SECTION 11
OF THE SECURITIES ACT OF 1933
15
U.S.C. § 77k (1988)
(a) In case any part of the
registration statement, when such part became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, any
person acquiring such security (unless it is proved that at the time of such
acquisition he knew of such untruth or omission) may, either at law or in
equity, in any court of competent jurisdiction, sue-
(1) every person who signed the
registration statement;
(2) every person who was a director
of (or person performing similar functions) or partner in, the issuer at the
time of the filing of the part of the registration statement with respect to
which his liability is asserted;
(3) every person who, with his
consent, is named in the registration statement as being or about to become a
director, person performing similar functions, or partner;
(4) every accountant, engineer, or
appraiser, or any person whose profession gives authority to a statement made
by him, who has with his consent been named as having prepared or certified any
part of the registration statement, or as having prepared or certified any
report or valuation which is used in connection with the registration
statement, with respect to the statement, in such registration statement,
report, or valuation, which purports to have been prepared or certified by him;
(5) every underwriter with respect
to such security. If such person acquired the security after the issuer has
made generally available to its security holders an earning statement covering
a period of at least twelve months beginning after the effective date of the
registration statement, then the right of recovery under this subsection shall
be conditioned on proof that such person acquired the security relying upon
such untrue statement in the registration statement or relying upon the
registration statement and not knowing of such omission, but such reliance may
be established without proof of the reading of the registration statement by
such person.
(b) Notwithstanding the provisions
of subsection (a) no person, other than the issuer, shall be liable as provided
therein who shall sustain the burden of proof-
(1) that before the effective date
of the part of the registration statement with respect to which his liability
is asserted (A) he had resigned from or had taken steps as are permitted by law
to resign from, or ceased or refused to act in, every office, capacity, or
relationship in which he was described in the registration statement as acting
or agreeing to act, and (B) he had advised the Commission and the issuer in
writing that he had taken such action and that he would not be responsible for
such part of the registration statement; or
(2) that if such part of the
registration statement became effective without his knowledge, upon becoming
aware of such fact he forthwith acted and advised the Commission, in accordance
with paragraph (1), and, in addition, gave reasonable public notice that such
part of the registration statement had become effective without his knowledge;
or
(3) that (A) as regards any part of
the registration statement not purporting to be made on the authority of an
expert, and not purporting to be a copy of or extract from a report or
valuation of an expert, and not purporting to be made on the authority of a
public official document or statement, he had, after reasonable investigation,
reasonable ground to believe and did believe, at the time such part of the
registration statement became effective, that the statements therein were true
and that there was no omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and (B) as
regards any part of the registration statement purporting to be made upon his
authority as an expert or purporting to be a copy of or extract from a report
or valuation of himself as an expert, (i) he had, after reasonable investigation,
reasonable ground to believe and did believe, at the time such part of the
registration not misleading; and (B) as regards any part of the registration
statement purporting to be statement became effective, that the statements
therein were true and that there was no omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (ii) such part of the registration statement did not fairly
represent his statement as an expert or was not a fair copy of or extract from
his report or valuation as an expert; and (C) as regards any part of the
registration statement purporting to be made on the authority of an expert
(other than himself) or purporting to be a copy of or extract from a report or
valuation of an expert (other than himself), he had no reasonable ground to
believe and did not believe, at the time such part of the registration
statement became effective, that the statements therein were untrue or that
there was an omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that such part of
the registration statement did not fairly represent the statement of the expert
or was not a fair copy of or extract from the report or valuation of the
expert; and (D) as regards any part of the registration statement purporting to
be a statement made by an official person or purporting to be a copy of or
extract from a public official document, he had no reasonable ground to believe
and did not believe, at the time such part of the registration statement became
effective, that the statements therein were untrue, or that there was an
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that such part of the
registration statement did not fairly represent the statement made by the
official person or was not a fair copy of or extract from the public official
document.
(c) In determining, for the purpose
of paragraph (3) of subsection (b) of this section, what constitutes reasonable
investigation and reasonable ground for belief, the standard of reasonableness
shall be that required of a prudent man in the management of his own property.
(d) If any person becomes an underwriter
with respect to the security after the part of the registration statement with
respect to which his liability is asserted has become effective, then for the
purposes of paragraph (3) of subsection (b) of this section such part of the
registration statement shall be considered as having become effective with
respect to such person as of the time when he became an underwriter.
(e) The suit authorized under
subsection (a) may be to recover such damages as shall represent the difference
between the amount paid for the security (not exceeding the price at which the
security was offered to the public) and (1) the value thereof as of the time
such suit was brought, or (2) the price at which such security shall have been
disposed of in the market before suit, or (3) the price at which such security
shall have been disposed of after suit but before judgment if such damages
shall be less than the damages representing the difference between the amount
paid for the security (not exceeding the price at which the security was
offered to the public) and the value thereof as of the time such suit was
brought: Provided, That if the defendant proves that any portion or all of such
damages represents other than the depreciation in value of such security
resulting from such part of the registration statement, with respect to which
his liability is asserted, not being true or omitting to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, such portion of or all such damages shall not be recoverable. In no
event shall any underwriter (unless such underwriter shall have knowingly
received from the issuer for acting as an underwriter some benefit, directly or
indirectly, in which all other underwriters similarly situated did not share in
proportion to their respective interests in the underwriting) be liable in any
suit or as a consequence of suits authorized under subsection (a) for damages
in excess of the total price at which the securities underwritten by him and
distributed to the public were offered to the public. In any suit under this or any other section of this title the
court may, in its discretion, require an undertaking for the payment of the
costs of such suit, including reasonable attorney's fees, and if judgment shall
be rendered against a party litigant, upon the motion of the other party
litigant, such sosts may be assessed in favor of such party litigant (whether
or not such undertaking has been required) if the court believes the suit or
the defense to have been without merit, in an amount sufficient to reimburse
him for the reasonable expenses incurred by him, in connection with such suit,
such costs to be taxed in the manner usually provided for taxing of costs in
the court in which the suit was heard.
(f) All or any one or more of the
persons specified in subsection (a) shall be jointly and severally liable, and
every person who becomes liable to make any payment under this section may
recover contribution as in cases of contract from any person who, if sued
separately, would have been liable to make the same payment, unless the person
who has become liable was, and the other was not, guilty of fraudulent
misrepresentation.
(g) In no case shall the amount
recoverable under this section exceed the price at which the security was
offered to the public.