Statutory Claims: Drinker Biddle & Reath
A. Pennsylvania and Massachusetts Securities Acts
Defendant Drinker Biddle & Reath adds its objection that the plaintiffs should not be allowed to amend their complaint to include claims under the Pennsylvania Securities Act and the CPL against it because the absence of privity between it and the plaintiffs renders those claims deficient as a matter of law. Drinker Biddle & Reath did not sell any securities to anyone. Although, as discussed above in connection with defendant Coleman, Pennsylvania law does not required strict, technical privity in the context of violations of the Pennsylvania Securities Act, the defendant must in some sense be a seller of the securities. 70 Pa.C.S. § 1-501(a). Plaintiffs' complaint states only that Drinker Biddle & Reath prepared and executed disclosure documents. Nothing in the complaint supports an inference that Drinker Biddle & Reath sold anything to the plaintiffs.
Plaintiffs point to 70 Pa.C.S. § 1-503 and claim that it extends liability to Drinker Biddle & Reath through the phrase "every broker dealer or other agent who materially aids in the act or transaction constituting the violation, are also jointly and severally liable." However, as several other courts have noted:
It appears that [ § 503] only establishes a cause of action in favor of a party who has been held liable to a private party under section 501. Support for the position that section 503 does not provide for a cause of action against an aider and abettor is found in several cases. First, in [ Biggans v. Bache Halsey Stuart Shields, Inc., 638 F.2d 605 (3d Cir. 1980)], Judge Sloviter noted that the sole source of civil liability for any acts in violation of section 401 is found in section 501. 638 F.2d at 609. . . . In Sharp v. Coopers & Lybrand, 649 F.2d 175, 191-92 (3d Cir. 1981), the court again held that the Pennsylvania Securities Act grants a private remedy to a buyer only against his seller.