Kalodner, Adams, and Rosenn, Circuit Judges
This appeal is another instance of the widespread litigation spawned by the reorganization in bankruptcy of the Penn Central Transportation Company. Appellants, plaintiffs in the district court, have appealed from an order granting partial summary judgment to defendants in the consolidated multidistrict proceedings known as the Penn Central Securities Litigation, which has been assigned to Chief Judge Lord of the Eastern District of Pennsylvania.*fn1 The litigation consists of numerous actions brought by shareholders of the Penn Central Company (Holding Company) after its wholly owned railroad subsidiary, the Penn Central Transportation Company (Railroad), filed a petition for reorganization in bankruptcy on June 21, 1970. Defendants include certain companies in the Penn Central complex, a number of their present and former officers and directors, and certain independent accountants. Defendants are alleged to have violated numerous provisions of the securities acts primarily during the period between February 1, 1968, and June 21, 1970.*fn2
The actions are predicated upon allegedly false and misleading financial information concerning the Penn Central complex which the defendants prepared, filed with the SEC, or released to the shareholders and the public in an allegedly successful attempt to inflate the market price of Penn Central Company capital stock. Certain defendants are also alleged to have intentionally prepared and distributed false and misleading proxy materials, and to have sold stock on the basis of inside information concerning the deteriorating financial situation of the companies.
On December 6, 1971, the district court granted motions permitting the Trustees in reorganization of the Penn Central Transportation Company, and the Penn Central Company itself, to assert exclusive control over all derivative actions brought by the shareholders. These derivative actions are not before us. We are concerned only with individual causes of action by the plaintiffs.
On May 7, 1971, plaintiffs petitioned for an order declaring that eighteen actions could be maintained as a class action. Defendants cross-petitioned for partial summary judgment on a number of counts of the complaints. On August 7, 1972, the district court granted partial summary judgment to defendants on the counts, inter alia, at issue on this appeal, and granted class action status to the plaintiffs who had viable causes of action remaining after the decision on summary judgment. 347 F. Supp. 1327 (E.D. Pa. 1972). Plaintiffs petitioned for reconsideration and after further briefing and argument, the decision for partial summary judgment was reaffirmed on April 17, 1973. 357 F. Supp. 869 (E.D. Pa. 1973). On May 16, 1973, the district court certified that there was no just reason to delay appeal of the order as reaffirmed, and entered final judgment as to those claims for which summary judgment was granted. Fed. R. Civ. Proc. Rule 54(b). We therefore have jurisdiction over these appeals under 28 U.S.C. § 1291. Simmonds Aerocessories v. Elastic Stop Nut Corp., 257 F.2d 485, 489 (3d Cir. 1958).
Plaintiffs contest on this appeal only two issues of law decided by the district court's opinions and orders. First, they appeal the district court's dismissal of claims brought under Section 10(b) of the Securities Exchange Act of 1934 (1934 Act), 15 U.S.C. § 78j(b), as to plaintiffs who did not engage in any open market purchases or sales of stock in the relevant companies during the period of time covered by the complaints. The district court in dismissing these counts rejected plaintiffs' contention that the purchase or sale requirement was met by the 1969 transaction by which persons owning stock in the company later known as the Penn Central Transportation Company exchanged their shares for shares of the Penn Central Company. Second, plaintiffs appeal the dismissal of all counts brought under Section 13(a) of the 1934 Act, 15 U.S.C. § 78m(a). This dismissal was based upon the district court's conclusion that no implied private right of action exists under that section. Since the issues involved in the dismissals of the counts under the two sections are distinct, we treat them seriatim.
I. THE SECTION 10(b) CLAIM
On February 1, 1968, the New York Central Railroad Company merged with the Pennsylvania Railroad Company. The resulting corporation, after a change of name effective May 8, 1968, was known as the Penn Central Company (Railroad). Railroad stock was held directly by individual members of the public.
On April 10, 1969, the Railroad shareholders received proxy materials from the company which sought approval of the formation of a new holding company which would have Railroad as its 100% owned subsidiary. The stockholders would exchange their Railroad shares for shares in the holding company, and they would then own all the shares in the holding company, which in turn would own all the shares of Railroad.
The Railroad shareholders approved this proposal at the annual meeting of Railroad held on May 13, 1969, and the reorganization became effective on October 1, 1969. The newly created railroad subsidiary, formerly known as the Penn Central Company, was renamed the Penn Central Transportation Company (still referred to herein as Railroad). The newly created holding company was named the Penn Central Company (Holding Company).*fn3 Railroad is the corporation that on June 21, 1970, entered reorganization proceedings pursuant to Section 77 of the Bankruptcy Act.
Among the plaintiffs in this consolidated action are a number who owned Railroad stock on February 1, 1968. They exchanged that stock for Holding Company stock pursuant to the May 1969 corporate reorganization, and continued to hold that Holding Company stock until June 21, 1970. They at no other time during the two year period purchased or sold stock in either of the corporations on the open market. These plaintiffs (as well as other plaintiffs who did engage in open market transactions during the two year period) allege various causes of action against the defendants based upon Section 10(b) of the 1934 Act.*fn4 Chief Judge Lord granted summary judgment to defendants on all Section 10(b) claims brought by plaintiffs in this category. He based this determination on his findings that the exchange of stock pursuant to the 1969 reorganization was not a "purchase or sale" by these plaintiffs, and therefore they had not alleged fraud "in connection with the purchase or sale of any security."
Plaintiffs contend on this appeal that the reorganization affected several "important basic rights" of the shareholders and had serious economic consequences to the corporation; therefore, the protection of Section 10(b) should be extended to the share exchange by which the reorganization was consummated. We agree with the excellent analysis of the transaction by Chief Judge Lord and we therefore reject the contention.
We must begin our discussion by noting that this case does not raise the question of the continuing validity of the rule of Birnbaum v. Newport Steel Corp., 193 F.2d 461 (2d Cir.) cert. denied, 343 U.S. 956, 72 S. Ct. 1051, 96 L. Ed. 1356 (1952), that to have standing to bring a 10(b) action the plaintiff must himself have been a purchaser or seller in connection with the fraudulent scheme alleged.*fn5 Were we to completely eliminate the Birnbaum requirement, it would not help plaintiffs in this case. Even if plaintiffs themselves need not be the purchasers or sellers, they must still allege (1) a purchase or sale of securities, and (2) fraud in connection with that purchase or sale of securities. Since our attention is not directed to any alleged purchase or sale of securities other than the share exchange accompanying the reorganization,*fn6 our inquiry must be centered in any event on whether that exchange brings the transaction within the statutory scope of 10(b). See SEC v. National Securities, Inc., 393 U.S. 453, 467 n.9, 89 S. Ct. 564, 21 L. Ed. 2d 668 (1969).
It is well established that the share exchange accompanying the merger of two separate and distinct corporate entities, pursuant to which shareholders in one or both of the original entities exchange their shares for shares in the surviving or newly created corporation, constitutes a "purchase or sale" bringing the transaction within the scope of 10(b). SEC v. National Securities, Inc., supra, 393 U.S. at 464-467, 89 S. Ct. 564, 21 L. Ed. 2d 668; Dasho v. Susquehanna Corp., 380 F.2d 262 (7th Cir.) cert. denied sub nom., Bard v. Dasho, 389 U.S. 977, 88 S. Ct. 480, 19 L. Ed. 2d 470 (1967). In National Securities, Inc., plaintiffs alleged that they were fraudulently induced by misleading proxy statements to vote in favor of a merger between their company, Producers Life Insurance Company, and National Life & Casualty Insurance Co. In holding 10(b) applicable, the Court stated:
The deception furthered a scheme which resulted in [the plaintiffs] losing their status as shareholders in Producers and becoming shareholders in a new company. Moreover, by voting in favor of the merger, each approving shareholder individually lost any right under Arizona law to obtain an appraisal of his stock and payment for it in cash . . . . Whatever the terms "purchase" and "sale" may mean in other contexts, here an alleged deception has affected individual shareholders' decisions in a way not unlike that involved in a typical cash sale or share exchange. The broad antifraud purposes of the statute and the rule would clearly be furthered by their application to ...