Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975) (U.S. Supreme Court)
Blue Chip Stamps v. Manor Drug Stores is a cornerstone Supreme Court decision defining who has standing to bring private damages actions under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.
Whether a private plaintiff who was an offeree but did not purchase securities due to alleged misrepresentations has standing to seek damages under Section 10(b) of the Securities Exchange Act and Rule 10b-5.
In private damages actions under Section 10(b) and Rule 10b-5, standing is limited to actual purchasers or actual sellers of securities. Offerees who did not purchase, would-be sellers who did not sell, and holders who neither purchased nor sold lack standing. This purchaser-seller requirement, known as the Birnbaum rule, is adopted as a categorical threshold for private Rule 10b-5 damages claims.
No. An offeree who did not purchase securities lacks standing to bring a private damages action under Section 10(b) and Rule 10b-5. The Court reversed the Ninth Circuit and reinstated dismissal of the complaint.
Blue Chip Stamps is the leading case on standing in private Rule 10b-5 litigation. It requires law students and practitioners to begin any 10b-5 analysis by asking whether the plaintiff actually purchased or sold a security; if not, the federal private damages claim fails at the threshold. The case also exemplifies how the Court uses policy and institutional competence concerns to cabin implied rights of action, a theme that recurs across federal statutory interpretation. In practice, Blue Chip bars "holder" and "nontransaction" claims under 10b-5, channels some claims to other federal or state remedies, and continues to operate alongside later developments (e.g., Basic's fraud-on-the-market doctrine) without being displaced as the governing standing rule.