Ward v. Bullis, No. 20070188, 748 N.W.2d 397, 2008 N.D. LEXIS 81 (N.D., 4/25/08).  Statutory Definitions ("Agent" “Materially Aids”) * State States Interpreted (N.D.C.C. § 10-04-17) * Representation Issues.  To be liable as an agent under the North Dakota Securities Act, an attorney must do more than act as legal counsel.  The attorney must actively assist in offering securities for sale, solicit offers to buy or actually perform the sale.
As part of his employment agreement with Intellisol, Volk was granted an option to purchase Intellisol stock.  Volk hired Bullis, an attorney, to help him exercise the option because he did not have the funds available to purchase the stock.  Bullis advised Volk he could raise money to exercise the option by purchasing stock at the option price and then selling some of the stock to other investors at a higher price.  Bullis set up Softech, an LLC.  Investors in Softech became part owners of a company that owned Intellisol stock. Investment funds received were deposited in and disbursed through Bullis' law firm trust account and the Softech address was that of Bullis' law office.  Hager, a registered representative of ProEquities, was hired to find potential investors.  Hager solicited the investors, including Plaintiffs, but payment for the Softech membership units was made to Bullis' law firm and Bullis issued the shares or units.  Hager and Bullis each received 5% of the gross Softech sales and 5,000 shares of Intellisol stock.  Bullis also received a flat hourly fee for his legal work.  Two years later, Intellisol ceased operations and the stock became worthless.  Plaintiffs suffered a total loss of their investments.  They filed an action in state court naming Bullis, Hager, ProEquities and Volk for violations of the North Dakota Securities Act and common law fraud.  Hager and ProEquities settled.  Volk defaulted and judgment was entered against him.  Bullis moved for summary judgment, arguing that he was only performing as an attorney involved in securities work.  The district court granted Bullis' motion.  On appeal, Plaintiffs argued that Bullis was liable because he was an agent of the seller and participated or aided in the sale.  The Supreme Court agrees.  The Court reasons that an attorney is not liable as an agent unless the attorney acts in a manner that goes beyond legal representation.  To rise to the level of effecting the purchase or sale of securities, the attorney must actively assist in offering securities for sale, solicit offers to buy or actually perform the sale.  Here, there was a genuine issue of material fact about whether Bullis' conduct constituted an attempt to effect the purchase or sale of securities. While Bullis did not initially solicit the Plaintiffs' purchases of the securities, there was evidence that, if believed, established his role in the investment scheme that was more than that of an attorney who merely provided legal services and drafted documents. (W. Nelson) (SLC Ref. No. 2008-23< 6/16/08)