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CALIFORNIA CORPORATE & SECURITIES LAW

Court Finds Plaintiffs Are Not Privies

Yesterday’s post noted that the plaintiff in a derivative suit is bringing claims on behalf of the corporation.  Thus, when a derivative suit is dismissed, does that dismissal have any effect on other pending or subsequently filed derivative suits?  This is a topic that I first discussed a few years back in Delaware Court of Chancery “Overrules” Federal Court.  That post was critical of…

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9th Circuit Upholds Issue Preclusion In Subsequent Derivative Suit

Derivative suits rarely arrive alone.  When something goes awry, directors and officers can be expected to see multiple suits based on demand futility as well as wrongful demand refusal.  Often, suits will be filed at different times and in different fora.  It is important to remember, however, that the “real” plaintiff in these suits is…

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In This Case, Placement Agent Status Was Better Than Underwriter Status

As a general matter, California Corporations Code Section 25401 declares it unlawful to make an untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the offer or sale of a security.  Section 25401, however, does…

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Federal Court Rejects Court Of Chancery’s Privity Analysis

Two years ago, I wrote about La. Mun. Police Emples. Ret. Sys. v. Pyott, 46 A.3d 313 (Del. Ch. 2012) in which Vice Chancellor J. Travis Laster refused to give preclusive effect to federal district court’s dismissal of a derivative action.  See Delaware Court of Chancery “Overrules” Federal Court.  Among other things, the Court of Chancery…

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In This “Unreliable” Opinion, Court Requires Privity For Action Against Unlicensed Broker-Dealer

Since California Corporations Code Section 25501.5 was enacted ten years ago, I’ve been repeatedly asked “What do it mean?“.  The statute provides that a person who purchases a security from, or sells a security to, an unlicensed broker-dealer may bring an action for rescission of the sale or purchase or, if the plaintiff or the defendant no longer owns…

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Federal Court Sides With Second DCA In Privity Split

In Moss v. Kroner, 197 Cal. App. 4th 860 (2011), the Second District Court of Appeal found that rescission was available to a plaintiff under Corporations Code Section 25504 even though the plaintiff was not in privity with the defendant.  Section 25504 imposes liability on specified persons who are in “control” of persons who are liable under Section…

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Court Rules Law Firm That Drafted Documents Was Not A Seller Of Securities

Section 25400(d) of the California Corporations Code declares it unlawful for any broker-dealer or “other person selling or offering for sale” to make a false or misleading statement for the purpose of inducing the purchase or sale of a security if that person knew or had reason to know that the statement was false or…

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More On Privity And Section 25500

In this May 10, 2011 post, I wrote that U.S. District Court Judge Jeffrey S. White had ruled that privity is required under Section 25500. Louisiana Pacific Corp. v. Money Mkt. 1 Institutional Inv. Dealer, Fed. Sec. L. Rep. (CCH) P96,262 (March 28, 2011).  I noted, however, that the leading treatise on California’s securities laws…

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Second DCA Takes Issue With Fourth DCA Over Privity

Privity is one those requirements that isn’t intrinsically interesting and yet it is extremely important.  Over the last year, I’ve written several posts discussing the privity requirement (or lack thereof) under the Corporate Securities Law of 1968, including these posts: Court Rejects Control Requirement For Director Liability (discussing Hellum v. Breyer, 194 Cal.App.4th 1300 (2011)); Is…

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Is Privity Required Or Not Required Under Section 25500?

California Corporations Code Section 25400 lists a variety of acts that are considered to manipulate the price of securities.  Section 25400 was modeled on Section 9(a) – (e) of the Securities Exchange Act of 1934.  Although Section 25400 declares these acts to be “unlawful”, the statute does not technically impose liability.  The legislature left that duty to…

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