Simon Junger v. Hertz, Neumark & Warner, 426 F.2d 805 (2d Cir. 1970). · Go Syfert
Search
Simon Junger v. Hertz, Neumark & Warner, 426 F.2d 805 (2d Cir. 1970). Cases Citing This Book View Copy Cite
19 citation events across 8 distinct courts.
Strongest positive: Armstrong v. Mcalpin (ca2, 1983-01-24)
Top citers, strongest first. 8 distinct citers. How cited ↗
discussed Cited as authority (rule) Armstrong v. Mcalpin
2d Cir. · 1983 · confidence medium
Sec. 78t(a), as principals under the common law of agency, or as both, Marbury Management, Inc. v. Kohn, 629 F.2d 705 (2d Cir.), cert. denied, 449 U.S. 1011 , 101 S.Ct. 566 , 66 L.Ed.2d 469 (1980); Junger v. Hertz, Neumark & Warner, 426 F.2d 805, 807 (2d Cir.), cert. denied, 400 U.S. 880 , 91 S.Ct. 125 , 27 L.Ed.2d 118 (1970), must also await further factual development. 53 The allegations that appellee Shultes, the president of appellee Sheffield and an investment advisor to the Growth Companies between April 16, 1971 and August 13, 1973, "was aware" of and "approved" of the alleged churning …
discussed Cited as authority (rule) Armstrong v. McAlpin
2d Cir. · 1983 · confidence medium
The possible liability of these two companies as controlling persons, 15 U.S.C. § 78t(a), as principals under the common law of agency, or as both, Marbury Management, Inc. v. Kohn, 629 F.2d 705 (2d Cir.), cert. denied, 449 U.S. 1011 , 101 S.Ct. 566 , 66 L.Ed.2d 469 (1980); Junger v. Hertz, Neumark & Warner, 426 F.2d 805, 807 (2d Cir.), cert. denied, 400 U.S. 880 , 91 S.Ct. 125 , 27 L.Ed.2d 118 (1970), must also await further factual development.
discussed Cited as authority (rule) Samuel STERN, Appellant, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Appellee (2×)
4th Cir. · 1979 · confidence medium
In that article the author said that "(p)roof that the defendant's act 'caused' the plaintiff's loss is indisputably a prerequisite of recovery in tort (under Section 7)" and absent such proof, "recovery should be denied." 13 It has been stated that, in order to meet this burden, the plaintiff must show "that defendant's liberal offer of credit induced him to purchase stock (or options) which he would not have otherwise acquired." Landry v. Hemphill, Noyes & Co. (1st Cir. 1973) 473 F.2d 365, 370 , Cert. denied 414 U.S. 1002 , 94 S.Ct. 356 , 38 L.Ed.2d 237 Reh. denied 415 U.S. 960 , 94 S.Ct. 14…
cited Cited "see" SECURITIES & EXCHANGE COM'N v. Packer, Wilbur & Co., Inc.
S.D.N.Y. · 1973 · signal: see · confidence high
See Junger v. Hertz, Newmark & Warner, 426 F.2d 805 (2d Cir. 1970); Meisel v. New Jersey Trust Co., 218 F.Supp. 274 (S.D.N.Y.1963).
cited Cited "see" Barbara B. Sack v. V. T. Low, Doing Business as a Partnership Under the Name of Bear, Stearns & Co., and Richard W. Silverman
2d Cir. · 1973 · signal: see · confidence high
See Junger v. Hertz, Neumark & Warner, 426 F.2d 805 , 806 n. 1 (2 Cir.), cert. denied, 400 U.S. 880 , 91 S.Ct. 125 , 27 L.Ed.2d 118 (1970) ; Klein v. Bower, 421 F.2d 338, 343-344 (2 Cir. 1970).
discussed Cited "see" Fed. Sec. L. Rep. P 92,710 Stanley S. Pearlstein v. Scudder & German, a Partnership (2×) also: Cited "see, e.g."
2d Cir. · 1970 · signal: see · confidence high
See Note, Federal Margin Requirements as a Basis for Civil Liability, 66 Colum.L.Rev. 1462, 1470-1471 (1966) 7 See, e.g., Junger v. Hertz, Neumark & Warner, 426 F.2d 805 (2 Cir. 1970); Smith v. Bear, 237 F.2d 79, 87-88 (2 Cir. 1956); Serzysko v. Chase Manhattan Bank, 290 F.Supp. 74 (SDNY 1968), aff'd mem. 409 F.2d 1360 (2 Cir.), cert. denied, 396 U.S. 904 , 90 S.Ct. 218 , 24 L.Ed.2d 180 (1969); Moscarelli v. Stamm, 288 F.Supp. 453 (EDNY 1968); Glickman v. Schweickart & Co., 242 F.Supp. 670 (SDNY 1965); Cooper v. North Jersey Trust Co., 226 F.Supp. 972 (SDNY 1964); Remar v. Clayton Securities C…
cited Cited "see, e.g." A. J. WHITE & CO. and Allen J. White, Petitioners, v. SECURITIES AND EXCHANGE COMMISSION, Respondent
1st Cir. · 1977 · signal: see also · confidence low
See also Junger v. Hertz, Neumark & Warner, 2 Cir., 1970, 426 F.2d 805 , cert. denied, 400 U.S. 880 , 91 S.Ct. 125 , 27 L.Ed.2d 118 .
discussed Cited "see, e.g." Alaska Interstate Company v. McMillian (2×)
D. Del. · 1975 · signal: compare · confidence low
Compare 12 C.F.R. § 220.109 and In the Matter of Sutro Bros. & Co., 41 S.E.C. 443 (1963) with Junger v. Hertz, Neumark & Warner, 426 F.2d 805 (2nd Cir. 1970).
Retrieving the full opinion text from the archive…
Simon JUNGER, Plaintiff-Appellant,
v.
HERTZ, NEUMARK & WARNER, Defendant-Appellee
128, Docket 33701.
Court of Appeals for the Second Circuit.
May 6, 1970.
426 F.2d 805
1970 U.S. App. LEXIS 9381
Simon Junger, pro se., Mortimer Goodman, New York City (Grandefeld & Goodman, New York City, on the brief), for defendant-appellee.
Lumbard, Waterman, Jameson.
Cited by 17 opinions  |  Published
PER CURIAM.

Junger brought this action under the securities laws, seeking to recover $5,000 he lost because Hertz, Neumark & Warner, a member firm of the New York Stock Exchange, allegedly violated section 7(c) of the Securities Act of 1934, 15 U.S.C. § 78g(c) (1964) by its participation in certain transactions which occurred in 1965 and 1966. Section 7(c) provides that

It shall be unlawful for any * * * broker * * * directly or indirectly, to extend or maintain credit or arrange for the extension or maintenance of credit to or for any customer—
(1) On any security * * * in contravention of the rules and regulations which the Board of Governors of the Federal Reserve System shall prescribe * * *.

Regulation T, promulgated by the Federal Reserve pursuant to this section, has long provided that a broker cannot arrange for a third party to extend credit in a greater amount than the broker could extend to the customer directly. Junger attempted to prove below that one Gelber, a registered representative of defendant, arranged a loan between Junger and one Stark, a money-lender and factor who supplied funds to Junger to purchase securities which themselves became the security for the loans. It is undisputed that the credit extended by Stark was far in excess of that which Hertz, Neumark could have itself extended consonant with the prevailing margin requirements. Judge Bonsai gave judgment for defendant on Jung-er's failure of proof, and we affirm.

It has long been settled that a person for whom a broker has unlawfully arranged credit has a private right of action against the broker for violation of section 7(c). See Smith v. Bear, 237 F.2d 79 (2d Cir. 1956); Remar v. Clayton Securities Corp., 81 F.Supp. 1014 (D. Mass.1949); Note, Federal Margin Requirements as a Basis for Civil Liability, 66 Colum.L.Rev. 1462, 1467-71 (1966). But an essential element in such a suit is establishing that the broker had sufficient connection with the extension of credit by a third party. [1]

The heart of Junger’s case is his claim that Gelber “arranged” the factoring agreement. Junger testified that Gelber introduced him to Stark, a fellow customer of Gelber’s, that Gelber handled the mechanics of the factor arrangement, accepted Junger’s payments on the account on behalf of Stark, and took purchase orders from Junger for Stark’s account. This would seem a paradigm example of arranging. As the SEC stated in Sutro Bros. & Co., 41 SEC 443, 456-57 (1963):

[It is] clear that when a broker permits himself to become the intermediary between customer and factor with[*807] respect to the customer’s account or dealings with the factor, as by conveying the customer’s communications or instructions to the factor or by responding to requests or directives of the factor concerning the customer’s transactions, the broker becomes so involved in extension or maintenance of credit for the customer by the lender as to be held to be arranging.

Junger of course would have had to establish that Hertz, Neumark was responsible for Gelber’s unlawful actions, but liability might be rested on either section 20 of the 1934 Act, 15 U.S.C. § 78t (1964), or common law doctrines of the liability of a principal for certain acts of his agent, Restatement (Second) of Agency §§ 219-67 (1958). See generally Moscarelli v. Stamm, 288 F.Supp. 453, 460-461 (E.D.N.Y.1968); Note, Brokerage Firms’ Liability for Salesmen’s Fraudulent Practices, 36 Fordham L. Rev. 95 (1967).

The court below, however, did not accept Junger’s version of the events in question. Contrary to Junger’s testimony, Stark testified that he had been introduced to Junger by people unconnected to Hertz, Neumark in defendant’s board room, that he had personally explained the entire arrangement to Jung-er, and that Junger made payments on the account to him directly except that once or twice Gelber, knowing that Stark was due in the office momentarily, agreed to hold the money briefly; Gelber corroborated this testimony. Accepting the Stark-Gelber version, Judge Bonsai found that Hertz, Neumark’s only connection with the factoring arrangement was the execution of purchase and sell orders on Junger’s shares held in Stark’s name in Stark’s account.

It is clear that when the customer establishes credit entirely on his own and the only connection of the broker is to execute transactions involving stocks purchased on credit, the broker does not violate section 7(c) and Regulation T. See Sutro Bros. & Co., 41 SEC at 451-52; Meisel v. New Jersey Trust Co., 218 F. Supp. 274, 277 (S.D.N.Y.1963). For, as Professor Loss points out, “any other view would make the broker an insurer that customers were employing credit, wherever secured, only to the extent that could be provided by the broker.” 5 L. Loss, Securities Regulation 3295 (1969).

Affirmed. Each party shall bear his own costs.

1

. Since we accept Judge Bonsai’s finding that Junger did not prove this element of his claim we do not consider the other elements in a private cause of action under 7(e). Such an implied action sounds in tort, and there are difficult questions of proximate cause and quantum of relief which must be faced. See generally 5 L. Loss, Securities Regulation 3307-10 (1969).