ESG Capital Partners v. Venable LLP, No. 13-56684 (9th Cir. 2016)
Annotate this CaseESG was a group of investors formed to purchase pre-Initial Public Offering (pre-IPO) Facebook shares. ESG’s managing agent negotiated the purchase with a man he believed to be "Ken Davis." "Ken Davis" was an alias for Troy Stratos, an alleged con artist. Venable represented "Dennis" in the Facebook deal, which is the subject of this securities fraud suit. After learning that ESG had been defrauded, managing agent Burns panicked and hid the news from ESG. ESG claims it did not learn of the alleged fraud and that their money had been stolen until November 2012. ESG filed suit against Stratos and Venable and attorney Meyer on March 6, 2013, alleging eight causes of action. The district court dismissed ESG's complaint, and subsequently the first amended complaint (FAC), with prejudice. The court held that ESG's federal securities fraud claim is sufficiently pled under FRCP 9(b) and the Private Securities Litigation Reform Act, 15 U.S.C. 78j(b), 17 C.F.R. 240.10b–5; ESG's state law fraud claim, which parallels the federal securities fraud claim, is sufficiently pled under FRCP 9(b); ESG’s nonfraud state law claims for conversion, unjust enrichment, unfair competition, aiding and abetting fraud, and conspiracy to commit fraud are sufficiently pled under FRCP 8(a)(2); and ESG's breach of fiduciary duty claim is barred by Cal. Civ. Proc. Code 340.6's one-year statute of limitations. Finally, the court concluded that neither the aiding and abetting fraud claim nor the conspiracy to commit fraud claim is barred by Cal. Civ. Code 1714.10’s Agent’s Immunity Rule. Accordingly, the court affirmed in part, reversed in part, and remanded.
Court Description: Securities. The panel affirmed in part and reversed in part the district court’s dismissal for failure to state a claim of a securities fraud action brought by ESG Capital Partners, L.P., a group of investors formed to purchase pre-Initial Public Offering Facebook shares. ESG Capital’s managing agent negotiated the purchase of shares with an alleged con artist who was represented by defendant Venable LLP, a law firm. ESG transferred funds but never received the shares. Reversing in part, the panel held that ESG Capital’s federal securities fraud claim under § 10(b) of the Securities Exchange Act was sufficiently pled under Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act. The panel held that Venable attorney David Meyer was the maker of alleged false statements and had a duty to disclose information to ESG. ESG pled facts that led to a strong inference of scienter. It also sufficiently pled reliance. ESG CAPITAL PARTNERS V. VENABLE LLP 3 The panel held that ESG’s state law fraud claim, which paralleled the federal securities fraud claim, was sufficiently pled under Fed. R. Civ. P. 9(b). The panel held that ESG’s nonfraud claims under California state law for conversion, unjust enrichment, unfair competition, aiding and abetting fraud, and conspiracy to commit fraud were sufficiently pled under Fed. R. Civ. P. 8(a)(2). The panel held that neither the aiding and abetting fraud claim nor the conspiracy claim was barred by Cal. Civ. Code § 1714.10’s Agent’s Immunity Rule, which shields an attorney who merely acted as an agent of a third party that had a duty to the plaintiff. Affirming in part, the panel held that ESG’s state law claim for breach of fiduciary duty, which alleged conduct that fell within the scope of providing legal services, was barred by Cal. Civ. Proc. Code § 340.6’s one-year statute of limitations. The panel reversed the dismissal of ESC’s other claims and remanded the case to the district court.
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.