concurring.
Although I join in the judgment reversing the district court, I write separately because, unlike Judge Rosenn, I am willing to assume that the decision of this court on the prior appeal in this case does not foreclose us from deciding whether Bateman Eichler, Hill Richards Inc. v. Berner et al., 472 U.S. 299, 105 S.Ct. 2622, 86 L.Ed.2d 215 (1985), applies to a contract action.
The Supreme Court announced what I read as a general rule in Bateman Eichler, supra, that a defense of in pari delicto may not be asserted by a tipper in a damage action by a tippee under Rule 10(b)-5. However, the Court indicated that there could be what may be denominated as an exception to that rule under certain circumstances. Here the district court held that based on its findings of fact the exception applied and the defense of in pari delicto barred plaintiff Rothberg’s diversity action seeking judgment on two promissory notes.
I emphasize at the outset that although this is a diversity action, the doctrine of Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), is not applicable to defenses raised under federal law. As the Supreme Court has explained,
When a federal statute condemns an act as unlawful, the extent and nature of the legal consequences of the condemnation ... are ... federal questions, the answers to which are to be derived from the statute and the federal policy which it has adopted. To the federal statute and policy, conflicting state law and policy must yield.
Sola Electric Co. v. Jefferson Electric Co., 317 U.S. 173, 176, 63 S.Ct. 172, 174, 87 L.Ed. 165 (1942) (holding that local laws of estoppel are not applicable where the defense asserted in a diversity contract action is based on federal law); see also Kelly v. Kosuga, 358 U.S. 516, 519, 79 S.Ct. 429, 431, 3 L.Ed.2d 475 (1959). In the light of such law, and my assumption as to our prior decision, the first issue presented on appeal is whether the policies that led the Supreme Court generally to reject the in pari delicto defense in Rule 10(b)-5 actions by tippees against tippers should lead to a rejection of the defense in a contract action based on obligations arising out of the illegal transaction.
The Bateman Eichler decision rests on two distinct policy determinations. First, the Supreme Court found that a tipper who breaches his or her fiduciary duties is more culpable than a tippee who trades on the information. 472 U.S. at 313-14, 105 S.Ct. at 2630-31, 86 L.Ed.2d 215. Second, the Supreme Court found that “deterrence of insider trading most frequently will be maximized by bringing enforcement pressures to bear on the sources of such information — corporate insiders and broker dealers.” 472 U.S. at 316, 105 S.Ct. at 2632, 86 L.Ed.2d 215. In short, the Supreme Court held that the purposes of federal securities laws generally will be furthered by barring the use of the in pari delicto defense in actions by tippees against tippers under Rule 10(b)-5.
Whether the action is brought in contract, as here, or under Rule 10(b)-5, I believe that permitting a tippee to recover against a tipper, and thus barring the in pari delicto defense, will further the policies enumerated by the Bateman Eichler Court. First, allowing recovery by the tip-pee regardless of the form of the action will reinforce the notion that tippers are more culpable than tippees. Second, by holding tippers liable, they will be further deterred from breaching their fiduciary duty.1 Therefore, in my view, the form of *260the action is not controlling, at least so long as the subject matter arises out of the wrongdoing of the parties or their privies.
But defendants contend, and the district court found, that the exception noted in Bateman Eichler2 applies and renders the in pari delicto defense controlling. Since the correctness of this ultimate determination turns on the facts and inferences therefrom, the next major issue is whether, as Rothberg contends, the critical findings of fact made by the district court on this issue are clearly erroneous. On this phase of the case I agree completely with Judge Rosenn’s position that based on this record one can only reasonably conclude that such findings are mistaken. I say this with a full realization of the rigorous restraints imposed on our review by F.R.Civ.P. 52(a).
In light of the foregoing analysis, I agree with Judge Rosenn that the general rule of Bateman Eichler is controlling. Accordingly, I join in the judgment reversing the judgment of the district court.
. The district court apparently believed this second statement to be untrue because a tippee could wait until after the statute of limitations had run for federal violations before bringing the contract action. One benefit of permitting Rule 10(b) — 5 actions by tippees is that these actions will bring violations to the SEC’s attention. Bateman Eichler, 472 U.S. at 315-16, 105 *260S.Ct. at 2631-32, 86 L.Ed.2d 215. I do not believe, however, that this benefit was the determinative factor in the Bateman Eichler opinion. Rather, I read the Court to be more concerned with deterring tippers by imposing sanctions on them than with simply providing the SEC with an additional means of discovering violations.
. The Court said that where the plaintiff bears at least substantially equal responsibility for the violations he seeks to redress and preclusion of the action would not significantly interfere with effective enforcement of the securities laws and protection of the investing public the defense would be available.