Securities Regulation Keyed to Coffee
Blue Chip Stamps v. Manor Drug Stores
Facts
Blue Chips Stamp was a corporation where nine retailers owned 90% of the stock, similar to an antitrust consent decree, Blue Chip needed to divest itself of 55% of its stock and to offer it on the market to other vendors who had utilized the stamp service in the previously. The objective of the decree was to widen the contribution of the vendors in Blue Chip. Manor Drug Stores was one of the vendors whom the consent decree was designed to benefit. However, following receipt of a prospectus from blue chip, Manor Drugs declined the offer. Manor Drugs sued under 10b-5 two years later, claiming that the prospectus falsely made the offer look unappealing so that Blue Chip could sell shares on the open market for a higher price at a later date. Manor Drug claimed that if it had been aware of the facts that it would have purchased the stock. The district court dismissed this action, but the Ninth Circuit reversed. It held that Manor Drugs had what amounted to a “contract to purchase” under the decree, and so was a “purchaser” under the meaning of 10b-5.
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