406 U.S. 128, 153-154 (1972)
The Ute Indian Supervision Termination Act of August 27, 1954 addressed the Ute Indian Tribe of the Uintah and Ouray Reservation in Utah, which then had approximately 1,765 members consisting of 439 mixed-bloods and 1,326 full-bloods.1 The statute directed partition of tribal assets between the two groups, termination of federal supervision over mixed-blood property, and a development program for full-blood members.2 At the time the tribe's cash, accounts receivable, and land were valued at roughly $20,702,885, with additional holdings in oil, gas, and mineral rights plus unadjudicated claims against the United States.3
In 1956 the mixed-blood members formed Affiliated Ute Citizens as an unincorporated association authorized by the Act.4 Two years later Ute Distribution Corp. was incorporated to manage the undivided assets, including mineral rights, jointly with the full-bloods' business committee; UDC issued ten shares to each of the 490 mixed-blood members, producing 4,900 shares total.5 First Security Bank of Utah, N.A. served as transfer agent and held the certificates, which carried legends warning that the stock should not be sold or encumbered and requiring any pre-August 27, 1964 sale to be first offered to tribe members at a price no lower than that offered to nonmembers.6
The Secretary issued the termination proclamation effective at midnight August 27, 1961.7 During 1963 and 1964 mixed-blood shareholders sold 1,387 UDC shares, all to nonmembers.8 Bank assistant managers John B. Gale and Verl Haslem at the Roosevelt, Utah branch solicited standing orders from non-Indian buyers, purchased 113 shares themselves, prepared and notarized transfer documents including seller affidavits, and received commissions and gratuities; sales prices to non-Indians ranged from $300 to $700 per share while transfers among non-Indians occurred at $500 to $700 per share.9
In February 1965 Anita R. Reyos and eighty-four other mixed-bloods filed suit against the bank, Gale, Haslem, and automobile dealers alleging violations of section 10(b) and Rule 10b-5.10 In April 1968 AUC, on behalf of its 490 members, sued the United States seeking pro rata distribution of the mineral estate and a declaration that AUC rather than UDC was entitled to participate in management.11 The District Court conducted a bellwether trial of twelve Reyos plaintiffs, made detailed findings concerning the sales and the defendants' conduct, and entered judgments; the Tenth Circuit reviewed both cases on appeal, after which the Supreme Court granted certiorari.12
Whether 25 U.S.C. § 345 confers jurisdiction over AUC's claims seeking pro rata distribution of the mineral estate to individual mixed-blood members?13
Section 345 authorizes actions only for allotment.14 Allotment is a term of art meaning selection of specific land awarded to an individual allottee from a common holding.15 It provides consent to sue the United States solely for such claims.16 It does not extend to suits seeking distribution of undivided tribal mineral interests that have never been allotted.17
No. The mineral estate that AUC seeks to have conveyed pro rata has never been subjected to allotment.18 It remains tribal property not appurtenant to any allotment.19 Section 10 of the Partition Act itself contemplates and provides specifically for the non-allocation of that interest.20 The suit is therefore one against the United States without its consent under section 345.21
Neither 28 U.S.C. §§ 1399 and 2409 afford jurisdiction because they apply only to partition suits where the United States is a tenant in common or joint tenant.22
Whether AUC or UDC holds the right to manage the undivided mineral interests jointly with the full-bloods' tribal business committee?25
The Partition Act authorized mixed-blood members to organize and select authorized representatives with power to take actions required by the Act.26 When AUC formed UDC pursuant to that authority and delegated its powers to UDC by resolution, UDC became the entity entitled to manage the undivided assets.27
No. AUC formed UDC in 1958 specifically to manage mineral rights and unadjudicated claims jointly with the full-blood business committee.28 AUC approved UDC's articles by a 42-5 vote and by unanimous board resolution irrevocably delegated authority to UDC to accomplish the purposes for which it was formed.29 These steps were taken pursuant to the Partition Act.30 UDC's legitimacy was recognized by subsequent federal statutes.31
Therefore UDC and not AUC is entitled to manage the oil, gas, and mineral rights with the committee of the full-bloods.32
UDC holds the right to manage the undivided mineral interests jointly with the full-bloods' tribal business committee.33
Whether the United States owed and breached a continuing duty to mixed-blood shareholders after the 1961 termination proclamation that supports Federal Tort Claims Act liability for stock sales?34
After the termination proclamation issued under section 23 of the Partition Act, federal supervision over the UDC shares themselves ended.35 This left no remaining governmental authority over those shares.36 Therefore no duty on the part of the United States to restrain sales or support Tort Claims Act liability existed.37
No. The proclamation of August 26, 1961, marked the fulfillment of the purpose of terminating federal supervision over the trust and restricted property of the mixed-bloods.38 Each mixed-blood could thereafter sell his shares as he wished subject only to the restrictions imposed by UDC's own articles.39 The first-refusal right was created by UDC itself and imposed no duty on the United States.40 The Government is not liable under the Tort Claims Act for failure to restrain any sales.41
The United States owed no continuing duty after the 1961 termination proclamation that would support Federal Tort Claims Act liability for the stock sales.42
Related opinions on this issue
Justice Douglas joined the Court's opinion and judgment as to the individual and corporate respondents.43 He would have gone further and held that the United States has waived its sovereign immunity to petitioners' claims.44 He noted that the Ute Distribution Corp. was not chartered according to the guidelines mandated by Congress.45
He argued that even if the federal trust relationship was terminated as to individual property interests, the trust relationship was not terminated as to the group interest in the mineral rights.46 The United States continued to owe significant obligations and duties with regard to these mineral interests.47 He contended that the waiver of sovereign immunity in section 345 should receive a beneficent and liberal interpretation.48
The failure of Congress to extend sovereign immunity to the unpartitioned mineral interests supports the conclusion that immunity has been waived as to these claims.49
Whether Gale and Haslem violated Rule 10b-5 by engaging in a course of business that operated as a fraud on mixed-blood sellers without disclosing material facts about the market they developed?50
Rule 10b-5 prohibits any person from employing any device, scheme, or artifice to defraud.51 It also prohibits engaging in any act, practice, or course of business which operates as a fraud or deceit upon any person in connection with the purchase or sale of any security.52 When defendants act as market makers who develop and encourage a non-Indian market while facilitating sales by mixed-blood sellers, they have an affirmative duty to disclose material facts that reasonably could have been expected to influence the sellers' decisions.53
Yes. Gale and Haslem were active in encouraging a market for the UDC stock among non-Indians by soliciting and accepting standing orders from non-Indian buyers.54 They received commissions and gratuities.55 They were entirely familiar with the prevailing market.56
The mixed-blood sellers considered them familiar with the market and relied upon them.57 By devising a plan and inducing the mixed-blood holders to dispose of their shares without disclosing that the defendants were in a position to gain financially and that shares were selling for a higher price in the non-Indian market, the defendants engaged in a course of business that operated as a fraud within the meaning of Rule 10b-5.58
Gale and Haslem violated Rule 10b-5 by engaging in a course of business that operated as a fraud on mixed-blood sellers without disclosing material facts about the market they developed.59
Whether the bank bears liability for Rule 10b-5 violations committed by its employees Gale and Haslem in facilitating UDC stock transfers?60
A bank that is the transfer agent for shares maintains a branch to facilitate transfers.61 It has notice of its employees' improper activities in encouraging a market and receiving commissions.62 It knowingly creates apparent authority on the part of those employees.63 Such a bank is jointly and severally liable for their Rule 10b-5 violations.64
Yes. The bank was the transfer agent that had physical possession of all certificates.65 It maintained a Roosevelt branch for the purpose of facilitating transfers by mixed-bloods.66 It sought individual accounts from tribal members.67
Its employees Gale and Haslem performed their activities on bank premises during business hours.68 Because the bank was put upon notice of the improper activities of its employees and knowingly created the apparent authority on their part, its liability is joint and several with that of Gale and Haslem.69
The bank bears liability for Rule 10b-5 violations committed by its employees Gale and Haslem in facilitating UDC stock transfers.70
Whether positive proof of reliance on specific misrepresentations is required for recovery under Rule 10b-5 when defendants withhold material facts while facilitating securities sales?71
When defendants' activities disclose a course of business or device that operated as a fraud and the violation consists primarily of a failure to disclose, positive proof of reliance on specific misrepresentations is not a prerequisite to recovery.72 All that is necessary is that the facts withheld be material in the sense that a reasonable investor might have considered them important in making the decision.73 This establishes the requisite element of causation in fact.74
No. The defendants' activities disclose within the language of Rule 10b-5 a course of business or device that operated as a fraud because they devised a plan and induced the mixed-blood holders to dispose of their shares without disclosing material facts that reasonably could have been expected to influence their decisions to sell.75 Under these circumstances involving primarily a failure to disclose, positive proof of reliance is not required.76 The obligation to disclose together with the withholding of a material fact establishes the requisite element of causation in fact.77
Positive proof of reliance on specific misrepresentations is not required for recovery under Rule 10b-5 when defendants withhold material facts while facilitating securities sales.78
Whether the measure of damages under section 28 of the Securities Exchange Act is the difference between the fair value of what the seller received and what he would have received absent the fraud, or the defendant's profit if greater?79
Under section 28 of the Securities Exchange Act, the correct measure of damages is the difference between the fair value of all that the seller received and the fair value of what he would have received had there been no fraudulent conduct.80 When the defendant received more than the seller's actual loss, damages are the amount of the defendant's profit.81
Yes. The correct measure is the difference between the fair value of what the mixed-blood seller received and the fair value of what he would have received had there been no fraudulent conduct.82 This applies except in the situation where the defendant received more than the seller's actual loss.83 In that case damages are the amount of the defendant's profit.84
The measure of damages under section 28 is the difference between the fair value of what the seller received and what he would have received absent the fraud, or the defendant's profit if greater.85
Whether the District Court's $1,500 per share valuation of UDC stock at the time of the sales finds adequate support in the trial record?86
A district court sitting as trier of fact may draw reasonable inferences from the record and is not restricted to actual sale prices in an isolated and thin market.87 When the court considers the existence of valuable mineral deposits, prices paid in actual sales, opinion evidence, economic pressures on sellers, and other market factors, its valuation finding is entitled to deference if supported by a preponderance of the evidence.88
Yes. The District Court considered the existence of extensive oil shale deposits possessing substantial present and great potential value.89 It considered the presence of gas, coal, and other minerals.90 It considered each petitioner's remaining interest in the 1965 award by the Indian Claims Commission.91
It considered claims against the United States not yet fully adjudicated.92 It considered specific prices at which shares were sold by mixed-bloods and between white persons.93 It considered the fact that prices were influenced by the improper activities of Gale and Haslem.94 It considered the excess of sellers over buyers.95
It considered the typical Indian seller's lack of information compared with non-Indian buyers.96 It considered heavy economic pressure on Indian sellers.97 It considered opinion evidence in excess of $700 per share.98 It considered the tribe's own refusal to purchase at prices ranging from $350 to $700.99
On the preponderance of this evidence the court concluded the stock was worth $1,500 per share at the times of the sales.100
The District Court's $1,500 per share valuation of UDC stock at the time of the sales finds adequate support in the trial record.101