LCDR (Ret.) Lawrence BROWN and Alice Brown, et al., Plaintiffs-Appellants (85-5714), Plaintiffs-Appellees (85-5715), v. CITY OF COVINGTON, Defendant-Appellee (85-5714), Defendant-Appellant (85-5715), 805 F.2d 1266

TIMBERS, Senior Circuit Judge. This class action concerns a bond issue by appellee City of Covington, Kentucky (“City”), to finance the construction of a health care center. Appellants, the class of persons who purchased the bonds, appeal from a judgment entered June 17, 1985 in the Eastern District of Kentucky, Henry R. Wilhoit, Jr., District Judge, dismissing appellants’ federal securities law claims against the City.

The court held that, since government entities like the City were not specifically included within the pre-1975 definition of the term “person” in § 3(a)(9) of the Securities Exchange Act of 1934, 15 U.S.C. § 78c(a)(9) (1974) (“1934 Act”), appellants could not maintain an action against the City under § 10(

b) or Rule 10b-5. Appellants argue that the failure of Congress to include government entities like the City within the definition of “person” in § 3(a)(9) was merely a stylistic oversight. We hold that, prior to the 1975 amendment to § 3(a)(9), cities were not within the definition of the term “person” in the 1934 Act. Consequently no action under § 10(

b) or Rule 10b-5 is maintainable against the City for acts committed prior to the effective date of the 1975 amendment. We affirm. I. We summarize only those facts believed necessary to an understanding of the issues raised on appeal. In June 1972, the City issued $4,425,000 principal amount of Health Care Revenue Bonds. The proceeds of these tax-exempt municipal revenue bonds were used to finance the development and construction of a City-owned, non-profit geriatric health care center.

The idea for the health care center seems to have originated with the Mayor of the City and two independent promoters in early 1971. By October 1971 the promoters had set up a non-profit corporation to develop and run the health care center. Various feasibility studies were prepared at the behest of the promoters. While the results of these studies are disputed by the parties, it appears that the first two studies found no real demand for additional health care facilities in the area, and the two later studies found sufficient demand.

The health care center corporation also hired a financial advisor/under-writer for the bond issue. It was discovered later that this underwriter was controlled by one of the promoters. The bonds were sold through a final prospectus dated June 26, 1972. Shortly after the bonds were sold the Securities and Exchange Commission (“SEC”) began an investigation of the offer. This investigation ended in permanent injunctions being entered against the promoters, among others, enjoining them from future violations of the federal securities laws. Senex Corp., supra note 1, 399 F.Supp. at 499.

News of this investigation caused the trading price of the bonds to plummet. On November 1, 1974, the instant class action was commenced on behalf of all those persons who had purchased the bonds between the bonds’ initial offering and October 1, 1974. This class included not only those persons who held bonds at the time the complaint was filed, but also those persons who had sold their bonds at a loss prior to commencement of the action (collectively “appellants”). Appellants sued various defendants, including the City.

Appellants’ amended complaint alleged that the June 26, 1972 prospectus materially misstated and omitted relevant information about the bond offering. Appellants alleged that the prospectus failed to disclose a profit to the promoters from the construction cost of the center; that the prospectus failed to disclose the existence of the two unfavorable feasibility studies; that the prospectus failed to disclose the relationship between the underwriter and a promoter; and that the prospectus generally misstated the health care center’s chances of profitability.

Appellants claimed that these omissions and misstatements caused them to buy bonds at artificially inflated prices in violation of § 10(

b) of the 1934 Act, 15 U.S.C. § 78j(b)(1974), and Rule 10b-5, 17 C.F.R. § 240.10b-5 (1974). Appellants alleged that the City was aware of the omissions and misstatement and “authorized and approved” the prospectus. After numerous motions, the district court certified the class on July 8, 1978. Discovery on the merits ensued and culminated with the City’s motion for

summary judgment filed on July 19, 1979. The City argued that it was not a “person” within the meaning of the pre-1975 version of § 3(a)(9) of the 1934 Act and therefore not susceptible of being held liable under § 10(

b) or Rule 10b-5. While this motion was pending, the City petitioned the court for permission to sell the health care center. Under an agreement approved by the court, most of the proceeds of the sale were used to purchase United States Treasury obligations in an amount large enough to insure the payment of principal and interest on all outstanding bonds. Another $64,899.45 of the proceeds was earmarked for those class members who had sold their bonds at a loss prior to the commencement of the action. The court ordered the remaining $150,000 in sale proceeds impounded until it could rule on the City’s

summary judgment motion. On April 9, 1984 the court awarded

summary judgment in favor of the City. The court held that the City was not a “person” within the pre-1975 definition of that term provided in § 3(a)(9) of the 1934 Act. The court then reasoned that the City could not be held liable under § 10(

b) or Rule 10b-5 because the statute only proscribes fraudulent conduct by “any person”. The court also dismissed appellants’ pendent state law claims against the City for lack of jurisdiction. Appellants settled with all remaining defendants. Under the terms of these agreements all class members were fully compensated for any proven losses they had incurred. These agreements plus the sale proceeds insured that all class members’ claims were fully compensated. The settlement agreements also provided for a significant award of attorneys’ fees to appellants’ counsel.

These agreements were approved by the court in an order dated June 6, 1985. On June 18, 1985 the court disbursed the remaining $150,000 in sale proceeds to the City and entered a final judgment in the case. Appellants have appealed from that portion of the judgment awarding the City

summary judgment on appellants’ 1934 Act claims and the disbursement to the City of the $150,000. The City has cross-appealed from the court’s approval of the award of attorneys’ fees to appellants' counsel. The only issue raised on this appeal is whether the City is a person within the meaning of the pre-1975 version of § 3(a)(9) of the 1934 Act. For the reasons set forth below, we hold that the City is not a person within the pre-1975 version of § 3(a)(9) of the 1934 Act and cannot be held liable under § 10(

b) or Rule 10b-5 for acts or omissions committed prior to the effective date of the 1975 amendment to § 3(a)(9). II. We start, as we must, with the language of the statute itself. The pre-1975 version of § 3(a)(9) of the 1934 Act provided: “The term ‘person’ means an individual, a corporation, a partnership, an association, a joint-stock company, a business trust, or an unincorporated organization.” 1934 Act, ch. 404, § 3(a)(9), 48 Stat. 882.

In 1975 Congress amended § 3(a)(9) to read: “The term ‘person’ means a natural person, company, government, or political subdivision, agency, or instrumentality of a government.” 15 U.S.C. § 78c(a)(9) (1982). Appellants have conceded that the pre-1975 version of § 3(a)(9) covers the City’s bond offering. See Pub.L. 94-29 § 31(a), 89 Stat. 97 (1975) (effective date of amendment to § 3(a)(9) is June 4, 1975). On its face, then, the pre-1975 version of § 3(a)(9) does not include government entities like the City.

In marked contrast to the 1934 Act, the definition of “person” in the nearly contemporaneously passed Securities Act of 1933 (“1933 Act”) specifically includes such government entities. Section 2(2) of the 1933 Act has provided since its enactment that: “The term ‘person’ means an individual, a corporation, a partnership, an association, a joint-stock company, a trust, any unincorporated organization, or a government or political subdivision thereof.

As used in this paragraph the term ‘trust’ shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security.” 15 U.S.C. § 77b(2) (1982) (emphasis added). The combination of the specific inclusion of government entities in the 1933 Act definition of “person” and the omission of such entities in the 1934 Act definition of “person” strongly suggests that Congress intended government entities to be outside the scope of those provisions of the 1934 Act which require the participation of a “person”. Greenspan v.

Crosbie, [1976-1977 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 95,780 (S.D.N.Y.1976) (difference between 1933 and 1934 Acts’ definition of person evinces a “clear and unambiguous” Congressional intent not to include government entities under the 1934 Act antifraud provisions). In the face of this clear statutory language, appellants are forced to argue that the omission of government entities in the originally enacted 1934 Act definition of “person” was a mere “oversight” and Congress actually intended the antifraud provisions of the 1934 Act to cover entities like the City. We are unconvinced.

At the outset, we note that appellants face a heavy burden in persuading us that Congress did not mean what it said in the plain, unambiguous language of the 1934 Act. See Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980) (language of statute is controlling absent a “clearly expressed legislative intention to the contrary”). In the instant case this burden becomes almost insurmountable when it is remembered that Congress showed itself capable of saying what it meant with respect to the inclusion of government entities in the nearly contemporaneously passed 1933 Act.

In light of the painstaking care with which these two watershed acts were drafted, appellants must show an unequivocal intent by the 1934 Act drafters to include entities like the City within the scope of the Act’s antifraud provisions to convince us that Congress was careless in drafting the 1934 Act definition of “person”. Appellants have failed to demonstrate such unequivocal intent. The legislative history of the 1933 and 1934 Acts, in fact, hurts appellants’ case.

While the legislative history of the 1934 Act is silent on the reasons for the omission of government entities from § 3(a)(9), the legislative history of the 1933 Act suggests that Congress was concerned with safeguarding the states’ “rights” to issue securities largely unhindered by federal law. In explaining the exemption for government issuers found in § 3(a)(2) of the 1933 Act, the House Committee Report stated, “By such a delineation, any constitutional difficulties that might arise with reference to the inclusion of state and municipal obligations are avoided.” H.R.Rep.

No. 85, 73rd Cong., 1st Sess., 14 (1933). In light of this legislative history, it is more likely that the omission of government entities from the definition of “person” in the 1934 Act was a manifestation of Congress’ concern over states’ rights rather than an inadvertent lapse in drafting prowess. In re New York City Municipal Securities Litigation, 507 F.Supp. 169, 181-82 (S.D.N.Y.1980). Appellants' case is further weakened by the fact that Congress thought it necessary in 1975 to amend § 3(a)(9) to include government entities.

While appellants would have us believe that the amendment was nothing more than a “technical clarification”, we note that the courts and commentators have viewed the amendment as subjecting municipal issuers to liability under § 10(

b) and Rule 10b-5 for the first time. Monell v. Department of Social Services, 532 F.2d 259, 263 n. 3 (2d Cir.1976), rev’d on other grounds, 436 U.S. 658 (1978) (“the definition of ‘person’ in § 3(a)(9) of the [1934 Act] ... did not include governmental agencies until the 1975 amendment”) (dictum); Greenspan v. Crosbie, supra, [1976-1977 Transfer Binder] Fed.Sec.L.Rep. at 90,827 (“Any possible question concerning the

interpretation of [pre-1975 § 3(a)(9)] is laid to rest by the 1975 Amendments”); Doty & Petersen, The Federal Securities Laws and Transactions in Municipal Securities, 71 N.W.U. L.Rev. 283 (1976). While Congress’ actions in 1975 do not control our resolution of Congress’ intent in 1934, we find persuasive Congress’ perception that § 3(a)(9) needed an amendment to include government entities. Appellants’ only remaining argument is a retreat to the Supreme Court’s oft-repeated admonition that the federal securities laws aimed at combatting fraud should not be given an overly technical

interpretation, but should be read flexibly to effectuate their remedial purposes. E.g., Herman & MacLean v. Huddleston, 459 U.S. 375, 386-87 (1983); SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 195 (1963). While we agree with appellants that such noble policy goals must be given full play when the statute is ambiguous, we have found no case in which a court has used the remedial policy behind the anti-fraud provisions of the federal securities laws in effect to rewrite an otherwise clear

section of the 1934 Act. See Chiarella v. United States, 445 U.S. 222, 234 (1980) (“the 1934 Act cannot be read ‘more broadly than its language and statutory scheme permit’ ”), quoting SEC v. Sloan, 436 U.S. 103, 116 (1978). In effect, appellants ask us to accelerate the effective date of the 1975 amendment to § 3(a)(9) based on nothing more than the remedial purposes behind § 10(b). We have neither the power nor the inclination to rewrite the federal securities laws.

Finally, we are fortified in our view that the pre-1975 version of the definition of “person” in § 3(a)(9) does not include government entities by the like holdings of every other court that has considered the question. In Re New York City Municipal Securities Litigation, supra; Woods v. Homes & Structures of Pittsburgh, 489 F.Supp. 1270 (D.Kan.1980); In Re Equity Funding Corp., 416 F.Supp. 161 (C.D.Cal.1976); Greenspan v. Crosbie, supra.

In light of this settled case law, the legislative history of the 1933 and 1934 Acts, and the 1975 amendment to § 3(a)(9), we decline appellants’ invitation to hold that Congress did not mean what it said in the originally enacted § 3(a)(9). III. To summarize: We hold that prior to the 1975 amendment to § 3(a)(9) government entities like the City were not within the 1934 Act definition of the term “person”. Therefore, since § 10(

b) only proscribes fraudulent acts committed by “any person”, the City cannot be held liable under § 10(

b) or Rule 10b-5 for the acts alleged in appellants' complaint, all of which were committed pri- or to the effective date of the amendment. Appellants have failed to show that Congress acted inadvertantly when it omitted government entities from the 1934 Act definition of “person”. We therefore affirm the district court’s

summary judgment in favor of the City on appellants’ § 10(

b) and Rule 10b-5 claims. It is for Congress, not this Court, to amend the federal securities laws. In the case of § 3(a)(9), Congress did just that, but only a little too late for appellants. AFFIRMED. . For a more detailed account of the facts underlying this case see SEC v. Senex Corp., 399 F.Supp. 497, 499-502 (E.D.Ky.1975), aff’d, 534 F.2d 1240 (6th Cir.1976). . Because all of appellants’ claims were fully compensated under the court-approved settlement agreements, the disposition of the $150,-000, should appellants prevail on appeal and at a trial on the merits, is somewhat unclear.

It appears from the terms of the settlement agreements that a substantial portion of any additional funds recovered would go to appellants’ counsel as additional fees. . The City has asked that we reach its cross-appeal only in the event we upset the judgment entered below. In view of our decision in the primary appeal we dismiss the cross-appeal without deciding it. . We also affirm the court’s dismissal of appellants’ pendent state law claims against the City. See Aldinger v. Howard, 427 U.S. 1 (1976).