July 5, 2012
Sixth Circuit: Lawyers Performing Ordinary Legal Work are not Statutory Sellers under Kentucky Statute
The Sixth Circuit recently held that an attorney who performs traditional legal services for a company offering its securities to the public cannot be held liable as an offeror or seller of the securities or as an agent of the seller who materially aids the sale of securities, under the Kentucky securities statute. Bennett v. Durham (6th Cir. June 28, 2012). (Download BennettvDurham)
Durham was an attorney who represented two oil and gas exploration companies in connection with their sales of securities, including drafting the documents for the deals. He also made himself available to answer prospective investors' questions, all the while, according to plaintiffs, knowing that the documents contained material misstatements and that the securities were neither registered nor exempt from registration. The court relied on Pinter v. Dahl, 486 U.S. 622 (1988) and determined that there was no reason to think that Kentucky courts would construe the words differently. The court emphasized that plaintiffs did not allege any facts that would show that Durham performed any services other than "ordinary legal work securities lawyers do every day." Plaintiffs "cite no case holding an attorney liable under the Uniform Securities Act merely for drafting documents, providing advice and answering client questions."
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