Gustafson v. Alloyd Co., Inc., Fka Alloyd Holdings, Inc.

Summary

The Court, in an opinion by Justice Kennedy, held that a privately negotiated stock purchase agreement is not a prospectus supporting rescission under § 12(2) of the Securities Act of 1933. The term refers to documents describing public offerings by issuers or controlling shareholders, not private or secondary sales. The Court reversed the Court of Appeals and remanded. Justice Thomas, joined by Justices Scalia, Ginsburg, and Breyer, dissented, arguing that the Act’s express definition of prospectus encompasses communications in private and secondary transactions and should control over the majority’s structural and policy reasoning. Justice Ginsburg, joined by Justice Breyer, separately dissented, emphasizing the statutory text, drafting history, and longstanding scholarly and judicial understanding supporting coverage of private resales, and maintaining that any restriction should come from Congress.