5 F. Supp. 3d 1278
D. Colo.2013Background
- This case involves a federal Exchange Act claim alleging unregistered brokerage activities by Cohen, Young, AP Capital, and AP Group in KSpace financing.
- Plaintiffs Landegger and Whittemore claim §15(a)(1) violations and seek relief under §29(b) for rescission and damages.
- The AKS-I and AKS-II investment vehicles were used to raise capital for KSpace, with cross-signing by the Defendants.
- The court denied summary judgment on the federal claim, recognizing disputed factual issues related to privity and interrelated contracts.
- A prior ruling denied Nevada-state-law summary judgment; this Order focuses on the federal claim and privity-based relief.
- The court instructed parties to submit preliminary jury instructions on the federal claim and noted unresolved questions of privity and transaction structure.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of an implied private action under §15(a)(1) and §29(b) | Landegger/Whittemore contend Congress implied a private right | Cohen/Young argue no private action; SEC should enforce | Plaintiff prevailed; private action implied under federal statute |
| Privity requirement for §29(b) rescission | Privity exists via Operating Agreement and interrelated contracts | Only AP Group clearly in privity; others not clearly bound | Genuine disputes exist; privity question for trial |
| Privity with remaining Defendants beyond AP Group | Interrelated contracts create privity read together | Stranger-to-contract analysis forecloses privity | Issues for jury due to interrelated transactions and signatures |
| Availability of damages under §29(b) | Damages viable under implied action | Damages issue withdrawn/limited | Damages not pursued at this stage; precluded from trial evidence |
Key Cases Cited
- J.I. Borak v. Curtiss-Weymann Co., 377 U.S. 426 (U.S. 1964) (implied private action analysis; private rights depend on text/intent)
- Cort v. Ash, 422 U.S. 66 (U.S. 1975) (four-factor approach to implied rights later narrowed)
- Touche Ross & Co. v. Redington, 442 U.S. 560 (U.S. 1979) (test for private rights focuses on congressional intent; limits implied actions)
- Cannon v. University of Chicago, 441 U.S. 677 (U.S. 1979) (contemporary context may aid statutory interpretation of private rights)
- Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353 (U.S. 1982) (contextual continuation of implied rights; legislative intent mattered with amended acts)
- Herman & MacLean v. Huddleston, 459 U.S. 375 (U.S. 1983) (implied private action under §10(b) recognized; longstanding remedy remains valid)
- SANDOVAL v. Hagan, 532 U.S. 275 (U.S. 2001) (restrictive approach: private rights must be created by Congress based on text/structure)