Full opinion text
FRANK A. KAUFMAN, District Judge. Plaintiffs in this case alleged violations of the Securities Act of 1933, 15 U.S.C. §§ 77a-aa, the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a-hh, the Maryland Securities Act, 3 Md.Code Ann. art. 32A, §§ 13-44 (1971 Repl.Vol.), and of common law fraud principles. Defendants denied liability and stated a counterclaim grounded in the 1934 Act and common law fraud. After a lengthy jury trial, 52 questions were submitted, pursuant to Federal Civil Rule 49(a), and answered by the jury. In their totality, those answers clearly added up to entitlement on the part of plaintiffs to judgments in their favor. Defendants have filed under Federal Civil Rule 50 for judgments in their favor in the case-in-ehief and as to their counterclaim, notwithstanding the jury’s answers to the special Rule 49(a) questions. The facts of the case were to some degree stipulated and in other respects highly controverted. In February 1969 negotiations began between Frederick and Benjamin Fox (the “Foxes”) and representatives of Kane Miller Corp. (“K-M”) for the acquisition of three corporations owned by the Foxes (the “Fox Companies”). Those negotiations took place in New York and in Maryland and were conducted both in person and over the telephone. They lasted from February 1969 to May 13, 1969. As indicated infra, there is disagreement about some of the events during those negotiations. At a date subsequent to February 10, 1969 and prior to May 13, 1969, K-M furnished to the Foxes in connection with the negotiations a copy of a K-M prospectus dated February 5, 1969 (the “Prospectus”), which had been drawn up in connection with a secondary offering of $1,750,000 of K-M convertible debentures, 218,750 shares of K-M common stock which were issuable upon conversion of those debentures, and an additional 286,500 shares of K-M common stock. The offerors of the debentures and common stock under the secondary offering were shareholders who had previously acquired such debentures and stock in a separate transaction with KM unrelated to the subsequent negotiations and agreement with the Foxes. The Prospectus was drawn up and filed prior to K-M’s acquisitions of Carolina By-Products Company, Inc. (Carolina), The American Meat Packing Corporation (AMPAC) and R. K. Baking Company, all of which acquisitions occurred after February 5, 1969. Carolina was acquired by K-M on March 26, 1969 for $8,000,000 in cash, a $1,000,000 promissory note and 24,922 shares of K-M common stock. AMPAC was acquired by K-M on April 16, 1969 for $8,500,000 in cash and 35,945 shares of K-M common stock. R. K. Baking Company and its three affiliated companies were acquired by K-M on May 2, 1969 for $700,000 in cash, notes payable over three years in the aggregate amount of $1,437,500, plus the greater of the value of $462,500 in cash or 10,268 shares of K-M common stock, payable in January 1972. Each of the acquisitions made by K-M in the first half of 1969 was immediately publicly announced. News releases were sent to the Wall Street Journal, the various ticker services, and to newspapers in or near communities in which there were situated K-M subsidiaries. Prior to February 1969 K-M had acquired Bayshore Foods, Inc., a small company located only a few miles from the Fox Companies. That apparently kindled local interest and caused a number of those press releases to be printed in the Easton Star Democrat, the only local newspaper, a weekly. On April 2, 1969 the following article appeared in the Easton Star Democrat: KANE-MILLER CORP. has completed an agreement to purchase Carolina By-Products Co., Inc. and affiliates, Greensboro, N. C. Total purchase price will be about $10 million in cash and securities. Acquisition of Carolina By-Products further broadens Kane-Miller’s agribusiness activities and adds another facet to its vertically integrated operations. Carolina By-Products converts animal and poultry materials into ingredients for poultry feed, which ties in directly with BAYSHORE FOODS, INC., the company’s chicken processing subsidiary headquartered in Easton. Kane-Miller last week announced an agreement to purchase FOX FOODS, INC., Queen Anne, a vegetable processor. On April 16, 1969, two issues later, the following article appeared in the Star Democrat (dealing with New York Loin which is not one of the complained of acquisitions): KANE-MILLER CORP. has agreed to purchase New York Loin Corporation and affiliates, New York, Kane-Miller President Daniel Kane announced last week. The contract calls for a down payment of $1.7 million in stock and additional contingency payments of up to $1 million in stock. Kane-Miller Corp., although headquartered in New York City is also a major corporate citizen of the Delmarva Pennisula. Its subsidiaries include BAYSHORE FOODS, INC. at Easton, Shorgood Poultry Co. at Milford, Del., and FOX FOODS, INC. at Queen Anne. On or about May 5, 1969, Frederick Fox received and read several times a copy of the 1968 K-M Annual Report. That report includes, inter alia, the following items: 1. On page 2 of the Report— 2. On page 7 of the Report— 3. On pages 16 and 17 the following K-M Consolidated Balance Sheet appeared— CONSOLIDATED BALANCE SHEET At December 31,1968 and 1967 ASSETS 1968 1967 CURRENT ASSETS Cash ............................................................ $ 2,316,815 $ 1,205,410 Notes and accounts receivable (net of notes receivable discounted of $5,839 and $69,873 and allowance for doubtful accounts of $260,011 and $241,976 for 1968 and 1967 respectively)........................................... 6,840,876 5,372,707 Inventories (note 2)................................................ 12,170,366 9,336,715 Prepaid expenses............................................... 213,642 140,300 TOTAL CURRENT ASSETS........................ 21,541,699 16,055,132 PROPERTY, PLANT AND EQUIPMENT —AT COST Less accumulated depreciation and amortization (notes 3 and 5) ............ 11,101,666 3,243,873 EXCESS OF PURCHASE PRICE OVER BOOK VALUE PAID FOR SUBSIDIARY ACQUISITIONS (NOTE 1)............................. 14,816,589 1,118,831 OTHER ASSETS AND DEFERRED CHARGES Notes and accounts receivable (net of allowance for doubtful accounts of $14,507 and $67,112 for 1968 and 1967 respectively) ............................................ 184,221 157,471 Deferred charges, security deposits, etc.................................. 399,485 518,212 TOTAL OTHER ASSETS AND DEFERRED CHARGES ........ 583,706 675,683 $48,043,660 $21,093,519 The accompanying notes and accountants' opinion are integral parts of this statement. 398 F.Supp — 39V2 LIABILITIES AND SHAREHOLDERS’ EQUITY 1968 1967 CURRENT LIABILITIES Notes — banks 4)............ $ 3,300,002 $ 4,179,998 Current of debt (note 5) 1,779,958 644,468 Accounts payable ........................ 3,624,161 2,665,376 Federal and state Income taxes (note 6)...... 1,654,259 426,717 Accrued expenses and other current liabilities 1,586,369 672,071 TOTAL CURRENT LIABILITIES 11,944,749 8,588,630 LONG-TERM LIABILITIES Long-term debt (note 5)................... 8,234,380 2,653,476 6% Convertible Subordinated Notes due serially to 1982 (note 7).................... 2,050,000 3,750,000 Payments due after one year for subsidiary acquisitions ............................. 412,533 — Other................................... 2,705 8,435 TOTAL LONG-TERM LIABILITIES....... 10,699,618 6,411,911 TOTAL LIABILITIES................... 22,644,367 15,000,541 COMMITMENTS AND CONTINGENCIES (NOTE 8) SHAREHOLDERS’ EQUITY (NOTES 5, 9 AND 10) Common stock par value $1 Authorized 3,000,000 shares; Issued and outstanding, 1,356,398 at December 31,1968 and 583,523 at December 31, 1967 ................. 1,356,398 583,523 Shares to be issued in connection with acquisition (note 9)................................. 684,210 — Paid-in capital ..................................... 18,537,402 2,418,705 Retained earnings................................. 4,821,283 3,090,750 25,399,293 6,092,978 $48,043,660 $21,093,519 The accompanying notes and accountants' opinion are integral parts ot this statement. 4. On page 20 of the Report the following Note to the Balance Sheet appeared— Note 12 — Post Balance Sheet Events On March 26, 1969, the Company acquired all of the outstanding stock of Carolina By-Products Co., Inc. and affiliates. The purchase price consisted of $8,000,000 in cash and a promissory note of $1,000,000 bearing interest at 4% and payable in annual installments of $500,000 each commencing on January 2, 1970. In addition, the Company has agreed to deliver 24,922 shares of its common stock upon the listing thereof. On April 4,1969, the Company agreed to acquire all of the outstanding stock of the New York Loin Corporation and Flavor Peak Meats Corp. and their subsidiaries in exchange for a maximum of 65,350 shares of its common stock, of which approximately 40,000 shares will be delivered on closing. Issuance of the remaining shares is contingent upon future earnings of the companies acquired. The Company has reached an agreement in principal to acquire all of the outstanding stock of Fox Canning Company, Inc., Fox Foods, Inc. and Institutional Foods Corporation in exchange for approximately 25,600 shares of its common stock, of which approximately 14,000 shares will be delivered on closing. Issuance of the remaining shares is contingent upon future earnings of the companies acquired. In March, 1969, the Company arranged interim financing with a group of banks by borrowing $9,000,000 for a period of approximately six months with interest at Vz % above the prime rate. 5. Among the other statements contained in the Report are: (a) “Kane-Miller is a significantly stronger company today that it was a year ago.” (Page 3). (b) “Working capital totaled $9.6 million * * (Page 13). In sum, the 1968 Annual Report disclosed that K-M had made four acquisitions between February 5, 1969 and May 5, 1969, none of which was mentioned in the February 5, 1969 Prospectus. Of the three acquisitons in question in this case, namely, Carolina, AMPAC and R. K. Baking, the 1968 Annual Report con-taned references to the two larger, Carolina and AMPAC, and to the detailed acquisition terms of Carolina. At trial there was conflicting testimony as to what further information, if any, the Foxes received during the February-June 1969 period as to acquisitions by K-M of companies other than the Fox Companies. Daniel and Stanley Kane, the principal executive officers of K-M , and Bruce Slovin, who was Executive Vice-President of K-M during K-M’s 1969 negotiations with the Foxes, all testified that they orally provided the Foxes (particularly Frederick) with complete information as to the details of each acquisition as soon as it took place. They testified that Frederick Fox was particularly eager to find out the financial details of the various acquisitions and was favorably impressed by the effect each had on the overall position of K-M. Frederick Fox, however, testified that he could not recall that he received any information about acquisitions other than that contained in the Report and that in any event any such information did not make much of an impression on him. In particular the Foxes claim that they were not provided with complete information concerning the purchase price of AMPAC and R. K. Baking and they were not informed that those purchases when combined with that of Carolina meant that K-M would have to borrow approximately $15,000,000 in short term funds. Although that debt was refinanced by K-M in December 1969 by an offering of $22,500,000 of long term, 9%% convertible debentures, it is the Foxes’ position that for some period of time in 1969 the liquidity of K-M’s financial position was impaired and that most or all of the decline in value of KM stock since 1969 has been due to KM’s impaired credit position during that period of time. On or about April 7, 1969, K-M prepared the following pro forma balance sheet which projected the effects of the acquisitions of Carolina and AMPAC on the K-M Consolidated Balance Sheet. That pro forma balance sheet was circulated in early March 1969 to certain persons K-M including the banks which loaned the money it used to acquire AMP AC and Carolina, but it was apparently not given to the Foxes: KANE-MILLER CORP. EXPLANATION OF ADJUSTMENTS TO PRO-FORMA CONSOLIDATED BALANCE SHEET DECEMBER 31, 1968 (a) Acquisition of Carolina By-Products Corp. and subsidiaries for $8,000,000 in cash plus $1,000,000 in stock (consummated March 1969). (b) Bank financing obtained March 1969 for Carolina By-Products acquisition ($9,000,000 due in approximately six months) and repayment of Carolina By-Products bank loan. (c) Reclassification of $2,500,000 bank loans being held for take-out by Massachusetts Life Insurance Co. pursuant to Agreement. (d) Proposed acquisition of The American Meat Packing Corporation (Ampac) for $8,500,000 in cash and $1,500,000 in stock. (e) Proposed additional short-term bank financing of $6,500,000 for Ampac acquisition. SUBSEQUENT ADJUSTMENT (f) To reflect proposed public offering to net the Company $17,500,000 before the year-end (tentatively scheduled for September 1969). In May 1969 the Foxes and K-M entered into an agreement (the “Agreement”) dated May 13, 1969 providing for the sale by the Foxes of all of the outstanding stock in the Fox Companies in return for 25,582 shares of K-M common stock, of which 13,954 were to be delivered outright to the Foxes and the remaining 11,628 were to be placed in escrow. The number, if any, of those escrow shares to be transferred outright to the Foxes was contingent upon the future earnings of the Companies. At the same time, Benjamin and Frederick Fox entered into employment contracts with K-M, each of said contracts to run through April 1, 1973, at a salary for each of the Foxes of $25,000 per year. The Agreement was executed on May 13, 1969 and the sale was closed on June 3, 1969 in Easton, Maryland. The K-M stock that the Foxes received on that date bore a legend that it could not be disposed of without a registration statement or an opinion of counsel of K-M that it could be sold without a registration statement. During the latter part of 1970 a dispute arose between K-M and the Foxes as to whether the inventory of the Fox Companies had been misstated at the time of their acquisition by K-M. On December 31, 1970 a settlement agreement (the “Settlement Agreement”) was entered into between the parties. It provided that the Foxes would return half or 6977 of the 13,954 shares of K-M stock they had received outright in June 1969 and that they would give up any rights they might have had in the escrow shares. Furthermore, the employment contracts of Frederick and Benjamin Fox were altered by moving their termination days forward fifteen months from April 1, 1973 to December 31, 1971. The Settlement Agreement specifically provided that it did not constitute an admission of any liability by the Foxes to K-M. Just over five months later, on June 2, 1971, the Foxes brought this action. Plaintiffs’ complaint is stated in nine counts. The defendants, in addition to filing general denials to the complaint, advanced six affirmative defenses and a counterclaim against the Foxes. Count I alleges that K-M violated section 12(2) of the Securities Act of 1933 (“’33 Act”). Counts II and III allege violation of section 17(a) of the ’33 Act. Counts IV and V allege violations of Rule 10b-5 promulgated under section 10(b) of the Securities Exchange Act of 1934 (“’34 Act”). Count VI alleges a common law breach of warranty by K-M of the May 1969 Agreement. Count VII alleges violations of section 34 of the Maryland Securities Act, 3 Md.Ann. Code art. 32A, § 34 (1973 Cum.Supp.). Count VIII alleges that K-M committed common law fraud when it entered into the May 1969 Agreement. Count IX alleges that K-M violated Rule 10b-5 and committed common law fraud in connection with the December 1970 Settlement Agreement. Defendants’ asserted affirmative defenses are failure to state a claim, release, waiver, estoppel, laches and limitations. Defendants’ counterclaim alleges that the Foxes violated Rule 10b-5 and committed common law fraud in connection with the Settlement Agreement. Counts II and III were voluntarily dropped by the Foxes prior to trial. As discussed infra, this Court granted summary judgment for K-M as to Count VI prior to trial. Since the language of section 34 of the Maryland Securities Act is substantially identical to that of section 12(2) of the ’33 Act (except for its provision of attorneys’ fees as part of the recovery), the parties agreed prior to trial that a jury finding of liability or non-liability with respect to Count I would be binding as to Count VII except that the defendants could still raise the affirmative defense to Count VII provided by section 34(f) of the Maryland Securities Act. Because that affirmative defense and Count IX were filed shortly before trial and together raised the possibility that the parties would need or desire to present evidence as to the facts underlying the inventory dispute which was resolved by the December 1970 Settlement Agreement and because neither side sought to rescind that Agreement, the parties and this Court agreed that the issues pertaining to Count IX and the section 34(f) affirmative defense would be separated pursuant to Federal Civil Rule 42(b) from the other triable issues and those two separated issues would be later tried before the same jury empan-elled for the first portion of the trial. The parties and this Court also agreed, pursuant to Federal Civil Rule 42(b), to reserve for subsequent non-jury trial the issue of the amount of counsel fees under Count VII. Thus, the case went to trial before the jury upon (1) Count I — section 12(2); (2) Counts IV and V — Rule 10(b)-5; (3) Count VIII— common law fraud; and (4) the counterclaim. THE WARRANTY CLAIM-COUNT VI Before trial the parties each filed motions for summary and/or partial summary judgment pursuant to Federal Civil Rule 56. All of those motions were denied because of the existence of factual disputes except defendants’ motion relating to Count VI. In that count, the Foxes allege that K-M warranted in the May 13, 1969 Agreement that the February 5, 1969 Prospectus contained all information required to be disclosed therein and that the warranties of K-M were to be true and of the same effect as if they had originally been made at the time of the closing. Sections 3.1 and 6.4 of the May 13th Agreement provide : 3.1 The representations and warranties of Kane-Miller contained herein shall be true and not breached at and as of the time of Closing, with the same effect as though such representations and warranties had been repeated at and as of such time. 6.4 There have been delivered to the Stockholders copies of Kane-Miller’s Prospectus dated February 5, 1969. Such Prospectus contains all information required to be disclosed therein by the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Such Prospectus does not include any untrue statement of a material fact and does not omit to state any material fact so required to be stated therein necessary to make the statement therein not misleading. Section 6.4 sets forth a warranty made by K-M on May 13, 1969 that the Prospectus was accurate as of the date it was dated, namely, February 5, 1969. Section 6.4 contains no warranty by KM that the Prospectus was still accurate on May 13th. Section 3.1 provides that as of June 3, 1969, all warranties in the May 13th Agreement, including that set forth in section 6.4, would remain true. Together they simply provide that on February 5, 1969 the Prospectus contained all required information, etc., and that on May 13, 1969 and June 3, 1969 K-M still believed that on February 5, 1969 the Prospectus contained that information. K-M did not warrant in section 3.1 or section 6.4 or elsewhere in the May 13, 1969 Agreement that the Prospectus gave an accurate picture of K-M as of either May 13th or June 3rd of that year. The May 13th Agreement did not contain any warranty that there had been no adverse changes in K-M’s condition since February 5, 1969 and no such warranty is reasonably inferable from the language of the Agreement including sections 3.1 and 6.4 thereof. Plaintiffs have conceded that the February 5th Prospectus was accurate as of that date. Accordingly, since the May 13th Agreement, and sections 6.4 and 3.1 thereof, warrant nothing more, defendants’ motion for summary judgment as to Count VI, that is, the breach of warranty count, was granted by this Court prior to trial. In passing, it is additionally noted that in the December 31, 1970 Settlement Agreement plaintiffs, in paragraph 4 of that document, agreed to terminate all obligations K-M might have owed them under section 6.4 of the original Agreement and that section 3.1 standing alone without section 6.4 contains no mention of the February 5, 1969 Prospectus. EFFECT OF THE SETTLEMENT AGREEMENT Throughout the entire course of this litigation K-M has continuously asserted that the complaint should be dismissed as stating claims which are within the coverage and the meaning of the December 1970 Settlement Agreement and that that latter document constitutes a final and complete settlement of all claims between K-M and the Foxes growing out of the 1969 transaction. While that might have been a reasonable goal for K-M to pursue at the time the Settlement Agreement was entered into in 1970, and while it is possible, as K-M has asserted, that that is what K-M thought it was obtaining in the Settlement Agreement, the only language in that agreement which releases K-M from any obligations to the Foxes is paragraph 4 which provides as follows: 4. The representations and warranties made by Kane-Miller in Section 6.4 of the Agreement are hereby terminated and of no further force or effect, and Kane-Miller shall have no further obligation to the Stockholders in respect thereof. That language is precise and narrow and speaks for itself. K-M was represented by competent counsel during the period K-M negotiated and then entered into the Settlement Agreement. A party well represented by counsel who signs a carefully worded document offering him a narrow and specific release will not be heard, in the absence of any effort on his part to rescind the document, to say that it was his belief that it was in fact a general release. See generally as to the parole evidence rule and its applicability, 3 A. Corbin, Contracts § 573 et seq. (1960); Restatement of Contracts § 237 (1932); Restatement (Second) of Contracts §§ 239-44 (Tent. Draft No. 6, March 31, 1971); 9 J. Wigmore, Evidence § 2425 et seq. (3d ed. 1940). If the Settlement Agreement constitutes such a general release, evidence thereof must be found in the text of the document itself- — and in this case it is not there to be found. Furthermore, K-M’s explicit and implicit advancement of the affirmative defenses of release, waiver and estoppel must confront the very strong disfavor in which such defenses are held in securities eases. Both the ’33 Act (in § 14, 15 U.S.C. § 77n) and the ’34 Act (in § 29(a), 15 U.S.C. § 78cc(a)) contain very specific anti-waiver clauses as does the Maryland Securities Act (3 Md.Ann. Code art. 32A, § 34(g)). In Wilko v. Swan, 346 U.S. 427, 438, 74 S.Ct. 182, 188, 98 L.Ed. 168 (1953), Mr. Justice Reed wrote, in a 12(2) case, that “[Congress] has enacted the Securities Act to protect the rights of investors and has forbidden a waiver of any of those rights.” While it may be true, as counsel for K-M has argued, that those provisions should not be read as applying literally to releases made after the alleged violation of the law and made as part of the settlement of a valid dispute, nevertheless those provisions dictate a cautious approach to such defenses when they are raised in securities cases. K-M also claims that even if paragraph 4 of the 1970 Settlement Agreement, does not bar the Foxes’ claims herein, those claims are barred by paragraph 1 of the Settlement Agreement which provides in part: * * * It is agreed that the entire consideration which the Stockholders [the Foxes] shall be entitled to retain in exchange for all of the outstanding shares of stock of the Companies shall be 6,977 shares of Kane-Miller common stock * * *. Those words, K-M asserts, prevent the Foxes from pursuing the within action since any recovery in this case by the Foxes would constitute additional “consideration” to them. But paragraph 1 is not phrased in the language of general release. It is directed toward the number of shares of K-M stock the Foxes were to retain after the subtractions negotiated to settle and dispose of the claims made by K-M prior to December 31, 1970 that the Foxes had in the May 13, 1969 Agreement fraudulently misstated the Companies’ inventory. Words of general release are commonly used by attorneys. They were not used in paragraph 1 any more than they were used in paragraph 4 of the Settlement Agreement. In sum, the “release” approach of defendants may not prevail. COUNT I — SECTION 12(2) OF THE ’33 ACT In Count I of the complaint, the Foxes seek damages under section 12(2) of the ’33 Act. At no time has either side sought to rescind the Agreement and return the Fox Companies to the hands of the Foxes and the K-M stock the Foxes hold to K-M. Section 12(2) (15 U.S.C. § 771(2)) provides, in pertinent part, that * * * the person purchasing such security * * * may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security. The Foxes contend that they no longer possess all of the “security” since they returned 6977 shares pursuant to the Settlement Agreement and that in any event the clear import of section 12(2) is that damages should be available if rescission, in a practical sense, is impossible, as the Foxes argue it is in this case because K-M has so changed the Fox Companies as to make them into something far different than they were in June 1969. K-M, while agreeing that rescission is not practically possible, argues that section 12(2) provides no remedy at all for the Foxes because the Foxes still hold the K-M stock. That view expressed by K-M may or may not be correct. See Deckert v. Independence Shares Corp., 311 U.S. 282, 288, 61 S.Ct. 229, 85 L.Ed. 189 (1940); Johns Hopkins University v. Hutton, 297 F.Supp. 1165, 1226 (D.Md.1968), aff’d in part, rev’d in part on other grounds, 422 F.2d 1124 (4th Cir. 1970) (seemingly aff’d, at 1131-32, as to the point of this citation), on remand, 326 F.Supp. 250, 262 (D.Md.1971), aff’d in part, rev’d in part on other grounds, 488 F.2d 912 (4th Cir. 1973); Pfeffer v. Cressaty, 223 F.Supp. 756, 757 (S.D.N.Y.1963). However, in a factual situation in which rescission is either impossible or not practically possible, such a result may perhaps be so harsh as to be untenable within the policy framework of a provision such as section 12(2) in a statute such as the '33 Act. But even if the Foxes may seek relief under 12(2), in the form of “re-scissional” or other damages, they are barred from so doing in this case by section 13 of the '33 Act which provides in pertinent part (15 U.S.C. § 77m): No action shall be maintained to enforce any liability created under section . . . [12(2)] unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence . In Johns Hopkins University v. Hutton, 422 F.2d supra at 1131, Judge Butz-ner commented: * * * But the one-year limitation of Section 13 does not depend wholly on the subjective judgment of the buyer. Instead it must be tested by the objective standard of reasonable diligence on the part of the buyer in making discovery. * * * Had Hopkins compared all the experts’ reports, which it had a right to do under the terms of the production payment, it could readily have discovered the untrue statements and the omissions about which it now complains. In this case the misrepresentations and omissions that the Foxes are complaining about are related to the acquisitions made between February 1969 and May 13, 1969 and the effect that those acquisitions had upon the K-M balance sheet and consequently upon the value of K-M stock. For purposes of liability under section 12(2) the key question is what knowledge did the Foxes have, or what knowledge should the Foxes have had, about those facts on or before June 2, 1970, one year before this action was instituted on June 2,1971. The 1968 Annual Report of K-M which Frederick Fox read several times on or before May 5, 1969 refers to the acquisitions of Carolina and AMPAC and also contains the details as to the acquisition price of Carolina. On June 20 and 21, 1969 a K-M corporate management meeting was held in Maryland. Both Frederick and Benjamin Fox attended that meeting as did four officers of AMPAC, four officers of Carolina and two officers of R.K. Baking. Each person attending that meeting was publicly introduced by name by Bruce Slovin to all of those present and a picture of all of those present was distributed to all those present. At that time a copy of the 1969 K-M First Quarter Report was distributed to all of those present. On the third page of that Report, under the heading “Five firms become subsidiaries”, AMPAC, Carolina, R.K. Baking, New York Loin and the Fox Companies are listed. Accordingly, the Foxes either had knowledge or should have had knowledge by the exercise of reasonable diligence of all the acquisitions by June 21, 1969. In a letter dated May 9, 1970, and sent to Daniel Kane, Frederick Fox made the following statement: I certainly am proud of that annual report which just came out. It was extremely well done .... That report, the 1969 K-M Annual Report, contains on pages 16-22 a detailed and concededly accurate K-M balance sheet as of December 31, 1969. In his testimony at trial, Frederick Fox emphasized the care and attention with which he read the February 5, 1969 Prospectus balance sheet during the negotiations leading up to the acquisition of the Companies. Although he denied on the stand that he read any later balance sheet with anything like the attention he gave to the one in that Prospectus, he should have had, with the exercise of reasonable diligence, considerable knowledge of K-M’s financial position as of December 31, 1969. The balance sheet as of that date indicates in several places the complained about acquisitions and in Note 6 on Page 19 gives details of the $22,500,000 offering of 9%% convertible debentures which K-M made in December 1969 in part to pay off the short term notes used by it to acquire AMPAC and Carolina. Between June 9, 1969 and May 1, 1970, K-M sent the Foxes no fewer than ten copies of drafts of prospectuses and registration statements. Although Frederick Fox has testified that he only read the portion of each one that dealt specifically with the Fox Companies and did not read any other portions of it, each of those documents contained true and accurate pictures of the financial condition of K-M as of the date they were printed. There was undisputed evidence that the Foxes received a copy of the K-M Preliminary Prospectus dated June 30, 1969 sometime during July 1969. On pages 627-628 of that document, the same page at which details are stated about the acquisition of the Fox Companies, details of the acquisitions of Carolina, AMPAC and R. K. Baking are given with accurate dollar figures for the amounts of cash, notes and stock paid for each. That prospectus also in-eludes a March 1969 pro forma balance sheet which reflected the acquisition of Carolina and AMPAC. The Foxes claim that they were unaware until January 1971 of the details of the acquisitions of those three companies and the effect those acquisitions had upon the overall financial picture of K-M. But at least five months before the end of the year 1969, the Foxes had in their possession documents which set forth the details of those acquisitions. The major, if not sole effect, of those acquisitions of which the Foxes complain is the substantial decline in the market value of K-M stock which they assert (and K-M denies) was caused by the market’s recognition of the allegedly adversely altered financial picture of K-M after the latter made the three acquisitions. By June 1970, K-M stock had fallen from the high of over 50 which it reached near the beginning of 1969 to under 15. It is hard for this Court to believe, despite the jury’s answers to the special questions put to it, that the Foxes were unaware of the precipitous decline in the value of the stock which was the entire return received by them for the sale of their family business — a business which constituted their major asset — and that at the same time the Foxes failed to read with some degree of care the information set forth in documents handed or otherwise available to them relating to K-M’s then current financial condition. But in any event, even if the Foxes did not themselves actually know of the same on or before June 2, 1970, the Foxes, in the exercise of reasonable diligence, should have discovered, on or before that date, what the jury in this case has found to constitute material untrue statements and omissions relative to the 1969 transaction. It therefore follows that even if the Foxes may seek damages in a 12(2) action, notwithstanding their continued ownership of K-M shares, they are barred from successfully so doing by the one-year limitations provision of section 13. In their answers to Questions VIII through XI of the Special Jury Questions, the members of the jury found that the Foxes neither knew nor, by the exercise of reasonable diligence or care, should have known of the untruths or omissions complained of herein before June 8, 1970. To the extent that those answers are inconsistent with this Court’s conclusions as stated supra, this Court holds that those answers by the jury are totally without support in the record. While Frederick Fox did testify that he did not know of the untruths or omissions, and there thus was evidence from which the jury could find actual lack of knowledge by plaintiffs, the record establishes that the Foxes with the exercise of reasonable diligence and due care should have known of the same. In that last regard, not only did plaintiffs fail to establish by a preponderance of the evidence that they should not have so known, but defendants established the contrary by clear and convincing evidence if not beyond a reasonable doubt. In point of fact, there was not sufficient evidence to go to the jury on that issue, in the face of a motion for a directed verdict by defendants. However, nevertheless, this Court allowed that question to go to the jury and submitted the question to the jury “subject to a later determination” in a judgment-notwithstanding-the-verdict context as provided in Federal Civil Rule 50(b) in line with Judge Craven’s strong suggestion in Phoenix Savings & Loan v. Aetna Casualty & Sur. Co., 427 F.2d 862 (4th Cir. 1970). Therein, Judge Craven wrote (at 873-74): * * * Indeed, we note in passing that it is frequently the better practice, where all of the evidence has been presented to the jury and at the close of the evidence a motion for directed verdict is made, for the trial judge to reserve ruling on that motion until the jury has reached a verdict. Should it then be deemed necessary to grant the motion, the jury verdict can be reinstated without the necessity of costly retrial if, on appeal, the directed verdict or judgment notwithstanding the verdict be found in error. * * * COUNT VII — SECTION U OF THE MARYLAND SECURITIES ACT —AND COUNT IX As discussed supra, the parties and this Court have agreed, prior to trial, that the language of sections 34(a) (2) and (g) of the Maryland Securities Act and sections 12(2) and 13 of the ’33 Act are substantially identical and that a finding of liability vel non as to one of them would be a finding as to the other (subject to the affirmative defense found in section 34(f) of the Maryland Act). Therefore, since this Court has held supra that section 13 offers a complete defense to Count I, which alleges a violation of section 12(2), this Court also holds that section 34(g) offers a complete defense to that count based on the Maryland Act, namely, Count VII. Consequently, there is no need for this Court to confront the issue of the meaning or possible application of section 34(f) of the Maryland Act. Nor is there any need for this Court to hold at this time a non-jury trial in order to determine the amount of counsel fees the Foxes would be entitled to receive under Count VII if they had been successful in establishing liability under that count. Of course, if this Court is in error as to Count VII, a jury trial as to the 34(g) question and a non-jury trial as to the counsel fee issue would seemingly be required upon remand. After the jury verdict, counsel for the Foxes informed this Court that the Foxes had decided not to press Count IX which raised the only issue, other than that presented by the section 34(g) defense to Count VII, which had been reserved for the second or bifurcated portion of the jury trial. Further, counsel for both sides agreed after trial that neither side desired at this time to make any further presentation of evidence to or to seek any further determination by the jury which served in this case. In that connection both sides understand and agree that if an appeal taken herein by one or both sides should result in a remand, which in turn should require trial of the 34(g) affirmative defense issue, a jury other than the jury which returned the answers to the 52 Special Questions in this case would need to be empanelled to answer such questions as are put to the jury in a further trial. RESCISSIONAL DAMAGES UNDER RULE 10b-5 Plaintiffs seek “rescissional damages” under Counts IV and V pursuant to section 10(b) of the ’34 Act and Rule 10b-5. The doctrine of “rescissional damages” seems to have originated, at least in 10b-5 law, with the decision in Myzel v. Fields, 386 F.2d 718 (8th Cir. 1967), cert. denied, 390 U.S. 951, 88 S.Ct. 1043, 19 L.Ed.2d 1143 (1968), in which (at 741) Judge Lay held: * * * [I]n an action at law a jury may award recisional damages if the contract has already been mutually rescinded or is otherwise set aside by law. * * * Judge Lay noted (at 742) that section 29(b) of the ’34 Act automatically voids a sale once a violation of Rule 10b-5 has been found and that therefore a plaintiff who has established such a violation is entitled to seek money damages equivalent to restitution of what he has sold. In Baumel v. Rosen, 412 F.2d 571 (4th Cir. 1969), cert. denied, 396 U.S. 1037, 90 S.Ct. 681, 24 L.Ed.2d 681 (1970), in the course of consideration of the remedy of rescission in a 10b-5 case, Judge Bryan wrote (at 574-75) : * * * Rescission is a radical move, and the law exacts the election of that course to be asserted without wait. The demand is that advice of the determination be given within a reasonable time after discovery of the ground for rescission. This principle is stringently administered. Reasonable time is inceptive from the receipt by the rescinder of word putting him on notice. It is then incumbent upon him to pick up the scent and nose to the source. * * * If the quest confirms the suspicion, then he must make decision with reasonable dispatch. Failing this, entitlement to rescission disappears. ****** Further rationale for the requirement of immediacy is that every day’s lapse renders more difficult the very aim of rescission: to return the parties to statu quo ante. That obviously is well exampled here. [Citation omitted.] In Johns Hopkins University v. Hutton, 488 F.2d supra at 917, Judge Field quoted from the above language from Baumel and stated that “it was not any unique factual contours of Baumel which provoked Judge Bryan to state the principle which we find applicable to the present case:”, namely, that in order to obtain rescission in a 10b-5 action the plaintiff must act with all reasonable dispatch after he either has actual knowledge of the fraud or notice of facts which, in the exercise of due diligence, should lead him to acquire knowledge thereof. Herein, since, as discussed supra in relation to plaintiffs’ 12(2) cause of action, the Foxes should have had knowledge of the untruths or omissions at least one year before they instituted the within suit on June 2, 1971, the Foxes did not thereby act with “reasonable dispatch”. Thus, they are not entitled to obtain either rescission or rescissional damages assuming the doctrine of “rescissional damages” to be applicable and assuming one or both of those remedies to be otherwise available to plaintiffs. Special Question XXVII put to the jury read: Have plaintiffs, after they had, or should reasonably have had, information which should have led them to seek to discover whether a defendant made any untrue statement of material fact or omitted to make any statement of material fact, made, with all reasonable promptness, all reasonable efforts to discover detailed information concerning the same and thereafter to institute this suit as promptly as practically possible ? The jury answered in the affirmative. But that answer is totally without support in the record. Once again, while there was not sufficient evidence to go to the jury on that point, this Court submitted the same to the jury on the basis of the above referred to Phoenix approach. However, the state of the evidence now requires, and this Court at this time grants a judgment notwithstanding the answer to Question XXVII and hereby answers that question in the negative. Accordingly, plaintiffs may not obtain rescissional damages under Counts IV and/or V, even “if the contract [of May 1969] has already been mutually rescinded” (which is not the case) or even if the contract [of May 1969] is otherwise set aside by law” (which would also appear not to be the case). See the above-quoted language from Myzel v. Fields, supra at 741. COUNTERCLAIM Without waiving their affirmative defenses of release, waiver and estoppel based upon the December 1970 Settlement Agreement, defendants stated their counterclaim based upon the grounds that, at the time the Foxes entered into the Settlement Agreement with K-M, the Foxes had already determined to file the within type of suit, that that determination to sue was a material fact to K-M in the context of K-M’s taking from and receiving back K-M stock from the Foxes, i. e., that such taking from and receiving back by K-M was the same in legal effect as a purchase by K-M of its own stock from the Foxes, that the Foxes’ intent to sue was a fact material and adverse to K-M and therefore to the then value of each of K-M’s shares of stock, and that therefore the Foxes omitted to reveal to K-M a material fact when the December 1970 Settlement Agreement was negotiated and consummated. Put another way, K-M contends that the Foxes’ said alleged failure to disclose their then existing intention to sue K-M caused K-M to settle the inventory dispute for less than K-M would have demanded if K-M had known of that intention to sue. Additionally, K-M argues that if it had known of the Foxes’ intention to sue, KM would not have settled the inventory dispute for less than a complete release. K-M seeks as damages under its counterclaim the total of any judgment awarded against K-M in the case in chief brought by the Foxes plus K-M’s legal fees incurred in defending this case. In support of its counterclaim, K-M offered evidence which showed that in September 1970 a suit had been initiated against K-M in the United States District Court for the Western District of Pennsylvania, Dwyer et al. v. Kane-Miller Corp., C.A. 60-70 Erie (W.D.Pa. February 2, 1973), aff’d, 487 F.2d 1394 (3d Cir. 1973). That suit was brought by the former owners of the Firch group of companies which had been acquired by K-M during the latter part of June 1969, within one month after the Fox acquisition. K-M offered evidence at trial which tended to show that the complaint filed in the Dwyer ease resembled very closely the original complaint brought in this action. The jury in this case was informed that the Dwyer case had been brought and that it had been brought under circumstances somewhat similar to those in this case, but the jury was not informed that K-M obtained a defendant’s judgment in the Dwyer case after the within case was instituted by the Foxes since this Court tentatively expressed the belief before trial, and concluded during trial, that while the fact of that result might well be relevant and material herein, the jury’s knowledge of that result might also, on balance, have unduly prejudiced the right of the Foxes to have the instant litigation determined on its own facts. Even assuming that the legal theory upon which K-M’s counterclaim is based supports a 10b-5 or a common law fraud action, the jury’s answers to Special Questions XXXII and XXXIII, in which answers it found that K-M had failed to establish that the Foxes, in the period leading up to and including the date the Settlement Agreement was entered into, either made any untrue statement of material fact or omitted to make any necessary statements about any material facts to K-M, are substantially supported by evidence in the case. Accordingly, the Foxes are entitled to judgment as to the counterclaim in both the 10b-5 and common law fraud contexts in which the counterclaim is stated. THE SLOVIN — LOEBER LANDAU LETTER On March 26, 1969 Andrew Heine, a partner in the law firm that handled K-M's legal affairs, telephoned David Berliner of the Securities and Exchange Commission in Washington, D. C. and inquired about the effect that the acquisition of Carolina would have on the outstanding registration statement pursuant to which shares of K-M were being sold in a secondary distribution by a group of K-M shareholders (the February 5th Prospectus was drawn up for that offering). Berliner informed Heine that Carolina was a material acquisition and consequently no shares covered by that registration statement could be offered for sale until the registration statement was amended. That understanding was confirmed by a letter from Heine to Berliner dated March 26, 1969. Heine then informed Bruce Slov-in of K-M of that information. The next day Slovin wrote to W. Loe-ber Landau of the law firm which was acting as counsel for the selling shareholders who were covered by the registration statement. That letter was also sent to fourteen people and institutions which were participating in the secondary offering. It was not sent to the Foxes. The relevant parts of that letter are appended in the margin. The question arose before and during trial as to whether plaintiffs should be permitted to introduce the letters into evidence. K-M contended that since the letters referred to shares which were not used by K-M to acquire the Fox Companies, the letters were irrelevant. Moreover, K-M complained of alleged prejudicial effect upon the jury if its members learned that the Securities and Exchange Commission, a government agency, felt that the February 5, 1969 Prospectus, a copy of which had been furnished to the Foxes, was apparently deemed not up to date during the period K-M negotiated with the Foxes. By way of contrast, the Foxes contended that the letters were relevant because the Berliner letter was evidence that KM had been put on notice that the Carolina acquisition was a material change and therefore, seemingly, one about which K-M should have informed the Foxes (which of course K-M contends it did), and because the Berliner letter stands as evidence that K-M itself was on notice on March 26, 1969 that the Prospectus was not at that date an entirely accurate picture of K-M’s then current financial affairs. K-M’s counsel informed this Court that in the Dwyer case Judge Joseph P. Willson refused to admit the letters into evidence. However, in the context of this case, this Court determined that the Foxes’ reasons in favor of admissibility were persuasive — and accordingly held the two letters relevant and admissible. Because, however, of the possible prejudicial effect of the letters against the defendants, the two letters were admitted into evidence with cautionary remarks made by this Court to the jury, which contained the following statement : You are informed that the parties agree that Kane-Miller Corp. and its attorneys handled the discussions with the SEC and the information forwarded to Mr. Landau strictly in accordance with applicable law and regulations. The said two exhibits are of relevance in this case only to the extent that they bear upon the materiality of the acquisitions referred to in the said two letters and disclosure of material information by Kane-Miller Corp. and the other defendants to the Foxes. Counsel on both sides and this Court agree that there is no basis for any inference of wrongdoing in those letters or in the conversations between Mr. Heine and Mr. Berliner and that that matter was handled by Kane-Miller Corporation and its attorneys in accordance with law and regulations. While consenting to the language used in that mid-trial cautionary instruction to the jury, K-M did not waive its objection to the admissibility of the Loe-ber Landau letter or any reference to it by counsel for the Foxes. That objection was thus preserved for possible appeal. In the opinion of this Court, with the cautionary remarks to the jury quoted supra, the probative value of the Loe-ber Landau letter was not “substantially outweighed by the danger of unfair prejudice,” and in the exercise of a trial court’s discretion as to relevancy of proof and extent of prejudice, both the Loeber Landau and the Heine letters were properly admitted into evidence. COUNT VIII — COMMON LAW FRAUD Count VIII of the complaint alleges that K-M committed common law fraud against the Foxes in connection with the May 1969 Agreement. While the burden of proof, i. e., clear and convincing evidence, see Peurifoy v. Congressional Motors, Inc., 254 Md. 501, 517, 255 A.2d 332 (1969), and the elements which must be established in a common law fraud action may in many respects place a heavier duty on a plaintiff therein than in actions grounded in some of the provisions of the ’33 and ’34 Acts, the possibility that the applicable limitations period in such a fraud action might be a longer period than the period applicable in actions brought pursuant to those statutory provisions seemingly caused plaintiffs to press their common law fraud complaint. In that connection, it is to be noted that the general three-year limitations period in Maryland includes actions of fraud, Md. Ann.Code, Cts. & Jud.Proc. § 5-101 (1974), whereas, as discussed supra, the applicable limitations period in a 12(2) action is clearly shorter, and as discussed infra, the applicable period in a 10b-5 action might be shorter. An issue such as common law fraud presents a question which is to be determined by applicable state law, Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), in this case either Maryland or New York law. The parties have agreed that the applicable legal principles developed by the courts of those two states do not materially differ and that the Maryland decisions fairly reflect those principles. In Casale v. Dooner Laboratories, Inc., 503 F.2d 303 (4th Cir. 1973), Judge Craven wrote: Under the law of Maryland, the elements of actionable fraud are these: (1) a false representation, (2) knowledge of its falsity or such reckless indifference to truth so as to impute knowledge, (3) that the false representation was made for the purpose of defrauding another, (4) that the other person relied upon the misrepresentation, had the right to rely upon it, believed it to be true, and embarked upon a course of conduct he would not have chosen but for the misrepresentation, and (5) damage directly resulting from the false representation. James v. Goldberg, 256 Md. 520, 261 A.2d 753, 758 (1970); Appel v. Hup-field, 198 Md. 374, 84 A.2d 94, 95-96 (1951). In Canatella v. Davis, 264 Md. 190, 198, 286 A.2d 122, 126 (1972), Judge Smith commented: The criteria for recovery in an action of deceit were set forth by Judge Marbury for the Court in Suburban Properties Mgmt. Inc. v. Johnson, 236 Md. 455, 204 A.2d 326 (1964): “The elements of legal fraud are: (1) that a representation made by a party was false; (2) that either its falsity was known to that party or the misrepresentation was made with such reckless indifference to truth to impute knowledge to him; (3) that the misrepresentation was made for the purpose of defrauding some other person; (4) that that person not only relied upon the misrepresentation but had the right to rely upon it with full belief of its truth, and that he would not have done the thing from which damage resulted if it had not been made; and (5) that that person suffered damage directly resulting from the misrepresentation. It appears that a fraud action, grounded entirely on non-disclosure, may well exist in Maryland. * * * This evidence was properly submitted to the jury so that it could consider whether appellant intentionally concealed material facts in order to obtain appellee’s money. Where such concealment effectively suppresses material facts with the object of creating or continuing a false impression, a cause of action based on fraud may arise. Fegeas v. Sherrill, 218 Md. 472, 147 A.2d 223 (1958). Levin v. Singer, 227 Md. 47, 64, 175 A.2d 423 (1961). The jury’s answers in the affirmative to Questions XXII through XXVI in and of themselves support a judgment against K-M based on common law fraud committed by intentional concealment of a material fact. Those questions asked the jury to find whether the Foxes had “established by clear and convincing evidence” that: (1) K-M “omitted to make [a] statement of material fact in writing or orally to [the Foxes] for the purpose of defrauding [them]” and (2) whether the Foxes “fully believed that complete disclosure had been made to them and that they would not have entered into the transaction in the manner in which they did if they had known of such omission of material fact”. The parties have stipulated, and it would appear to be legally correct in the factual context of this case, that the measure of damages for recovery under the Rule 10b-5 action and the common law fraud action are substantially the same. Accordingly, any recovery under Count VIII, the fraud count in this case, is the same as under Counts IV and V, the 10b-5 counts. Since, as set forth infra, the Foxes are entitled to judgment under Counts IV and V, i.e., their 10b-5 actions, the entry or non-entry for them of judgment under Count VIII is of little import. Nevertheless, while this Court, sitting non-jury, would not as a fact-finder have answered Questions XXII and XXVI in the affirmative in the context of the clear and convincing burden of proof embodied therein, the record contains sufficient evidence for the jury so to conclude if its members totally accepted the credibility and the reliability of the testimony of Frederick Fox and other plaintiffs’ evidence and totally rejected that of the Kanes, Slovin and other defendants’ evidence. LIMITATIONS IN AND ELEMENTS OF A 10b — 5 ACTION There is no limitations period provided by federal statute as to civil liability under Rule 10b-5. Indeed, that liability itself is not provided explicitly by statute but rather has been judicially implied from the Rule. That lack of a limitations period is to be contrasted with the very explicit limitations period provision for civil liability under section 12(2) of the ’33 Act as set forth in section 13 of that Act and discussed supra. The Foxes instituted this case on June 2, 1971 against Kane-Miller Corp. and on July 22, 1971 added by amending their complaint under Federal Civil Rule 15, the individual defendants. As related supra, all relevant events occurred less than three years before either of those dates, but more than one year before both of those dates, and some of them occurred more than two years before one or both of those dates. Limitations is a defense cautiously to be applied. See, e.g., Burnett v. N. Y. Central R. Co., 380 U.S. 424, 428, 85 S.Ct. 1050, 13 L.Ed.2d 941 (1965). The ’34 Act — and Rule 10b-5 of it — constitute remedial legislation, liberally to be construed. Tcherepnin v. Knight, 389 U.S. 332, 336, 88 S.Ct. 548, 19 L.Ed.2d 564 (1967); SEC v. Capital Gains Research Bureau, 375 U.S. 180, 186, 84 S.Ct. 275, 11 L.Ed.2d 237 (1963); Herpich v. Wallace, 430 F.2d 792, 801 (5th Cir. 1970). “[T]he broad remedial policies of the federal securities laws are best served by a longer, not a shorter, statute of limitation.” (Footnotes omitted.) United California Bank v. Salik, 481 F.2d 1012, 1015 (9th Cir. 1973), cert. denied, 414 U.S. 1004, 94 S.Ct. 361, 38 L.Ed.2d 240 (1974). Further, with specific reference to 10b-5 actions, they occupy, insofar as the elements of the case, and also a plaintiff’s burden of proof are concerned, an intermediate position between common law fraud and the all but strict liability provisions of section 12(2). Thus, a 10b-5 plaintiff need not make out all of the elements of common law fraud to recover in a 10b-5 case. Kubik v. Goldfield, 479 F.2d 472, 476 n.6 (3d Cir. 1973); SEC v. Manor Nursing Centers, Inc., 458 F.2d 1082, 1096 (2d Cir. 1972); Douglass v. Glenn E. Hinton Investments, 440 F.2d 912, 915 (9th Cir. 1971). On the other hand, while a 12(2) defendant must prove he did not have, and should not reasonably have had, scienter, a 10b-5 plaintiff must make a showing of something resembling traditional scienter by the defendant before he can recover. Moreover, a 12(2) plaintiff, as opposed to a 10b-5 plaintiff, need not prove any reliance. Compare Johns Hopkins University v. Hutton, 422 F.2d 1124, 1129 (4th Cir. 1970), with Johns Hopkins University v. Hutton, 488 F.2d 912, 914-15 (4th Cir. 1973), and Baumel v. Rosen, 283 F.Supp. 128, 140 (D.Md. 1968) (Winter, J., sitting by designation as a district judge), aff’d in part and rev’d in part on other grounds, 412 F.2d 571 (4th Cir. 1969) (seemingly aff’d, at 573, as to the point of this citation), cert. denied, 396 U.S. 1037, 90 S.Ct. 681, 24 L.Ed.2d 681 (1970). See also Johns Hopkins University v. Hutton, 297 F.Supp. 1165, 1222-23 (D.Md.1968), aff’d in part and rev’d in part on other grounds, 422 F.2d 1124 (4th Cir. 1970), and compare it with 326 F.Supp. 250, 257-60 (D.Md.1971), aff’d in part and rev’d in part, 488 F.2d 912 (4th Cir. 1973). Additionally, see Affiliated Ute Citizens v. United States, 406 U.S. 128, 153-54, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972); Note, The Reliance Requirement in Private Actions Under SEC Rule 10b-5, 88 Harv.L.Rev. 584 (1975). However, in a non-disclosure case such as the within case, given the inherent difficulty in proving reliance on the negative of an omitted statement, the role of reliance may be a limited one. See Carras et al. v. Burns et al., 516 F.2d 251, 257 (4th Cir. 1975); 2 A. Brom-berg, Securities Law: Fraud: Sec. Rule 10b-5 § 8.6 at 209 (1967); Note, 88 Harv.L.Rev. supra at 590-92. In any event, against that background, it is certainly arguable that a 10b-5 plaintiff who is required to prove more than a 12 (2) pl