444 U.S. 11
No. 77-1645.
Argued March 20, 1979. Reargued October 2, 1979.
Decided November 13, 1979.
MR. JUSTICE STEWART delivered the opinion of the Court.
The Investment Advisers Act of 1940, 15 U.S.C. 80b-1 et seq., was enacted to deal with abuses that Congress had [444 U.S. 11, 13] found to exist in the investment advisers industry. The question in this case is whether that Act creates a private cause of action for damages or other relief in favor of persons aggrieved by those who allegedly have violated it.
The respondent, a shareholder of petitioner Mortgage Trust of America (Trust), brought this suit in a Federal District Court as a derivative action on behalf of the Trust and as a class action on behalf of the Trust's shareholders. Named as defendants were the Trust, several individual trustees, the Trust's investment adviser, Transamerica Mortgage Advisors, Inc. (TAMA), and two corporations affiliated with TAMA, Land Capital, Inc. (Land Capital), and Transamerica Corp. (Transamerica), all of which are petitioners in this case.1
The respondent's complaint alleged that the petitioners in the course of advising or managing the Trust had been guilty of various frauds and breaches of fiduciary duty. The complaint set out three causes of action, each said to arise under the Investment Advisers Act of 1940.2 The first alleged that the advisory contract between TAMA and the Trust was unlawful because TAMA and Transamerica were not registered under the Act and because the contract had provided for grossly excessive compensation. The second alleged that the petitioners breached their fiduciary duty to the Trust by causing it to purchase securities of inferior quality from Land Capital. The third alleged that the petitioners had misappropriated profitable investment opportunities for the benefit [444 U.S. 11, 14] of other companies affiliated with Transamerica. The complaint sought injunctive relief to restrain further performance of the advisory contract, rescission of the contract, restitution of fees and other considerations paid by the Trust, an accounting of illegal profits, and an award of damages.
The trial court ruled that the Investment Advisers Act confers no private right of action, and accordingly dismissed the complaint.3 The Court of Appeals reversed, Lewis v. Transamerica Corp., 575 F.2d 237, holding that "implication of a private right of action for injunctive relief and damages under the Advisers Act in favor of appropriate plaintiffs is necessary to achieve the goals of Congress in enacting the legislation." Id., at 239.4 We granted certiorari to consider the important federal question presented. 439 U.S. 952.
The Investment Advisers Act nowhere expressly provides for a private cause of action. The only provision of the Act that authorizes any suits to enforce the duties or obligations created by it is 209, which permits the Securities and Exchange Commission (Commission) to bring suit in a federal district court to enjoin violations of the Act or the rules promulgated under it.5 The argument is made, however, that the [444 U.S. 11, 15] clients of investment advisers were the intended beneficiaries of the Act and that courts should therefore imply a private cause of action in their favor. See Cannon v. University of Chicago, 441 U.S. 677, 689; Cort v. Ash, 422 U.S. 66, 78; J. I. Case Co. v. Borak, 377 U.S. 426, 432.
The question whether a statute creates a cause of action, either expressly or by implication, is basically a matter of statutory construction. Touche Ross & Co. v. Redington, 442 U.S. 560, 568; Cannon v. University of Chicago, supra, at 688; see National Railroad Passenger Corp. v. National Association of Railroad Passengers, 414 U.S. 453, 458 (Amtrak.) While some opinions of the Court have placed considerable emphasis upon the desirability of implying private rights of action in order to provide remedies thought to effectuate the purposes of a given statute, e. g., J. I. Case Co. v. Borak, supra, what must ultimately be determined is whether Congress intended to create the private remedy [444 U.S. 11, 16] asserted, as our recent decisions have made clear. Touche Ross & Co. v. Redington, supra, at 568; Cannon v. University of Chicago, supra, at 688. We accept this as the appropriate inquiry to be made in resolving the issues presented by the case before us.
Accordingly, we begin with the language of the statute itself. Touche Ross & Co. v. Redington, supra, at 568; Cannon v. University of Chicago, supra, at 689; Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 472; Piper v. Chris-Craft Industries, Inc., 430 U.S. 1, 24. It is asserted that the creation of a private right of action can fairly be inferred from the language of two sections of the Act. The first is 206, which broadly proscribes fraudulent practices by investment advisers, making it unlawful for any investment adviser "to employ any device, scheme, or artifice to defraud . . . [or] to engage in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client," or to engage in specified transactions with clients without making required disclosures.6 The second is 215, which provides that contracts whose formation or performance would [444 U.S. 11, 17] violate the Act "shall be void . . . as regards the rights of" the violator and knowing successors in interest.7
It is apparent that the two sections were intended to benefit the clients of investment advisers, and, in the case of 215, the parties to advisory contracts as well. As we have previously recognized, 206 establishes "federal fiduciary standards" to govern the conduct of investment advisers, Santa Fe Industries, Inc. v. Green, supra, at 471, n. 11; Burks v. Lasker, 441 U.S. 471, 481-482, n. 10; SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 191-192. Indeed, the Act's legislative history leaves no doubt that Congress intended to impose enforceable fiduciary obligations. See H. R. Rep. No. 2639, 76th Cong., 3d Sess., 28 (1940); S. Rep. No. 1775, 76th [444 U.S. 11, 18] Cong., 3d Sess., 21 (1940); SEC, Report on Investment Trusts and Investment Companies (Investment Counsel and Investment Advisory Services), H. R. Doc. No. 477, 76th Cong., 2d Sess., 27-30 (1939). But whether Congress intended additionally that these provisions would be enforced through private litigation is a different question.
On this question the legislative history of the Act is entirely silent - a state of affairs not surprising when it is remembered that the Act concededly does not explicitly provide any private remedies whatever. See Cannon v. University of Chicago, 441 U.S., at 694. But while the absence of anything in the legislative history that indicates an intention to confer any private right of action is hardly helpful to the respondent, it does not automatically undermine his position. This Court has held that the failure of Congress expressly to consider a private remedy is not inevitably inconsistent with an intent on its part to make such a remedy available. Ibid. Such an intent may appear implicitly in the language or structure of the statute, or in the circumstances of its enactment.
In the case of 215, we conclude that the statutory language itself fairly implies a right to specific and limited relief in a federal court. By declaring certain contracts void, 215 by its terms necessarily contemplates that the issue of voidness under its criteria may be litigated somewhere. At the very least Congress must have assumed that 215 could be raised defensively in private litigation to preclude the enforcement of an investment advisers contract. But the legal consequences of voidness are typically not so limited. A person with the power to avoid a contract ordinarily may resort to a court to have the contract rescinded and to obtain restitution of consideration paid. See Deckert v. Independence Corp., 311 U.S. 282, 289; S. Williston, Contracts 1525 (3d ed. 1970); J. Pomeroy, Equity Jurisprudence 881 and 1092 (4th ed. 1918). And this Court has previously recognized that a comparable [444 U.S. 11, 19] provision, 29 (b) of the Securities Exchange Act of 1934, 15 U.S.C. 78cc (b), confers a "right to rescind" a contract void under the criteria of the statute. Mills v. Electric Auto-Lite Co., 396 U.S. 375, 388. Moreover, the federal courts in general have viewed such language as implying an equitable cause of action for rescission or similar relief. E. g., Kardon v. National Gypsum Co., 69 F. Supp. 512, 514 (ED Pa. 1946); see 3 L. Loss, Securities Regulation 1758-1759 (2d ed. 1961). Cf. Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 735.
For these reasons we conclude that when Congress declared in 215 that certain contracts are void, it intended that the customary legal incidents of voidness would follow, including the availability of a suit for rescission or for an injunction against continued operation of the contract, and for restitution.8 Accordingly, we hold that the Court of Appeals was correct in ruling that the respondent may maintain an action on behalf of the Trust seeking to void the investment advisers contract.9
We view quite differently, however, the respondent's claims for damages and other monetary relief under 206. Unlike 215, 206 simply proscribes certain conduct, and does not in terms create or alter any civil liabilities. If monetary liability to a private plaintiff is to be found, it must be read into the Act. Yet it is an elemental canon of statutory construction that where a statute expressly provides a particular remedy or remedies, a court must be chary of reading others into it. [444 U.S. 11, 20] "When a statute limits a thing to be done in a particular mode, it includes the negative of any other mode." Botany Mills v. United States, 278 U.S. 282, 289. See Amtrak, 414 U.S., at 458; Securities Investor Protection Corp. v. Barbour, 421 U.S. 412, 419; T. I. M. E., Inc. v. United States, 359 U.S. 464, 471. Congress expressly provided both judicial and administrative means for enforcing compliance with 206. First, under 217, 15 U.S.C. 80b-17, willful violations of the Act are criminal offenses, punishable by fine or imprisonment, or both. Second, 209 authorizes the Commission to bring civil actions in federal courts to enjoin compliance with the Act, including, of course, 206. Third, the Commission is authorized by 203 to impose various administrative sanctions on persons who violate the Act, including 206. In view of these express provisions for enforcing the duties imposed by 206, it is highly improbable that "Congress absentmindedly forgot to mention an intended private action." Cannon v. University of Chicago, supra, at 742 (POWELL, J., dissenting).
Even settled rules of statutory construction could yield, of course, to persuasive evidence of a contrary legislative intent. Securities Investor Protection Corp. v. Barbour, supra, at 419; Amtrak, supra, at 458. But what evidence of intent exists in this case, circumstantial though it be, weighs against the implication of a private right of action for a monetary award in a case such as this. Under each of the securities laws that preceded the Act here in question, and under the Investment Company Act of 1940 which was enacted as companion legislation, Congress expressly authorized private suits for damages in prescribed circumstances.10 For example, Congress [444 U.S. 11, 21] provided an express damages remedy for misrepresentations contained in an underwriter's registration statement in 11 (a) of the Securities Act of 1933, and for certain materially misleading statements in 18 (a) of the Securities Exchange Act of 1934. "Obviously, then, when Congress wished to provide a private damages remedy, it knew how to do so and did so expressly." Touche Ross & Co. v. Redington, 442 U.S., at 572; Blue Chip Stamps v. Manor Drug Stores, supra, at 734; see Amtrak, supra, at 458; T. I. M. E., Inc. v. United States, supra, at 471. The fact that it enacted no analogous provisions in the legislation here at issue strongly suggests that Congress was simply unwilling to impose any potential monetary liability on a private suitor. See Abrahamson v. Fleschner, 568 F.2d 862, 883 (CA2 1977) (Gurfein, J., concurring and dissenting).
The omission of any such potential remedy from the Act's substantive provisions was paralleled in the jurisdictional section, 214.11 Early drafts of the bill had simply incorporated [444 U.S. 11, 22] by reference a provision of the Public Utility Holding Company Act of 1935, which gave the federal courts jurisdiction "of all suits in equity and actions at law brought to enforce any liability or duty created by" the statute (emphasis added). See S. 3580, 76th Cong., 3d Sess., 40 (a), 203 (introduced by Sen. Wagner, Mar. 14, 1940); H. R. 8935, 76th Cong., 3d Sess., 40 (a), 203 (introduced by Rep. Lea, Mar. 14, 1940). After hearings on the bill in the Senate, representatives of the investment advisers industry and the staff of the Commission met to discuss the bill, and certain changes were made. The language that was enacted as 214 first appeared in this compromise version of the bill. See Confidential Committee Print, S. 3580, 76th Cong., 3d Sess., 213 (1940). That version, and the version finally enacted into law, S. 4108, 76th Cong., 3d Sess., 214 (1940), both omitted any references to "actions at law" or to "liability."12 The unexplained deletion of a single phrase from a jurisdictional provision is, of course, not determinative of whether a private remedy exists. But it is one more piece of evidence that Congress did not intend to authorize a cause of action for anything beyond limited equitable relief.13 [444 U.S. 11, 23]
Relying on the factors identified in Cort v. Ash, 422 U.S. 66, the respondent and the Commission, as amicus curiae, argue that our inquiry in this case cannot stop with the intent of Congress, but must consider the utility of a private remedy, and the fact that it may be one not traditionally relegated to state law. We rejected the same contentions last Term in Touche Ross & Co. v. Redington, where it was argued that these factors standing alone justified the implication of a private right of action under 17 (a) of the Securities Exchange Act of 1934. We said in that case:
"It is true that in Cort v. Ash, the Court set forth four factors that it considered `relevant' in determining whether a private remedy is implicit in a statute not expressly providing one. But the Court did not decide that each of these factors is entitled to equal weight. The central inquiry remains whether Congress intended to create, either expressly or by implication, a private cause [444 U.S. 11, 24] of action. Indeed, the first three factors discussed in Cort - the language and focus of the statute, its legislative history, and its purpose, see 422 U.S., at 78 - are ones traditionally relied upon in determining legislative intent." 442 U.S., at 575-576.
The statute in Touche Ross by its terms neither granted private rights to the members of any identifiable class, nor proscribed any conduct as unlawful. Touche Ross & Co. v. Redington, 442 U.S., at 576. In those circumstances it was evident to the Court that no private remedy was available. Section 206 of the Act here involved concededly was intended to protect the victims of the fraudulent practices it prohibited. But the mere fact that the statute was designed to protect advisers' clients does not require the implication of a private cause of action for damages on their behalf. Touche Ross & Co. v. Redington, supra, at 578; Cannon v. University of Chicago, 441 U.S., at 690-693; Securities Investor Protection Corp. v. Barbour, 421 U.S., at 421. The dispositive question remains whether Congress intended to create any such remedy. Having answered that question in the negative, our inquiry is at an end.
For the reasons stated in this opinion, we hold that there exists a limited private remedy under the Investment Advisers Act of 1940 to void an investment advisers contract, but that the Act confers no other private causes of action, legal or equitable.14 Accordingly, the judgment of the Court of Appeals is affirmed in part and reversed in part, and the [444 U.S. 11, 25] case is remanded to that court for further proceedings consistent with this opinion.
It is so ordered.
[Footnote 1] Hereinafter "the petitioners" refers to the petitioners other than the Trust. The Trust is a real estate investment trust within the meaning of 856-858 of the Internal Revenue Code of 1954, 26 U.S.C. 856-858. TAMA, in addition to advising the Trust, managed its day-to-day operations. Transamerica is the sponsor of the Trust and the parent of Land Capital. Land Capital is the parent of TAMA, through a subsidiary, and sold the Trust its initial portfolio of investments. Several of the individual trustees were at the time of suit affiliated with TAMA, Transamerica, or other subsidiaries of Transamerica.
[Footnote 2] Each cause of action was stated as a derivative shareholder's claim and restated as a shareholder's class claim.
[Footnote 3] The pertinent orders of the District Court are unreported.
[Footnote 4] The District Court was of the view that it was without subject-matter jurisdiction of the respondent's suit. The Court of Appeals recharacterized the District Court's order dismissing the suit as properly based upon the respondent's failure to state a claim upon which relief can be granted, Fed. Rule Civ. Proc. 12 (b) (6), noting that the respondent's suit was apparently within the District Court's general federal-question jurisdiction under 28 U.S.C. 1331. 575 F.2d, at 239, n. 2.
The Court of Appeals in this case followed the Courts of Appeals for the Fifth and Second Circuits, which also have held that private causes of action may be maintained under the Act. See Wilson v. First Houston Investment Corp., 566 F.2d 1235 (CA5 1978); Abrahamson v. Fleschner, 568 F.2d 862 (CA2 1977).
[Footnote 5] Section 209, 54 Stat. 854, as amended, as set forth in 15 U.S.C. 80b-9, provides in part as follows:
"(e) . . . Whenever it shall appear to the Commission that any person has engaged, is engaged, or is about to engage in any act or practice [444 U.S. 11, 15] constituting a violation of any provision of this subchapter, or of any rule, regulation, or order hereunder, or that any person has aided, abetted, counseled, commanded, induced, or procured, is aiding, abetting, counselling, commanding, inducing, or procuring, or is about to aid, abet, counsel, command, induce, or procure such a violation, it may in its discretion bring an action in the proper district court of the United States, or the proper United States court of any Territory or other place subject to the jurisdiction of the United States, to enjoin such acts or practices and to enforce compliance with this subchapter or any rule, regulation, or order hereunder. Upon a showing that such person has engaged, is engaged, or is about to engage in any such act or practice, or in aiding, abetting, counseling, commanding, inducing, or procuring any such act or practice, a permanent or temporary injunction or decree or restraining order shall be granted without bond. The Commission may transmit such evidence as may be available concerning any violation of the provisions of this subchapter, or of any rule, regulation, or order thereunder, to the Attorney General, who, in his discretion, may institute the appropriate criminal proceedings under this subchapter."
The language in 209 (e) that authorizes the Commission to obtain an injunction against persons "aiding, abetting, . . . or procuring" violations of the Act was added to the statute in 1960. 74 Stat. 887.
[Footnote 6] Section 206, 54 Stat. 852, as amended, as set forth in 15 U.S.C. 80b-6, reads as follows:
" 80b-6. Prohibited transactions by investment advisers
"It shall be unlawful for any investment adviser, by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly -
"(1) to employ any device, scheme, or artifice to defraud any client or prospective client;
"(2) to engage in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client;
"(3) acting as principal for his own account, knowingly to sell any security to or purchase any security from a client, or acting as broker for a person other than such client, knowingly to effect any sale or purchase of any security for the account of such client, without disclosing to such client in writing before the completion of such transaction the capacity in which he is acting and obtaining the consent of the client to such transaction. The prohibitions of this paragraph shall not apply to any [444 U.S. 11, 17] transaction with a customer of a broker or dealer if such broker or dealer is not acting as an investment adviser in relation to such transaction;
"(4) to engage in any act, practice, or course of business which is fraudulent, deceptive, or manipulative. The Commission shall, for the purposes of this paragraph (4) by rules and regulations define, and prescribe means reasonably designed to prevent, such acts, practices, and courses of business as are fraudulent, deceptive, or manipulative."
Section 206 (4) was added to the statute in 1960. 74 Stat. 887. At that time Congress also extended the provisions of 206 to all investment advisers, whether or not such advisers were required to register under 203 of the Act, 15 U.S.C. 80b-3. 74 Stat. 887.
[Footnote 7] Section 215, 54 Stat. 856, as set forth in 15 U.S.C. 80b-15, reads in part as follows:
" 80b-15. Validity of contracts
. . . . .
"(b) Every contract made in violation of any provision of this subchapter and every contract heretofore or hereafter made, the performance of which involves the violation of, or the continuance of any relationship or practice in violation of any provision of this subchapter, or any rule, regulation, or order thereunder, shall be void (1) as regards the rights of any person who, in violation of any such provision, rule, regulation, or order, shall have made or engaged in the performance of any such contract, and (2) as regards the rights of any person who, not being a party to such contract, shall have acquired any right thereunder with actual knowledge of the facts by reason of which the making or performance of such contract was in violation of any such provision."
[Footnote 8] One possibility, of course, is that Congress intended that claims under 215 would be raised only in state court. But we decline to adopt such an anomalous construction without some indication that Congress in fact wished to remit the litigation of a federal right to the state courts.
[Footnote 9] Jurisdiction of such suits would exist under 214, 15 U.S.C. 80b-14, which, though referring in terms only to "suits in equity to enjoin any violation," would equally sustain actions where simple declaratory relief or rescission is sought.
[Footnote 10] See Securities Act of 1933, 11 and 12, 15 U.S.C. 77k and 77l; Securities Exchange Act of 1934, 9 (e), 16 (b), and 18, 15 U.S.C. 78i (e), 78p (b), and 78r; Public Utility Holding Company Act of 1935, 16 (a) and 17 (b), 15 U.S.C. 79p (a) and 79q (b); Trust [444 U.S. 11, 21] Indenture Act of 1939, 323 (a), 15 U.S.C. 77www (a); Investment Company Act of 1940, 30 (f), 15 U.S.C. 80a-29 (f).
[Footnote 11] Section 214, 54 Stat. 856, as set forth in 15 U.S.C. 80b-14, provides:
" 80b-14. Jurisdiction of offenses and suits
"The district courts of the United States and the United States courts of any Territory or other place subject to the jurisdiction of the United States shall have jurisdiction of violations of this subchapter or the rules, regulations, or orders thereunder, and, concurrently with State and Territorial courts, of all suits in equity to enjoin any violation of this subchapter or the rules, regulations, or orders thereunder. Any criminal proceeding may be brought in the district wherein any act or transaction constituting the violation occurred. Any suit or action to enjoin any violation of this subchapter or rules, regulations, or orders thereunder, may be brought in any such district or in the district wherein the defendant is an inhabitant or transacts business, and process in such cases may be served in any district of which the defendant is an inhabitant or transacts business or wherever the defendant may be found. Judgments and decrees so rendered shall be subject to review as provided in sections 1254, 1291 and 1292 of title 28, and section 7, as amended, of the Act [444 U.S. 11, 22] entitled `An Act to establish a court of appeals for the District of Columbia', approved February 9, 1893. No costs shall be assessed for or against the Commission in any proceeding under this subchapter brought by or against the Commission in any court."
[Footnote 12] The respondent argues that the omission of any reference in 214 to "actions at law" is without relevance because jurisdiction over such cases as this would often exist under 28 U.S.C. 1331, the general federal-question jurisdiction statute, and because there was no express statement that the omission was intended to preclude private remedies. But the respondent concedes that the language of 214 was probably narrowed in view of the absence from the Investment Advisers Act of any express provision for a private cause of action for damages. We agree, but find the omission inconsistent more generally with an intent on the part of Congress to make such a remedy available.
[Footnote 13] Congress amended the Investment Company Act in 1970 to create a narrowly circumscribed right of action for damages against investment [444 U.S. 11, 23] advisers to registered investment companies. Act of Dec. 14, 1970, 20, 84 Stat. 1428, 15 U.S.C. 80a-35 (b). While subsequent legislation can disclose little or nothing of the intent of Congress in enacting earlier laws, see SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 199-200, the 1970 amendments to the companion Act are another clear indication that Congress knew how to confer a private right of action when it wished to do so.
In 1975, the Commission submitted a proposal to Congress that would have amended 214 to extend jurisdiction, without regard to the amount in controversy, to "actions at law" under the Act. See S. 2849, 94th Cong., 2d Sess., 6 (1976). The Commission was of the view that the amendment also would confirm the existence of a private right of action to enforce the Act's substantive provisions. See Hearings on S. 2849 before the Subcommittee on Securities of the Senate Committee on Banking, Housing, and Urban Affairs, 94th Cong., 2d Sess., 17 (1976); Hearings on H. R. 12981 and H. R. 13737 before the Subcommittee on Consumer Protection and Finance of the House Committee on Interstate and Foreign Commerce, 94th Cong., 2d Sess., 36-37 (1976). The Senate Committee reported favorably on the provision as proposed by the Commission, but the bill did not come to a vote in either House.
[Footnote 14] Where rescission is awarded, the rescinding party may of course have restitution of the consideration given under the contract, less any value conferred by the other party. See 5 A. Corbin, Contracts 1114 (1964). Restitution would not, however, include compensation for any diminution in the value of the rescinding party's investment alleged to have resulted from the adviser's action or inaction. Such relief could provide by indirection the equivalent of a private damages remedy that we have concluded Congress did not confer.