Securities Regulation

ORS 59.115
Liability in connection with sale or successful solicitation of sale of securities

  • recovery by purchaser
  • limitations on proceeding
  • attorney fees


(1)

A person is liable as provided in subsection (2) of this section to a purchaser of a security if the person:

(a)

Sells or successfully solicits the sale of a security, other than a federal covered security, in violation of the Oregon Securities Law or of any condition, limitation or restriction imposed upon a registration or license under the Oregon Securities Law; or

(b)

Sells or successfully solicits the sale of a security in violation of ORS 59.135 (Fraud and deceit with respect to securities or securities business) (1) or (3) or by means of an untrue statement of a material fact or an omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading (the buyer not knowing of the untruth or omission), and who does not sustain the burden of proof that the person did not know, and in the exercise of reasonable care could not have known, of the untruth or omission.

(2)

The purchaser may recover:

(a)

Upon tender of the security, the consideration paid for the security, and interest from the date of payment equal to the greater of the rate of interest specified in ORS 82.010 (Legal rate of interest) for judgments for the payment of money or the rate provided in the security if the security is an interest-bearing obligation, less any amount received on the security; or

(b)

If the purchaser no longer owns the security, damages in the amount that would be recoverable upon a tender, less the value of the security when the purchaser disposed of it and less interest on such value at the rate of interest specified in ORS 82.010 (Legal rate of interest) for judgments for the payment of money from the date of disposition.

(3)

Every person who directly or indirectly controls a seller liable under subsection (1) of this section, every partner, limited liability company manager, including a member who is a manager, officer or director of such seller, every person occupying a similar status or performing similar functions, and every person who participates or materially aids in the sale is also liable jointly and severally with and to the same extent as the seller, unless the nonseller sustains the burden of proof that the nonseller did not know, and, in the exercise of reasonable care, could not have known, of the existence of facts on which the liability is based. Any person held liable under this section shall be entitled to contribution from those jointly and severally liable with that person.

(4)

Notwithstanding the provisions of subsection (3) of this section, a person whose sole function in connection with the sale of a security is to provide ministerial functions of escrow, custody or deposit services in accordance with applicable law is liable only if the person participates or materially aids in the sale and the purchaser sustains the burden of proof that the person knew of the existence of facts on which liability is based or that the person’s failure to know of the existence of such facts was the result of the person’s recklessness or gross negligence.

(5)

Any tender specified in this section may be made at any time before entry of judgment.

(6)

Except as otherwise provided in this subsection, no action or suit may be commenced under this section more than three years after the sale. An action under this section for a violation of subsection (1)(b) of this section or ORS 59.135 (Fraud and deceit with respect to securities or securities business) may be commenced within three years after the sale or two years after the person bringing the action discovered or should have discovered the facts on which the action is based, whichever is later. Failure to commence an action on a timely basis is an affirmative defense.

(7)

An action may not be commenced under this section solely because an offer was made prior to registration of the securities.

(8)

Any person having a right of action against a broker-dealer, state investment adviser or against a salesperson or investment adviser representative acting within the course and scope or apparent course and scope of authority of the salesperson or investment adviser representative, under this section shall have a right of action under the bond or irrevocable letter of credit provided in ORS 59.175 (Procedures for notice filing and licensing).

(9)

Subsection (4) of this section shall not limit the liability of any person:

(a)

For conduct other than in the circumstances described in subsection (4) of this section; or

(b)

Under any other law, including any other provisions of the Oregon Securities Law.

(10)

Except as provided in subsection (11) of this section, the court may award reasonable attorney fees to the prevailing party in an action under this section.

(11)

The court may not award attorney fees to a prevailing defendant under the provisions of subsection (10) of this section if the action under this section is maintained as a class action pursuant to ORCP 32. [1967 c.537 §13(1), (2), (3), (4), (5), (7); 1985 c.349 §13; 1987 c.158 §10; 1987 c.603 §6; 1989 c.197 §5; 1991 c.331 §15; 1991 c.762 §1; 1993 c.508 §28; 1995 c.93 §27; 1995 c.696 §9; 1997 c.772 §9; 2003 c.576 §318; 2003 c.631 §1; 2003 c.786 §1]

Notes of Decisions

Claim of indemnity is actionable against officers or directors of sellers or participants in sale of unregistered securities under Oregon Blue Sky Law. Black & Co. v. Nova-Tech, Inc., 333 F Supp 468 (1971)

Although plaintiff has burden of proving knowledge of illegal securities transaction in order to establish liability, such knowledge is not relevant to question of participation. Black & Co. v. Nova-Tech, Inc., 333 F Supp 468 (1971)

Person may be participant in illegal securities transaction without having communicated with purchaser. Black & Co. v. Nova-Tech, Inc., 333 F Supp 468 (1971)

The three-year limitation of this statute will not apply to actions in federal court based on fraud or misrepresentation under S.E.C. Rule 10b-5. Hoffert v. E.F. Hinkle & Co., Inc., 56 FRD 395 (1972)

When attorney prepares, attends to execution of, and personally delivers and files documents required for registration of security with knowledge that solicitation and sales of such security have already been made, he "participates or materially aids" in sale of unregistered security. Adams v. American Western, 265 Or 514, 510 P2d 838 (1973)

Commencement of a class action suspended the limitation period as to members of the class who would have been parties had the suit been permitted to continue as a class action. Bergquist v. Intl. Realty, Ltd., 272 Or 416, 537 P2d 553 (1975)

A failure to account and deliver under ORS 59.205 states a cause of action under this section. State ex rel Healy v. Maryland Cas. Co. and Deal, 27 Or App 735, 557 P2d 258 (1976), Sup Ct review denied

An action on the bond under ORS 59.175 is not subject to the three-year statute of limitations under this section. State ex rel Healy v. Maryland Cas. Co. and Deal, 27 Or App 735, 557 P2d 258 (1976), Sup Ct review denied

The Corporation Commissioner had capacity to bring an action on the bond in behalf of unnamed injured persons. State ex rel Healy v. Maryland Cas. Co. and Deal, 27 Or App 735, 557 P2d 258 (1976), Sup Ct review denied

A limited partnership interest is a "security" subject to the anti-fraud provision of the Oregon Securities Law. Pratt v. Kross, 276 Or 483, 555 P2d 765 (1976)

Public policy does not prohibit nonculpable directors who have incurred liability under this section from seeking indemnity from those actually responsible for the wrongful issuance of unregistered securities. Collins v. Fitzwater, 277 Or 401, 560 P2d 1074 (1977)

Transaction whereby plaintiff paid $6,000 to defendant and took back promissory note in defendant's corporation, with agreement that plaintiff would have option to convert note to 50% interest in new corporation plus 25% interest in defendant's corporation, constituted "option for the sale of ... a security." Foelker v. Kwake, 279 Or 379, 568 P2d 1369 (1977)

Purchaser defrauded under this section was entitled to recover, in addition to costs, only $6000 paid for security plus interest from date of purchase, and judgment awarding purchaser $9,162 was in error. Foelker v. Kwake, 279 Or 379, 568 P2d 1369 (1977)

Where seller of securities was allegedly defrauded, this section expressly gave a remedy only to purchasers, and a remedy would not be implied in favor of sellers. Held v. Product Manufacturing Co., 286 Or 67, 592 P2d 1005 (1979)

Where defendants, officers and directors of corporation, who controlled 94 percent of its stock voted to declare 100-for-1 reverse stock split and soon after corporation changed its stock repurchase policy so that it would buy back minority shareholders stock at 50 percent of book value rather than at full book value as previously done, plaintiffs were not forced to sell their stock solely to corporation, and were not purchasers or sellers within meaning of this section and had no standing to sue under this section. Shivers v. Amerco, 670 F2d 826 (1982)

Liability for untrue statement or omission of material fact exists regardless of whether investor relied on statement or omission. Everts v. Holtmann, 64 Or App 145, 667 P2d 1028 (1983), Sup Ct review denied

Persons who prepare and execute documents knowingly intending to defraud one party may be held liable under this section even though documents are used to defraud party other than one originally intended; allegations that defendants prepared and executed contract misrepresenting terms of agreement and that misrepresentation was for sole purpose of deceiving a third party were sufficient to withstand motion to dismiss complaint. Fakhrdai v. Mason, 72 Or App 681, 696 P2d 1164 (1985), Sup Ct review denied

Attorney "participates or materially aids in the purchase" of securities under this section if attorney's routine professional services are coupled with knowledge of violation of Oregon securities laws by seller; if accountant performs number of services and knew buyers were being defrauded accountant may be liable under this section. Ahern v. Gaussoin, 611 F Supp 1465 (1985)

Where seller of unregistered securities alleges that purchaser had actual or constructive knowledge that securities were unregistered, equitable defenses are not available in action by purchaser under this section. Hall v. Johnston, 758 F2d 421 (1985)

Where plaintiff received tax benefits from investment in unregistered securities, damages shall equal plaintiff's losses exclusive of tax benefits and under tax benefit rule, prior tax credits will be disallowed. Hall v. Johnston, 758 F2d 421 (1985)

In action for securities law violations, where plaintiff presented sufficient evidence for jury to find that defendant either controlled seller of stock within meaning of this section or that defendant sold stock through his agent in violation of this section, court did not err in admitting testimony of purported agent's statements regarding defendant's knowledge and approval of stock sale. Wicks v. O'Connell, 89 Or App 236, 748 P2d 551 (1988)

Lawyer who prepared documents and performed other legal services for partnership could be held liable as one who "participates or materially aids" in unlawful sale of security (limited partnership units) under ORS 59.115 (3), unless he established lack of knowledge as affirmative defense. Prince v. Brydon, 307 Or 146, 764 P2d 1370 (1988)

Where plaintiff partner in securities action arising out of partnership agreement filed Oregon Securities Fraud Claim and interest in general partnership found not to be "security," defendants' motion for summary judgment granted. Casablanca Productions v. Pace Intern. Research, 697 F Supp 1563 (D. Or. 1988)

Investment companies' failure to adequately supervise their officer or agent could impose liability for secondary violations of securities laws. Pincetich v. Jeanfreau, 699 F Supp 1469 (D. Or. 1988)

This section applies only to buyer-seller relationship and may not be used as basis for award of damages or fees in dispute between parties with principal-agent relationship. Nesbit v. McNeil, 896 F2d 380 (9th Cir. 1990)

Common law agency principles may be invoked to impose liability against principal for agent's violation of this section. Badger v. Paulson Investment Co., Inc., 311 Or 14, 803 P2d 1178 (1991)

Evidence of apparent agency relationship between principal and agent is sufficient to impose liability on principal under this section. Badger v. Paulson Investment Co., Inc., 311 Or 14, 803 P2d 1178 (1991)

Where parent corporation transferred stock directly to landowners in partial payment for land purchased by subsidiary corporation, subsidiary corporation was not seller of stock. West Park Associates v. Butterfield Sav. & Loan, 814 F Supp 925 (1993)

Securities law liability based solely on status as control person does not constitute criminal conduct that can serve as predicate offense for Oregon Racketeer Influenced and Corrupt Organization Act liability. Computer Concepts, Inc. v. Brandt, 137 Or App 572, 905 P2d 1177 (1995)

Partial payments on judgment are applicable first to accumulated interest, then to principal. Ainslie v. Spolyar, 144 Or App 134, 926 P2d 822 (1996)

Allegation of violation of ORS 59.135 is subject to alternative statute of limitations applicable to that section, even though liability for violation is allegedly created under this section. Anderson v. Carden, 146 Or App 675, 934 P2d 562 (1997), Sup Ct review denied

Knowledge of illegality is not required for participant or provider of material aid to be liable. Ainslie v. First Interstate Bank, 148 Or App 162, 939 P2d 125 (1997)

Law Review Citations

53 OLR 170 (1974); 68 OLR 227, 891 (1989); 69 OLR 396 (1990); 34 WLR 31 (1998); 37 WLR 335 (2001); 50 WLR 195 (2014)

§§ 59.055 to 59.155

Law Review Citations

56 OLR 473 (1977); 68 OLR 228 (1989)

Chapter 59

Notes of Decisions

Public policy does not prohibit nonculpable corporate directors held liable under this chapter from seeking indemnification from persons actually responsible for the wrongful issuance of unregistered securities. Collins v. Fitzwater, 277 Or 401, 560 P2d 1074 (1977)

Atty. Gen. Opinions

Additional real estate license not required where security sold is interest in limited partnership to invest in real estate, (1978) Vol 38, p 1971


Source

Last accessed
Jun. 26, 2021