§ 6.1.1.1

• Jurisdiction: Arizona

§ 6.1.1.1 In General

Section 44-2003(A) is broadly worded to impose primary civil liability on "any person, including any dealer, salesman or agent, who made, participated in or induced the unlawful sale or purchase" of a security.¹⁵⁷⁸ The Arizona Supreme Court has described this language as "broad,"¹⁵⁷⁹ "sweeping language"¹⁵⁸⁰ that "applies the § 44-2001 rescissory remedy to [persons] other than the seller."¹⁵⁸¹

The range of potentially liable persons is illustrated by the cases decided under § 44-2003(A). The cases have included claims against a bank,¹⁵⁸² incorporators,¹⁵⁸³ auditors,¹⁵⁸⁴ state regulators,¹⁵⁸⁵ a town,¹⁵⁸⁶ a mutual fund company,¹⁵⁸⁷ a guarantor,¹⁵⁸⁸ a business broker,¹⁵⁸⁹ attorneys,¹⁵⁹⁰ corporate directors,¹⁵⁹¹ managing members of a limited-liability company,¹⁵⁹² and officers of public and non-public companies.¹⁵⁹³

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Notes:

^[1578] A.R.S. § 44-2003(A) (2013).

^[1579]Grand II, 225 Ariz. 171, 174 ¶ 17, 236 P.3d 398, 401 (2010).

^[1580]Id. at 174 ¶ 18, 236 P.3d at 401.

^[1581]Id. at 174 ¶ 13, 236 P.3d at 401.

^[1582]See Little v. First Cal. Co., No. Civ. 74-71 Phx, 1977 WL 1055, at *8-9 (D. Ariz. Oct. 17, 1977) (analyzing bank's liability under § 44-2003 (now § 44-2003(A)) and denying summary judgment because of disputed facts).

^[1583]See Trump v. Badet, 84 Ariz. 319, 322, 327 P.2d 1001, 1003-04 (1958) (upholding judgment against incorporators who induced the plaintiff to purchase stock).

^[1584]See Facciola v. Greenberg Traurig, LLP, No. CV-10-1025-PHX-FJM, 2011 WL 5833785, at *4 (D. Ariz. Nov. 21, 2011) (dismissing claims against auditors and concluding that their audits were prepared for reasons independent of securities transactions and amounted to only "collateral involvement" covered by "the safe harbor protection of § 44-2003(A)"); Standard Chartered, PLC v. Price Waterhouse, 190 Ariz. 6, 22-23, 945 P.2d 317, 333-34 (Ct. App. 1996) (holding on the facts shown at trial that an accounting firm was a collateral actor too remote from the securities transaction to be liable as a statutory participant or inducer); Sell v. Sewell, No. CV2007-005734, 2008 WL 4947723 (Ariz. Super. Ct. Nov. 12, 2008) (trial court order holding that the complaint did not sufficiently allege that auditors or attorneys participated or induced under § 44-2003)(A)); Grant v. Arthur Andersen, L.L.P., Nos. CV1999-019093, CV2000-015849, 2001 WL 35976018 (Ariz. Super. Ct. Feb. 16, 2001) (trial court order denying auditor's motion to dismiss and holding that the plaintiffs' complaint sufficiently alleged that the auditor participated in the securities-law violations).

^[1585]See State v. Superior Court, 123 Ariz. 324, 330-31, 599 P.2d 777, 783-84 (1979) (upholding trial court's refusal to dismiss claims under §§ 44-1991 and 44-2003 (now §§ 44-1991(A) and 44-2003(A)) against the ACC and its commissioners), overruled in parton other grounds by Sell v. Gama, 231 Ariz. 323, 330 ¶ 32, 295 P.3d 421...