(concurring).
I concur generally in Judge Timbers’ scholarly opinion except as to the injunction sought by the SEC.
In view of the apparent disparity between the views of my brothers I respectfully comment on some of the points raised.
STANDING
With respect to standing I am inclined to agree with Judge Mansfield that there is no constitutional question. My approach is, moreover, much closer to Judge Pollack’s though I disagree with his conclusion. It seems to me he was right in approaching the problem as one of causation before considering the question of standing. If there is no causation standing becomes a rather abstract conception. Since the seven per cent illegally acquired by BPC caused it to win the contest, the loser has standing. I think it unnecessary to say that a defeated contender who won a booby prize of say, one per cent of the stock, would have standing simply because he entered the lists and lost.
SCIENTER AND CAUSATION
I agree that some kind of scienter must be shown. But I do not think a litmus paper test of scienter will ever be found. I am content to accept the general formulation that mere negligence will not suffice in a private action for money damages and that “recklessness that is equivalent to wilful fraud,” SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 868, 2 Cir. (Friendly, C. J. concurring), is required for a violation of Section 14 (e) as well as of Section 10(b). In modern times statutory construction grows case by case much as the common law did when more general rules of law were involved. And I venture to say that stability may be more easily attained by analogizing from decided cases whose facts are known than by guessing what may come within some general rule which must of necessity be inchoate if only for want of the gift of prophecy.
RULE 10b-6
With respect to the Rule 10b-6 violation I limit my concurrence to agreement that there was such a violation as we held in Chris-Craft Industries, Inc. v. Bangor Punta Corp., 426 F.2d 569, 576-577 (2 Cir.1970), and would hold that since the block purchases were necessary for control causation was established. I do not think we are required in this case to pass more precisely on the general question whether a purchase off the market that does not affect the tape causes price fluctuations and damage simply because it is a violation of Rule 10b-6. On that question Judge Pollack, in my respectful submission, was right.
SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF-APPELLANT-APPELLEE V. BANGOR PUNTA CORPORATION, DEFENDANT - APPELLEE - APEL-LANT
INJUNCTIVE RELIEF
Judge Mansfield and I do not agree that Judge Pollack’s denial of injunctive relief to the SEC against BPC should be reversed. We respectfully suggest that the matter is not so clear that we should substitute our judgment for the judgment of the experienced trial Judge below who sat as a chancellor in equity. He heard the witnesses and had the opportunity by observation better to prophesy future conduct than we can on this printed record.
The days are long since past when appellate courts in the federal system in equity cases reviewed findings of fact de novo. The scope of appellate review is more sharply limited even in causes that would have been formerly classed as proceedings in equity. The findings of the trial Court must be clearly erroneous or they will not be set aside. Fed.R.Civ.P. 52(a).
*394Specifically, the test for review of the denial of injunctive relief is whether there has been an abuse of discretion. See United States v. W. T. Grant Co., 345 U.S. 629, 633, 634, 73 S. Ct. 894, 97 L.Ed. 1303 (1953). In United States v. W. T. Grant Co. the Supreme Court said that for reversal “the Government must demonstrate that there was no reasonable basis for the District Judge’s decision.” 345 U.S. at 634, 73 S.Ct. at 898. And this Court has recognized that this'rigorous limitation on appellate review applies to SEC actions for injunctive relief as well. As was said in SEC v. Manor Nursing Centers Inc., 458 F.2d 1082, 1100 (2 Cir. 1972), “the party seeking to overturn the district court’s exercise of discretion has the burden of ‘showing that the court abused that discretion, and the burden necessarily is a heavy one.’ SEC v. Culpepper, supra, 270 F.2d [241] at 250; United States v. W. T. Grant Co., 345 U.S. 629, 633, [73 S.Ct. 894, 97 L. Ed. 1303] (1953).” I think we lose sight of these accepted principles if we reverse and order the issuance of a permanent injunction in this case.
Here Judge Pollack found against the SEC on its primary contention. He found that there was no purposeful withholding of the completion of the Dumaine negotiation until the contest for Piper was over. 331 F.Supp. 1154 at 1160. We cannot set this finding aside as clearly erroneous on this record. This is a weighty finding by a trial Judge experienced in the securities field. In the last analysis we are dealing with intent and must seek to determine whether there is a likelihood of recurrence of unlawful activity and a need for a prophylatic against recidivism. Who is better able to determine such things than the Judge who saw and heard the witnesses and got the feel of what happened?
In the opinion in the other cases decided today, we accept the District Court’s “inferences drawn from undisputed evidence” that the delay in consummating the deal resulted from a prudent business decision to investigate the legal and accounting impact of the sale.
Judge Timbers argues that there is a “core” difference between the standard of “a propensity or natural inclination to violate the securities law” attributed to Judge Pollack, and the test offered by Judge Timbers’ opinion “whether there is a reasonable likelihood that the wrong will be repeated.” Of course the statute expresses it as “any person [who] is engaged or about to engage in any acts or practices which constitute or will constitute a violation.” The use of either test, if indeed they differ except in verbiage, is not the subject of immutable statutory command. We do not see sufficient difference in the standards juxtaposed to find that the District Court erred as a matter of law. Indeed, if one wished to be finicky, Judge Timbers’ formulation is the more limited — “the wrong will be repeated” implying a rather narrowly repetitive violation while the propensity standard covers a multitude of violations (emphasis supplied). We emphasize that we are not in the least interested in limiting the basis for an SEC injunction as a matter of general rule.
The dissent also misinterprets our view on intent. We are not limiting our injunctive relief to common law fraud as is implied from the citation of SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 200, 84 S.Ct. 275, 11 L.Ed.2d 237 (1968). Nor are we eliminating reckless conduct that may be tantamount to culpable negligence from the proper basis for injunctive relief at the instance of the Commission. Nor do we treat as unimportant the public interest as is suggested.
Since we do not deny that in a proper case even sustained recklessness can be the basis for injunctive relief there is no such divergence of opinion in the abstract as Judge Timbers suggests. We repeat that we are not the finders of fact. The impact of our decision is, by its terms, limited to the scope of appellate review.
*395In Texas Gulf Sulphur, supra, this Court simply remanded “the cause as to it [Texas Gulf Sulphur Company] for a further determination below, in the light of the approach explicated by us in the foregoing opinion, as to whether in the exercise of its discretion, the injunction against it which the Commission seeks should be ordered” (emphasis supplied). And as Chief Judge Friendly said in concurring: “Absent much clearer language than is found in the 1934 Act, the entitlement of a plaintiff to an injunction thereunder remains subject to principles of equitable discretion.” He pointed out that Judge Bonsai had acted on the erroneous belief that “no violation of the Rule had occurred and he was thus without power to enjoin,” but Chief Judge Friendly wrote: “If Judge Bonsai had denied an injunction on these grounds [i. e. .‘no danger of repetition’], I see no basis on which we could properly have reversed him.” 401 F.2d at 869.
In the instant case the District Judge found that the omission in the registration statement was material, but in his discretion, considering the public interest, he did not enjoin because he did not believe there was likelihood of recurrence. 331 F.Supp. at 1162-1163. We do not consider that to be such an abuse of discretion as to support reversal. And “abuse of discretion” it would have to be. See Hecht Co. v. Bowles, 321 U.S. 321, 331, 64 S.Ct. 587, 88 L.Ed. 754 (1944).
Nor do we believe that a conglomerate should be more harshly judged than others. The issue is not whether it will seek other acquisitions but rather how it will go about doing them.
In any event sanctions need not be cumulative. Damages tend to have a didactic effect. The SEC has, through our decision in the companion cases now largely achieved its commendable purpose. Further to enjoin we think would be to add yet another star to the flag of a battle already won. The denial of an injunction is affirmed.