SEC v. Blackburn

2020 WL 565551 (2020)

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SEC v. Blackburn

United States District Court for the Eastern District of Louisiana
2020 WL 565551 (2020)

Facts

Treaty Energy Corporation (Treaty) was a public corporation based in Louisiana. Samuel Whitley (defendant), a licensed attorney, served as Treaty’s outside counsel for approximately four years. During that time, Whitley drafted four opinion letters advising Treaty’s officers (defendants) to sell millions of shares of Treaty’s unregistered stock. The letters stated that the stock was exempt from registration. The Securities and Exchange Commission (SEC) (plaintiff) filed suit against Whitley, alleging that his drafting of the opinion letters violated § 5 of the Securities Act of 1933. Specifically, the SEC asserted that Whitley was a necessary participant and substantial factor in the officers’ selling of the unregistered shares. However, Whitley argued that, as an attorney who merely authored opinion letters and did not participate in the negotiations or organization of the sale, he was not a motivating force and did not play an integral role in the sale. Therefore, Whitley asserted that he could not be held liable under § 5. The SEC and Whitley both moved for summary judgment.

Rule of Law

Issue

Holding and Reasoning (Barbier, J.)

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