The Sixth Circuit recently held that an attorney who performs traditional legal work during a public securities offering is not liable under the Kentucky securities statute. In Bennett v. Durham, Case Nos. 11-5782/5918 (6th Cir. June 28, 2012), plaintiff investors sued not only the companies, but the attorneys who represented the companies in connection with the issuance and sale of the securities. Plaintiffs alleged that the attorneys knew documents contained material misrepresentations and omissions and that the securities were neither registered nor exempt from registration.
Relying on Pinter v. Dahl, 486 U.S. 622, 650 (1988), the Sixth Circuit reasoned that an attorney performing traditional legal services is not someone who “offers or sells a security” for the purposes of Ky. Rev. Stat. § 292.480(1). The Court noted that plaintiffs had not alleged any facts that the attorneys went beyond their role as an attorney or legal advisor. The Court further held that an attorney is not a partner, officer or director, or an agent who materially aided in the sale or purchase of the securities under Ky. Rev. Stat. § 292.480(4). “It is not enough that the attorney ‘represents’ the issuer in a matter that culminates in the sale of securities; he must represent the issuer ‘in effecting or attempting to effect’ the sale, meaning that carrying out or bringing about the sale must be the job the client hires the attorney to perform.” Where the attorneys simply drafted documents, provided advice, and answered client questions, they were not considered “agents” for purposes of the statute.