Appellant Overton A. Currie appeals a decision by the district court granting a motion for directed verdict in favor of the Cayman defendants1 in a securities lawsuit. Currie makes three contentions on appeal: (1) that the district court erroneously required appellant to establish reasonable reliance for a claim under section 12(2) of the Securities Act of 1933; (2) that the district court's directed verdict on the other noncontract claims was improper because sufficient evidence of reasonable reliance was presented to survive the motion; and (3) that the district court erroneously dismissed a claim under section 17(a) of the Securities Act of 1933 on the ground that the statute implies no private right of action. Finding that the district court improperly granted the motion for directed verdict with respect to the section 12(2) claim, we affirm in part and reverse in part.

Currie filed this action on August 30, 1982 alleging violations of the Securities Act of 1933, the Securities Exchange Act of 1934, the regulations promulgated under the federal securities statutes by the Securities and Exchange Commission ("SEC"), and various violations of the laws of Georgia and Texas. Currie alleged that the claims are based on his investment in small, independent oil companies represented by the Cayman and RebPet defendants which are involved in the production and sale of hydrocarbon substances. According to appellant's amended complaint, representatives of REB Petroleum Company made several misrepresentations in soliciting Currie's investment in RebPet limited partnerships.2 Currie's investment in RebPet limited partnerships from 1976 to 1981 totaled over $421,913. Currie alleges that he received only $73,413.14 from the partnership, approximately one percent of the return he was promised to receive.

In 1980 the RebPet defendants sought the approval of the limited partners to an agreement substituting Cayman Production Company as the general partner of certain RebPet limited partnerships. The agreement included a plan whereby the limited partners could exchange their limited partnership interests for newly-issued stock in Cayman.3 Currie received a proxy statement and prospectus from Cayman Resources Corporation explaining the exchange offer. Currie alleges that William C. Rankin, vice-president and chief financial officer of Cayman, flew to Atlanta to induce Currie's acceptance of the exchange offer. According to the amended complaint Rankin misrepresented Cayman's assumption of RebPet's liabilities and obligations and the "disadvantages" of not participating in the transaction. Currie also maintains that the Cayman defendants failed to inform him that R.W. McCleskey, the former president of REB Petroleum Company, characterized the transaction as "absurd in its entirety," and that Mr. Abrams, the largest holder of the limited partnership interests, decided not to participate in the transaction.

Currie alleged numerous claims in his complaint. On September 24, 1984 the district court granted defendants' motion to dismiss the claim under section 17(a) of the Securities Act of 1933. 595 F. Supp. 1364. The district court subsequently granted a motion for directed verdict in favor of the Cayman defendants on the remaining issues.4

Currie contends that the district court erred in granting a motion for directed verdict in favor of the Cayman defendants because the district court included reasonable reliance as an element of his section 12(2) claim.5 In its order granting the motion for directed verdict, the district court stated that "[a] reasonable person, especially an attorney, in the factual context established by this case, would not have relied upon an oral assertion of Mr. Rankin plus the exchange of the Rankin-Currie letters (which do not mention 'assumption') on the legal question of whether the particular liabilities here asserted had been assumed."

We hold that the district court erroneously included reasonable reliance as an element of a claim under section 12(2) of the Securities Act. Under section 12(2) "plaintiffs need not prove that they relied in any way on the alleged misrepresentations or omissions." Hill York Corp. v. American Int'l Franchises, Inc., 448 F.2d 680, 695 (5th Cir.1971); see Sanders v. John Nuveen & Co., Inc., 619 F.2d 1222, 1225 (7th Cir.1980) ("It is well settled that Sec. 12(2) imposes liability without regard to whether the buyer relied on the misrepresentation or omission."), cert. denied, 450 U.S. 1005, 101 S. Ct. 1719, 68 L. Ed. 2d 210 (1981); Gilbert v. Nixon, 429 F.2d 348, 356 (10th Cir.1970); John Hopkins Univ. v. Hutton, 422 F.2d 1124, 1129 (4th Cir.1970). Plaintiffs seeking to recover under section 12(2) must only prove "that the defendants sold or offered to sell these securities by the use of the mails or instruments of transportation or communication in interstate commerce, and that the defendants misrepresented or omitted material facts." Hill York, 448 F.2d at 695; see Junker v. Crory, 650 F.2d 1349, 1359 (5th Cir. Unit A July 1981); Pharo v. Smith, 621 F.2d 656, 665 (5th Cir.1980). In addition plaintiffs must prove that they "had no knowledge of any untruth or omission." Hill York, 448 F.2d at 695.

In this case appellant established the initial elements of a section 12(2) claim through testimony that Rankin traveled to Atlanta to present the exchange offer to Currie. Appellant also submitted sufficient evidence to establish that the Cayman defendants misrepresented and omitted material facts and that Currie had no knowledge of any untruth or omission. On February 11, 1982 Currie told Rankin that he was considering a lawsuit against the RebPet defendants. During the conversation Currie expressed concern over whether Cayman had assumed certain liabilities. According to the testimony at trial, Rankin told Currie that Cayman "had assumed the liability" of the RebPet defendants. In a letter to Bill Woodson, appellant's attorney, dated February 16, 1982 Rankin stated that Cayman's general counsel had agreed that the "acceptance of the offer would not prejudice Mr. Currie's rights." Currie also testified that Rankin made several comments during his February 11 conversation with Currie and Woodson that there would be "disadvantages" to not participating in the exchange offer. Yet Cayman's president, David M. Whitney, testified at trial that "there were no negative consequences to not taking the exchange offer. They were not--their interest should not have changed at all."

Similarly, with respect to the omissions, Currie argues that McCleskey wrote a letter to a Cayman representative, Robert Best, describing the exchange offer as "absurd in its entirety," and yet this letter was not disclosed to Currie. Another alleged omission by the Cayman defendants was the failure to disclose to Currie that Mr. Abrams, the largest limited partner in RebPet, did not participate in the exchange offer.

Section 12(2) applies only to material misrepresentations and omissions. 15 U.S.C. Sec. 77l (2). In TSC Indus. Inc. v. Northway, Inc., 426 U.S. 438, 96 S. Ct. 2126, 48 L. Ed. 2d 757 (1976), the Supreme Court stated that the test of materiality is whether there is a substantial likelihood that a reasonable investor would consider the omitted facts or misrepresentations important in deciding whether to invest. See id. at 449, 96 S.Ct. at 2132; Kennedy v. Tallant, 710 F.2d 711, 719 (11th Cir.1983); SEC v. Carriba Air, Inc., 681 F.2d 1318, 1323 (11th Cir.1982). As the Fifth Circuit warned in Hill York, "[a] causation test should not be read into this Section." 448 F.2d at 696. We believe that each of the alleged misrepresentations and omissions by the Cayman defendants was material.

Appellees argue that even if the Cayman representatives made a misrepresentation, appellant did not establish that he had no knowledge of any untruth because the proxy statement and prospectus mailed to Currie in connection with the exchange offer provided information about which RebPet liabilities were assumed by Cayman. Appellees, however, cannot receive a directed verdict on the basis that the information was hidden in a proxy statement; this presents a question of fact for the jury.6 Because this court must view the evidence in a light most favorable to the nonmoving party, Boeing Co. v. Shipman, 411 F.2d 365, 374 (5th Cir.1969), we conclude that a jury may have drawn a rational inference in favor of Currie and that the district court inappropriately granted the motion for directed verdict.B.

Appellant argues that the district court erroneously dismissed count three of his amended complaint, which sought damages for an alleged violation of section 17(a) of the Securities Act of 1933.7 The district court dismissed the claim on the ground that no implied private cause of action exists under section 17(a). Although some circuits hold that section 17(a) implies a private right of action,8 the better reasoned authority holds that section 17(a) does not provide a private right of action. See In re Washington Pub. Power Supply Sys. Sec. Litig., 823 F.2d 1349 (9th Cir.1987) (en banc); Landry v. All American Assurance Co., 688 F.2d 381, 389 (5th Cir.1982). We find the Fifth Circuit's decision in Landry particularly persuasive. Applying a conservative Cort v. Ash analysis, see 422 U.S. 66, 95 S. Ct. 2080, 45 L. Ed. 2d 26 (1975),9 the Fifth Circuit concluded that "Sec. 17(a) of the Securities Act of 1933 points away from the implication of a private cause of action." Landry, 668 F.2d at 391.10 We therefore hold that section 17(a) does not imply a private cause of action and that the district court correctly dismissed this theory of relief.

Currie also challenges the district court's directed verdict for appellees on the other noncontract claims. The district court based its decision on Currie's failure to establish reasonable reliance. Currie argues that he presented sufficient evidence of reasonable reliance to escape a directed verdict on those claims. Regardless of whether Currie established the reliance element, however, we hold that Currie failed to offer sufficient evidence of loss causation to avoid a directed verdict on the noncontract claims.

In Huddleston v. Herman & MacLean, 640 F.2d 534 (5th Cir. Unit A Mar. 1981), aff'd in part and rev'd in part, 459 U.S. 375, 103 S. Ct. 683, 74 L. Ed. 2d 548 (1983), the Fifth Circuit stated that in an action under section 10(b):

Causation is related to but distinct from reliance. Reliance is a causa sine qua non, a type of "but for" requirement: had the investor known the truth he would not have acted. Causation requires one step further in the analysis: even if the investor would not otherwise have acted, was the misrepresented fact a proximate cause of the loss? The plaintiff must prove not only that, had he known the truth, he would not have acted, but in addition that the untruth was in some reasonably direct, or proximate, way responsible for his loss.

Id. at 549 (emphasis in original) (citation omitted) (footnote omitted). Some courts make the distinction between the terms "transaction causation" and "loss causation." Id. at 549 n. 24; see Harris v. Union Elec. Co., 787 F.2d 355, 366 (8th Cir.), cert. denied, --- U.S. ----, 107 S. Ct. 94, 93 L. Ed. 2d 45 (1986); Wilson v. Comtech Telecommunications Corp., 648 F.2d 88, 92 n. 7 (2d Cir.1981); Schlick v. Penn-Dixie Cement Corp., 507 F.2d 374, 380 (2d Cir.1974), cert. denied, 421 U.S. 976, 95 S. Ct. 1976, 44 L. Ed. 2d 467 (1975). Transaction causation, another way of describing reliance, is established when the misrepresentations or omissions cause the plaintiff "to engage in the transaction in question." Schlick, 507 F.2d at 380. Loss causation requires a showing that "the misrepresentations or omissions caused the economic harm...." Id. In other words a plaintiff must demonstrate that the defendant's fraudulent conduct "touches upon the reasons for the investment's decline in value." Huddleston, 640 F.2d at 549; see Marbury Management, Inc. v. Kohn, 629 F.2d 705, 718 (2d Cir.1980) (Meskill, J., dissenting) ("where one is induced to purchase securities in reliance upon a claim which, however deceitful, is immaterial to the operative reason for the pecuniary loss, recovery under a theory of fraud is precluded by the inability to prove the requisite causation").

Currie did not prove a causal relationship between the alleged untruths and his pecuniary loss. Currie has yet to show that the Cayman stock he received in the exchange offer was valued, due to the misrepresentations and omissions, less than the limited partnership interests. Currie therefore failed to establish an essential element of his section 10(b) claim.11 Currie's failure to establish proximate cause likewise supports the district court's directed verdict on the other noncontract claims. See, e.g., Galanti v. United States, 709 F.2d 706, 708 (11th Cir.1983) (proximate cause is an element of a negligence action), cert. denied, 465 U.S. 1024, 104 S. Ct. 1279, 79 L. Ed. 2d 683 (1984); International Indem. Co. v. Terrell, 344 S.E.2d 239, 244 (Ga.Ct.App.1986) (plaintiff must suffer a loss proximately caused by the fraud); State Nat. Bank of El Paso v. Farah Mfg. Co., Inc., 678 S.W.2d 661 (Tex.Ct.App.1984) (proximate cause is an element of a fraud action).

For all the foregoing reasons the decision of the district court is

AFFIRMED in part, REVERSED in part and REMANDED.