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CALIFORNIA CORPORATE & SECURITIES LAW

Ninth Circuit Holds Attorney’s Statement Was “Made”, Not Attributed

Readers familiar with the Nicene Creed will instantly recognize the phrase “begotten, not made”.  I won’t wade into the theological meaning of this phrase, but I cite it as an example of the importance that can be attached to the seemingly simple concept of making.  Under Rule 10b-5, it is unlawful for “any person, directly or indirectly, . . . [t]o make any untrue statement of a material fact” in connection with the purchase or sale of securities.  Because only “makers” are liable under the rule, the definition of “make” can be of critical importance in a securities fraud suit.

Determining whether someone is the “maker” of a statement may seem to be a straightforward exercise.  As the U.S. Supreme Court has observed: “One ‘makes’ a statement by stating it.”  Janus Capital Group, Inc. v. First Derivative Traders, 564 U.S. 135, 142 (U.S. 2011).  Sometimes, the determination may be more difficult.  For example, in ESG Capital Partners, LP v. Stratos, 2016 U.S. App. LEXIS 12718 (9th Cir. Cal. July 11, 2016), an attorney sent emails prefaced with the statement “It is Soumaya’s [the client’s] understanding . . .”.  Did the attorney “make” those statements?  The Ninth Circuit Court of Appeals noted that preparing or publishing another’s statement does not make someone the “maker” of the statement.  The Court also noted that attribution to another party generally indicates that the attributed party is the maker.  Nonetheless, the Court was “not convinced that such a short, easy preface could shield a messenger from liability in all circumstances”.

The Court’s opinion is troubling because it leaves the reader with a number of questions.  Why exactly isn’t the Court convinced?  Is it simply the brevity of the attribution?  Would a longer, more difficult attribution suffice?  What are the circumstances in which a messenger wouldn’t be shielded?

Why “begotten, not made” isn’t found in the original Nicene Creed

The original Nicene Creed didn’t actually include the phrase “begotten, not made”.   The creed was adopted in 325 C.E. in Nicea.  At the time, Nicea was part of the Roman Empire and the creed was drafted in Greek, the language of the eastern half of the empire.  Thus, the actual words used in the creed are “γεννηθέντα, οὐ ποιηθέντα”, which are the singular, aorist, passive, participle forms of the Greek words for beget and make.  For those not familiar with the aorist verb form, it generally is used to describe uncompleted action in the past.  The word “aorist” is derived from the Greek, ἀόριστος, meaning without boundaries.

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