## Facts

- Public shareholders of Penn Central Company brought consolidated federal securities actions after Penn Central Transportation Company filed for reorganization in bankruptcy on June 21, 1970.
- Plaintiffs alleged that, between February 1, 1968, and June 21, 1970, defendants (Penn Central entities, officers/directors, and independent accountants) prepared and disseminated materially false and misleading financial information in SEC filings and public disclosures to inflate Penn Central Company stock price.
- Plaintiffs also alleged that certain defendants issued misleading proxy materials and traded stock using inside information about the companies’ deteriorating finances.
- For the claims at issue on appeal, plaintiffs asserted “holder” harm: they alleged they refrained from selling their shares because of misleading periodic reports filed under § 13(a) of the Securities Exchange Act of 1934.

## Issues

1. Whether § 13(a) of the Securities Exchange Act of 1934 and related periodic reporting rules imply a private damages remedy for shareholders who claim they were misled into holding (not buying or selling) their stock.
2. Whether plaintiffs may use § 13(a) to obtain damages without meeting the express requirements of § 18 for false statements in SEC-filed documents.

## Decision

- The Third Circuit affirmed the district court’s partial summary judgment for defendants on the § 13(a)-based claims.
- The court held that § 13(a) does not create an independent implied private right of action for damages for shareholders asserting “holder” claims based on allegedly misleading periodic reports.
- The court concluded that claims seeking damages for misstatements in SEC-filed reports must proceed, if at all, under § 18’s express remedial scheme and limitations, rather than through an implied § 13(a) action.

## Legal Principles

- A court will not imply a private damages remedy under a reporting provision when the statute provides a specific express remedy governing false or misleading SEC-filed statements.
- Section 13(a) imposes issuer reporting duties primarily enforceable by the SEC and does not, by itself, authorize a damages action by shareholders who merely held stock in reliance on filed reports.
- Section 18 supplies the principal statutory damages remedy for materially false or misleading statements in SEC-filed documents and constrains standing and proof through its reliance and transaction-based requirements.
- “Holder” damages theories based on an asserted decision not to sell raise substantial causation and damages proof concerns, reinforcing adherence to the limits Congress placed on available private remedies.

## Conclusion

The Third Circuit rejected an implied private damages action under § 13(a) for shareholders claiming they were misled into holding Penn Central stock, holding that liability for false statements in SEC-filed reports is governed, if at all, by § 18’s express and limited remedial framework.


In re Penn Cent. Sec. Litig., 494 F.2d 528 (3d Cir. 1974)