ERNST AND ERNST v. HOCHFELDER 425 U.S. 185 (1976) CASE BRIEF

ERNST & ERNST V. HOCHFELDER

425 U.S. 185 (1976)

NATURE OF THE CASE: Action for damages under SEC Rule 10b-5.

FACTS: Hochfelder (P), a customer of First Securities Company of Chicago, lost money investing in a fraudulent scheme perpetrated by the bank's president. P sought damages under a negligence theory against Ernst and Ernst (D) for their failure to discover the scheme after performing an audit of the bank. The district court dismissed the case on the ground that negligence alone was insufficient to maintain a suit under 10b-5. The Court of Appeals reversed.

ISSUE:

RULE OF LAW:

HOLDING AND DECISION:

LEGAL ANALYSIS:

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