Buyers duped by a con artist into paying $11 million for supposed pre-IPO Facebook shares stated a 10b-5 claim as well as several state law claims against the con artist’s lawyer and Venable, the firm for which he worked. The lawyer did not simply relay the con artist’s false representations (each prefaced by “it is [con artist’s] understanding.” Instead, he also directly represented that the con artist was another individual whom he impersonated, and the lawyer told plaintiff its down payment would be released to the con artist’s firm, when in fact he released the funds to the con artist individually. A lawyer who undertakes to make representations about securities to prospective purchasers is under a duty to tell the truth. Plaintiff adequately alleged scienter, averring facts giving rise to an inference that lawyer knew con artist’s true identity and his scheme. Plaintiff’s claims were not barred by CCP 340.6’s one-year limitations period because while they alleged conduct undertaken while lawyer represented the con artist, with one exception, none of the claims depended on proof that lawyer breached any duty owed as a lawyer. The Agent’s Immunity Rule codified in Civ. Code 1714.10 didn’t shield the lawyer, either, since he owed an independent duty to plaintiff not to defraud it and since he also owed it an independent duty in handling the down payment which lawyer took into the firm’s trust account to be disbursed pursuant to plaintiff’s directions.
Ninth Circuit Court of Appeals (Pregerson, J.); July 11, 2016; 2016 WL 3672051