In September 2013, Governor Jerry Brown signed SB 538 (Hill) into law. This bill fundamentally rewrote a key anti-fraud provision of the Corporate Securities Law of 1968 – Corporations Code Section 25401. At the time, I cast a chary eye on the amendment and predicted that it would lead to judicial confusion. See California Creates Complete Chaos By Rewriting Anti-Fraud Statute, But “We Are Against Fraud Aren’t We?” Since then, I’ve been surprised to see courts apply the new statutory language to offers and sales of securities that occurred before the statute even took effect.
Such is the case with the recent ruling in AJZN, Inc. v. Yu, 2015 U.S. Dist. LEXIS 8407 (D. Del. Jan. 26, 2015). Readers may recall that I discussed an earlier ruling by Judge Lucy H. Koh who transferred the case to the U.S. District Court in Delaware. Federal Court Upholds Delaware Forum Selection Notwithstanding California Securities Law Claims. The case involved federal and state securities law claims that according to the Court’s ruling arose out of the offer and sale of a warrant in in 2009, more than four years before SB 538 took effect on January 1, 2014. Nonetheless, the Court quotes and applies Section 25401 as in effect on January 1, 2014. To add to the confusion, the Court cites cases interpreting the statute prior to the amendments effected by SB 538.
The Court also ruled that Rule 9(b) of the Federal Rules of Civil Procedure applies to Section 25401 claims. This would seem to follow if one is dealing with the amended statute, but what if the prior statute governs the plaintiff’s claim? See Court Declines To Apply Rule 9(b) To Section 25401 Claim.
As a final note, the Court didn’t quote or apply the current version of Section 25401. In 2014, the legislature enacted legislation SB 1461 that, among other things, corrected a likely typographical error introduced by SB 538. See The Securities Fraud Device That The Legislature Devised To Omit.
Have You Paid Your Rent Today?
Here in the United States, most people will associate February 2 with Ground Hog Day. In the Scottish legal tradition, February 2 was one of the so-called quarter-days. These were days on which rents were due and contracts expired or renewed. The other quarter-days in Scotland were: Whitsunday (May 15), Lammas (Aug. 1), and Martinmas (Nov. 11). One inconvenience of the historical system was that the quarters varied in length. This year, for example, there are 102 days from Candlemas to Whitsunday and only 78 days from Whitsunday to Lammas (the quarter-days correspond to religious holidays). In 1990, these dates were regulated by the Term and Quarter Days (Scotland) Act 1990. Keeping with my frequent admonition that this blog does not provide legal advice, please contact a lawyer knowledgeable in Scottish law, if you have any questions about how this bit of legal history might impact your own affairs.
