Deutschman v. Beneficial Corp.
841 F.2d 502 (3d Cir. 1989)

Procedural:Robert M. Deutschman appeals from a Fed.R.Civ.P. 12(b)(6) dismissal of his amended class action complaint against Beneficial Corporation Finn M.W. Caspersen, Beneficial's Chairman and Chief Executive Officer, and Halvorsen, its Chief Financial Officer

Facts:Deu chman (P) was a shareholder of Beneficial Corp. (D). In 1986 and 1987, Beneficial's (D) insurance division suffered severe losses, which had a negative impact on Beneficial's (D) financial welfare. Casperson, Beneficial's chairman and CEO, and Halvorsen, its CFO, issued statements on behalf of the company in an attempt to stop the decline in its stock price. The statements indicated that the financial problems were over and covered by the company's financial reserves. Casperson and Halvorsen held stock and stock options in Beneficial. Beneficial's shares were traded on the New York Stock Exchange and on other national stock exchanges. Dei.tschman, who had purchased call options on the stock, brought a class action alleging claims under the Securities Exchange Act.

Issue: Must there be a fiduciary relationship between a 10(b) defendant and the victim of that defendant's affirmative misrepresentation?

Rule: The purchaser of a call option on a corporation’s stock has standing to assert a Rule 10(b)(5) claim for misrepresentations made by the corporation.

Holding: Reversed.
The United States District Court for the District of Delaware, dismissed class action complaint and appeal was taken. The Court of Appeals, held that purchaser of option contract had standing to seek damages under Securities Exchange Act for affirmative misrepresentations he alleged were made by corporation, the stock of which was subject to options.