Does Illinois Permit Lawsuits By Those Who Merely "Hold" Securities?

The United States Supreme Court in Blue Chip Stamps v. Manor Drugstores, 421 U.S. 723 (1975) held that investors injured by fraud may recover under the Federal Securities Law only if the deceit caused them to purchase or sell securities. In the Blue Chips case, the Supreme Court stated that states may supply the remedy when Federal Law does not. California has done so. It authorizes “holder actions” which are suits by investors who contend that the fraud caused them to hold their shares when they would have sold them had they known the truth. See, Small v. Fritz Companies, Inc., 30 Cal. 4th 167 (2003).

Plaintiff, Anderson, the holder of about 95,000 shares of Aon Corporation claimed in a U.S. District Court case that he would have sold his stock in Aon if he known earlier of fraud by the Company. When the financial information was discovered the stock dropped from about $69.00 a share to about $14 a share. Anderson’s claim was under the Illinois Securities Law and the District Judge held that the Illinois law supplies the rule of decision. Securities law in Illinois tracks federal law when the statutes use the same language, see Tirapelli v. Advanced Equities, Inc., 351 Ill.App. 3d 450, 455, 813 N.E. 2d 1138, 1142 (2004), which means that Illinois may follow the purchaser-seller rule of Blue Chip Stamps. The District Court concluded that the Plaintiff does not have a claim under Illinois law.

The Seventh Circuit in Anderson v. Aon Corporation, No. 09-1144 decided July 26, 2010, after sorting out various procedural maneuvers by plaintiff, in effect held that it was not clear if Illinois will permit holder actions, but it reversed the District Court that had dismissed Plaintiff’s complaint and remanded so that Plaintiff could pursue his claim.

Does Plaintiff have a holder claim under Illinois law? The final determination of this issue will await a trial.