WHARF HOLDINGS LTD. v. UNITED INTERNATIONAL HOLDINGS

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Case Basics
Docket No. 
00-347
Petitioner 
Wharf Holdings Ltd.
Respondent 
United International Holdings
Advocates
(Argued the cause for the respondent)
(As amicus curiae, supporting the respondent)
(Argued the cause for the petitioner)
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Facts of the Case 

In return for United International Holdings, Inc.'s assistance in preparing its application, contracts, system, and financing for a cable television system in Hong Kong, Wharf Holdings Ltd. orally granted United an option to buy 10% of stock in the system. The parties never reduced the agreement to writing. Ultimately, Wharf refused to allow United to exercise its option. United then sued Wharf in Federal District Court, claiming that Wharf violated the Securities Exchange Act of 1934, which prohibits using "any manipulative or deceptive device or contrivance...in connection with the purchase or sale of any security." Wharf's internal documents, which suggested that Wharf never intended to carry out its promise, supported United's claim. A jury found in United's favor. The Court of Appeals affirmed.

Question 

Does an oral agreement to grant an option to buy stock, while secretly intending not to honor the option, violate the Securities Exchange Act of 1934?

Conclusion 
Decision: 9 votes for United International Holdings, 0 vote(s) against
Legal provision: Securities Act of 1933, the Securities and Exchange Act of 1934, or the Williams Act

Yes. In a unanimous opinion delivered by Justice Stephen G. Breyer, the Court held that an oral agreement to give an option to buy stock while secretly intending never to honor that option violates the Securities Exchange Act of 1934's prohibition of deceptive devices. Justice Breyer wrote for the Court that there was no "convincing reason to interpret the Act to exclude oral contracts as a class. The Act itself says that it applies to 'any contract' for the purchase or sale of a security."

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WHARF HOLDINGS LTD. v. UNITED INTERNATIONAL HOLDINGS. The Oyez Project at IIT Chicago-Kent College of Law. 25 November 2014. <http://www.oyez.org/cases/2000-2009/2000/2000_00_347>.
WHARF HOLDINGS LTD. v. UNITED INTERNATIONAL HOLDINGS, The Oyez Project at IIT Chicago-Kent College of Law, http://www.oyez.org/cases/2000-2009/2000/2000_00_347 (last visited November 25, 2014).
"WHARF HOLDINGS LTD. v. UNITED INTERNATIONAL HOLDINGS," The Oyez Project at IIT Chicago-Kent College of Law, accessed November 25, 2014, http://www.oyez.org/cases/2000-2009/2000/2000_00_347.