Recently, I wrote about the ruling in Cress v. Nexo Financial LLC, 2023 WL 6609352 (Oct. 10, 2023).   Today's post covers a different issue addressed in that case - to what extent does California's securities law preclude claims under California's Unfair Competition Law?

The plaintiff in Cress brought several causes of action relating to his transactions with the defendants which included purchases of securities and loan transactions.   The plaintiff's compliant included causes under both California's Corporate Securities Law and California's Unfair Competition Law.  The defendant argued that the UCL claims were barred because they involved securities transactions.  U.S. Magistrate Judge Thomas S. Hixson summarized the applicable law as follows:

In Bowen v. Ziasun Techs., Inc., the California Court of Appeal in the Fourth District concluded that "section 17200 does not apply to securities transactions." 116 Cal. App. 4th 777, 788 (2004), as modified on denial of reh'g (Apr. 7, 2004). This holding has since been somewhat narrowed. First, it is interpreted to be a bar on "lawsuits based on deceptive conduct in the sale and purchase of securities." Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal. App. 4th 688, 715 (2007). Second, courts "have allowed Section 17200 claims to proceed where the claims were tangentially related to securities transactions." Betz v. Trainer Wortham & Co., 829 F. Supp. 2d 860, 866 (N.D. Cal. 2011)l. "No court, however, has allowed Section 17200 claims to proceed where . . . the predicate acts are securities transactions." Id.

Accordingly Judge  Hixson dismissed the plaintiff's UCL claims based on the defendant's deceptive conduct in the sale of securities but allowed the plaintiff's claims related to borrowing to proceed.  

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