Why Privity Matters

In 2011, I posed the following question: Is Privity Required Or Not Required Under Section 25500? Section 25500 of the California Corporations Code provides the remedy for violations of Section 25400 which declares unlawful a variety of manipulative actions involving securities. See also More On Privity And Section 25500. 

A recent ruling by Judge Maxine M. Chesney illustrates why privity is important when bringing suit under the California Corporate Securities Law. Baltequera Inc. v. Bell-Carter Foods, LLC, 2022 U.S. Dist. LEXIS 81054.

The case was brought by three plaintiffs - Baltequera, Dcoop and Olives Way. Only Baltequera signed the agreement to purchase membership interests. Dcoop and Olives Way allegedly supplied Baltequera with the funds to make the purchase. The plaintiffs alleged, among other things, violations of both Section 25400 and Section 25401, which declares unlawful untrue statements or omissions of material facts in the purchase or sale of