The opinion of the court was delivered by: CONLON
SUZANNE B. CONLON, UNITED STATES DISTRICT JUDGE
In this securities fraud action, third-party defendant Steiner Diamond & Company, Inc. ("Steiner Diamond") moves the court to enter judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c).
Plaintiffs purchased stock of Doctors Officenters Corporation ("DOC") in a public offering on December 7, 1983. Plaintiffs sued defendants DOC, the Flashner Medical Partnership, Bruce Flashner, Ronald van der Horst, Lawrence Levy, Sherry Dolce, David Turner and David Shevitz. A second lawsuit added the law firm of Katten Muchin & Zavis as a defendant (collectively "defendants"). In each suit, plaintiffs state identical claims of common law fraud and violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) ("Section 10(b)") and Rule 10b-5.
Steiner Diamond now moves for judgment on the pleadings under Fed.R.Civ.P. 12(c). Steiner Diamond argues that the third-party complaint does not state a claim upon which relief can be granted. Under Fed.R.Civ.P. 12(h)(2), the defense of failure to state a claim on which relief can be granted may be raised in a motion for judgment on the pleadings. In this context, Fed.R.Civ.P. 12(c) merely serves as an auxiliary device for presenting a Fed.R.Civ.P. 12(b) motion after the close of the pleadings. Wright & Miller, Federal Practice and Procedure, Civil § 1367, p. 688 (1969). Steiner Diamond's motion will be treated as a Fed.R.Civ.P. 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted. As such, Steiner Diamond's motion may be viewed as a motion to reconsider the decision issued on December 12, 1988.
II. Contribution Under Rule 10b-5
Contribution is a remedy that "distributes the amount of damage sustained by the victim of a tort among the tort-feasors by requiring each to contribute proportionately to the total damages assessed." Heizer Corp. v. Ross, 601 F.2d 330, 331 (7th Cir. 1979). Steiner Diamond contends that contribution is not available under Rule 10b-5. The Supreme Court has implied a private right of action under Rule 10b-5. See, e.g., Santa Fe v. Green, 430 U.S. 462, 477, 97 S. Ct. 1292, 1303, 51 L. Ed. 2d 480 (1977). The question remains whether that implied right of action includes contribution or a separate right of contribution must be implied.
In Cort v. Ash, 422 U.S. 66, 78, 95 S. Ct. 2080, 2088, 45 L. Ed. 2d 26 (1975), the Supreme Court specified a four-part test to determine whether a private right of action should be implied from a statute:
First, is the plaintiff "one of the class for whose especial benefit the statute was enacted". . . .? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law?
The Supreme Court has given an increasingly restrictive reading to the Cort test. Illinois Health Care Ass'n v. Suter, 719 F. Supp. 1419, 1423 (N.D.Ill. 1989).
Once a court has implied a private right of action, the court has broad "flexibility and discretion" in determining the remedies available under that cause of action. King v. Gibbs, 876 F.2d 1275, 1279 (7th Cir. 1989) citing Schneider, Implying Rights and Remedies Under the Federal Securities Laws, 62 N.C.L.Rev. 853, 858-59 (1984). However, when the remedy creates independent substantive rights, the court must apply the same standard used to imply any other private right of action. King at 1280. In King, the court determined that a right to indemnification under Rule 10b-5 was a substantive right:
This broad "flexibility and discretion" assumes, though, that the remedy is simply implied and does not create any independent substantive rights. However, an implied right to indemnification would not simply be an adjunct to the § 10(b) and Rule 10b-5 cause of action but rather serve as a source of independent substantive rights. For example, implying a right to indemnification would necessarily expand the category of possible plaintiffs to include parties who neither purchased nor sold securities, a requirement of Rule 10b-5 actions. Also the implication of a right to indemnification, unlike the addition of a new remedy such as rescission or punitive damages, would give the court subject matter jurisdiction it would not otherwise have. Thus, because recognizing indemnification would give plaintiffs additional substantive rights, we believe the standard for creation of the cause of action should ...