IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF OREGON

LAWRENCE P. CIUFFITELLI, for himself

and as Trustee of CIUFFITELLI

REVOCABLE TRUST; GREG and

ANGELA JULIEN; JAMES and SUSAN

MACDONALD, as Co-Trustees of the

MACDONALD FAMILY TRUST; R.F.

MACDONALD CO.; ANDREW NOWAK,

for himself and as Trustee of the ANDREW

NOWAK REVOCABLE LIVING TRUST

U/A 2/20/2002; WILLIAM RAMSTEIN; and

GREG WARRICK, for himself and, with

SUSAN WARRICK, as Co-Trustees of the

WARRICK FAMILY TRUST, individually

and on behalf of all others similarly situated,

Plaintiffs,

v. 

DELOITTE & TOUCHE LLP;

EISNERAMPER LLP; SIDLEY AUSTIN

LLP; TONKON TORP LLP; TD

AMERITRADE, INC.; INTEGRITY BANK

& TRUST; and DUFF & PHELPS, LLC;

Defendants;

v.

N. SCOTT GILLIS; ROBERT J. JESENIK;

and BRIAN A. OLIVER;

Intervenors.

Case No. 3:16-cv-00580-AC

 FINDINGS AND RECOMMENDATION

ON DEFENDANTS’

MOTIONS TO DISMISS

1 - FINDINGS AND RECOMMENDATION ON DEFS.’ MOTIONS TO DISMISS

Case 3:16-cv-00580-AC Document 340 Filed 08/01/18 Page 1 of 62
ACOSTA, Magistrate Judge

Plaintiffs Lawrence P. Ciuffitelli and others (collectively, “Plaintiffs”) bring this putative

class action against Defendants Deloitte & Touche LLP (“Deloitte”); EisnerAmper LLP

(“EisnerAmper”); Sidley Austin LLP (“Sidley”); Tonkon Torp LLP (“Tonkon”); TD Ameritrade,

Inc. (“Ameritrade”); Integrity Bank & Trust (“Integrity”); and Duff & Phelps, LLC (“Duff”)

(collectively“Defendants”). Plaintiffs allege multiple violations ofOregon SecuritiesLawstemming

from the sale of securities issued by “Aequitas,” a group of related investment and private equity

entities.1 Plaintiffs seek to hold Defendants liable under Oregon Revised Statutes (“ORS”) §

59.115(3), which imposes joint and several liability for persons who participate or materially aid in

the sale of securities sold in violation of Oregon Securities Law. 

In order to state a claim, Plaintiffs must first establish that the securities were sold in

violation of Oregon Securities law; that is, primaryliability. Then, Plaintiffs must establish that each

Defendant participated or materially aided in the sale. Here, Plaintiffs allege that Aequitas sold them

various securities and notes (the “Disputed Securities”)2 without proper registration and made untrue

1

 The Aequitas group of companies, which are not a party to this action, entered

receivership in early 2016. A civil enforcement action, Securities and Exchange Commission et

al. v. Aequitas Management, LLC et al., Case No. 3:16-cv-0438-PK (“SEC Lawsuit”), is

currently pending in the District of Oregon before the Honorable Paul Papak. The individual

defendants in the SEC Lawsuit are intervenors in this action. Minutes Proceedings, ECF No. 164

(granting motion to intervene). Additionally, two cases involving claims similar to those alleged

in the instant case are currently pending in Multnomah County Circuit Court against some of the

same Defendants. Wurster, et al. v. Deloitte & Touche, LLP, et al., Case No. 16CV25920

(“Wurster Lawsuit”); Pommier, et al. v. Deloitte & Touche, LLP, et al., Case No. 16CV36436

(“Pommier Lawsuit”).

2

 The Disputed Securities are described in greater detail in the April 10, 2017 Amended

Findings and Recommendation (“April F&R”) at 7, ECF No. 242 (also available at Ciuffitelli for

himself an as Trustee of Ciuffitelli Revocable Trust, et al. v. Deloitte & Touche, LLP, et al., Case

No. 3:16-cv-00580-AC, 2017 WL 2927481, at *3 (D. Or. April 10, 2017), and in the Second

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Case 3:16-cv-00580-AC Document 340 Filed 08/01/18 Page 2 of 62
statements of material fact or material omissions in violation of Oregon Securities Law. Next,

Plaintiffs allege that Defendants are jointly and severally liable for Aequitas’s violations because

they participated or materially aided in those sales. 

Defendants previously filed a Joint Motion to Dismiss the First Amended Complaint

(“FAC”), and several Defendants individually moved to dismiss. See ECF Nos. 74, 78, 81, 85, 95,

113. On April 10, 2017, in an Amended Findings and Recommendation (“April F&R”), the court

granted in part and denied in part those earlier motions. ECF No. 242. The Honorable Michael W.

Mosman adopted the April F&R in toto. ECF No. 250. Plaintiffs were permitted to replead and on

September 8, 2017, filed a Second Amended Complaint (“SAC”). ECF No. 257.

Presently before the court are a Joint Motion to Dismiss the SAC filed by all Defendants

(ECF No. 278), and several individual motions to dismiss filed byDuff (ECF No. 269), Sidley (ECF

No. 272), Ameritrade (ECF No. 275), and Deloitte (ECF No. 277). Ameritrade also filed a

“Supplemental Authority” in support of its individual motion in which it asserts this court lacks

personal jurisdiction (ECF No. 286). Deloitte requests that the Court take judicial notice of certain

documents (ECF No. 280). Plaintiffs have filed Responses to the various motions (ECF Nos. 287,

288, 289, 290, 291), a Notice of New Facts (ECF No. 309), and a Notice of Supplemental Authority

(ECF No. 322). Defendants have filed Replies (ECF Nos. 296, 297, 299, 300, 301). Following the

completion of briefing, the court conducted oral argument on June 1, 2018. The issues are now

sufficiently developed. For the reasons stated below, the motions should be granted in part and

denied in part. 

Amended Complaint (“SAC”) ¶¶ 28-32, ECF No. 257.

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The court does not repeat the factual background set forth in the April F&R, except to note

that Plaintiffs have added Duff as a defendant.3 ECF Nos. 257, 259. Duff is a financial services

corporation that specializes in valuing commercial assets. Duff’s Mot. Dismiss at 3, ECF No. 269. 

Duff valued three portfolio companies of Aequitas Capital Opportunities Fund, LP (“ACOF”) in

December 2013, July 2014, and February-March 2015. SAC ¶ 195(c); Duff’s Mot. Dismiss at 3. 

Plaintiffs allege that Duff’s valuations were included in ACOF’s February 2014 Private Placement

Memorandum(“PPM”) and inAequitas Commercial Finance, LLC’s (“ACF”) consolidated financial

statements. SAC ¶¶ 195(c), (d). 

For ease of analysis, the court discusses each motion separately. 

Discussion

I. Standards for Motions to Dismiss 

Federal Rule of Civil Procedure (“Rule”) 8 requires a complaint to contain “a short and plain

statement of the claim showing that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). The

complaint must plead sufficient factual allegations to “state a claim to relief that is plausible on its

face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotations and citations omitted). Rule

8 is designed to “give the defendant fair notice of what the claim is and the grounds upon which it

rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). 

Rule 9(b) provides that “[i]n alleging fraud or mistake, a party must state with particularity

the circumstances constituting fraud or mistake.” FED. R. CIV. P. 9(b); Davidson v. Kimberly-Clark

Corp., 889 F.3d 956, 964 (9th Cir. 2018); Cafasso, United States ex rel. v. Gen. Dynamics C4 Sys.,

637 F.3d 1047, 1055 (9th Cir. 2011). To satisfyRule 9(b), a pleading must identify “the who, what,

3

 For the full factual background, see April F&R at 4-14. 

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when, where, and how of the misconduct charged.” Ebeid ex rel. United States v. Lungwitz, 616 F.3d

993, 998 (9th Cir. 2010) (internal quotation marks and citations omitted); United States v. United

Healthcare Ins. Co., 848 F.3d 1161, 1180 (9th Cir. 2016) (quoting Ebeid, 616 F.3d at 998). In a

claim based on fraudulent conduct and non-fraudulent conduct, Rule 9(b) applies only to the

allegations of fraudulent conduct. Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009);

Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1104-05 (9th Cir. 2003). 

A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal sufficiency

of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). “Dismissal under Rule

12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts

to support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097,

1104 (9th Cir. 2008) (citing Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990));

Davidson, 889 F.3d at 965. While a complaint need not contain detailed factual allegations to

survive a Rule 12(b)(6) motion, “it must plead enough facts to state a claim to relief that is plausible

on its face.” Twombly, 550 U.S. at 570. A claim is facially plausible when it “allows the court to

draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556

U.S. at 678. 

On a motion to dismiss under Rule 12(b)(6), the court may consider only the pleadings

themselves, exhibits that are physically attached to the complaint, and matters properly subject to

judicial notice. Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007) (per curium); e.g.,

Northstar Fin. Advisors Inc. v. Schwab Invs., 779 F.3d 1036, 1042 (9th Cir. 2015) (court may

consider materials incorporated into complaint, matters of public record, or documents whose

contents are alleged in the complaint and “whose authenticity no party questions”). On a motion to

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dismiss, the court must “‘accept factual allegations in the complaint as true and construe the

pleadings in the light most favorable to the non-moving party.’” Northstar, 779 F.3d at 1042

(quoting Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008)). 

II. Deloitte’s Request for Judicial Notice (ECF No. 280)

As an initial matter, Defendants request that the court take judicial notice of the documents

attached to the Declaration of Gavin M. Masuda (“Masuda Declaration”) in Support of Deloitte’s

Motion to Dismiss the Second Amended Complaint. Masuda Decl., ECF No. 279. Exhibits 1 and

2 to the Masuda Declaration are Generally Accepted Auditing Standards (“GAAS”) published by

the American Institute of Certified Public Accountants. The court previously took judicial notice

of the GAAS standards in the April F&R. See April F&R at 33-34. Plaintiff does not oppose this

request. Consistent with the April F&R, the court finds it appropriate to take judicial notice of the

existence of the GAAS standards in Exhibits 1 and 2. 

Defendants also request that the court incorporate by reference Exhibits 3 through 8 attached

to the Masuda Declaration. Exhibits 3 through 8 are Private Placement Memoranda (“PPMs”) and

a PPM Supplement identified in the SAC. The court previously incorporated these documents by

reference in the April F&R. See April F&R at 35. Plaintiff does not oppose this request. Because

Plaintiffs refer to the PPMs extensively in the SAC, and neither party contests the authenticity of the

PPMs, Exhibits 3 through 8 are incorporated by reference. See FED. R. CIV. P. 10(c); FED. R. EVID.

201; United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003) (finding documents not attached to

a complaint but extensively referred to by plaintiff may be incorporated by reference).

Deloitte’s Request for Judicial Notice (ECF No. 280) is GRANTED.

6 - FINDINGS AND RECOMMENDATION ON DEFS.’ MOTIONS TO DISMISS

Case 3:16-cv-00580-AC Document 340 Filed 08/01/18 Page 6 of 62
III. Joint Motion (ECF No. 278), Plaintiffs’ Response (ECF No. 287), Defendants’ Reply (ECF

No. 300)

In the Joint Motion, Defendants make three principal arguments: (1) Plaintiffs have failed

to plead facts sufficient to establish Aequitas’s primary liability for non-registration under Oregon

Revised Statutes (“ORS”) §§ 59.055 and 59.115(1)(a); (2) Plaintiffs allegations of primary liability

under ORS § 59.115(1)(b) fail to adequately identify the specific PPM “by means of” which

securities were sold to them; and (3) Plaintiffs have failed to plead facts sufficient to invoke the

discoveryrule, such that the statute of limitations bars claims for securities sold before April 4, 2013.

A. Plaintiffs’ Allegations of Primary Liability for Non-registration Satisfy Rule 8

Defendants argue that Plaintiffs’ have failed to plead sufficient factsfortheir non-registration

claims of primaryliability. Defendants argue that “under Rule 9(b), Plaintiffs were required to plead

particularized facts showing that the statements regarding registration were false when made – in

other words, that Aequitas represented a security was exempt from registration, when it fact it was

not.” Defs.’ Joint Mot. Dismiss at 13. Defendants also contend that Plaintiffs have failed to plead

facts showing that the securities in question were not “federal covered securities” sold under a

Regulation D exemption, specifically Rule 506(b). 

Plaintiffs respond that their non-registration claims need be alleged only pursuant to Rule

8. Plaintiffs underscore that in the SAC, they allege primary violations by Aequitas for nonregistration under ORS §§ 59.055 and 59.115(1)(a). Plaintiffs contend that ORS § 59.055 is a strict

liability statute, and because they no longer solely allege that Aequitas made false or misleading

statements regarding non-registration status, they need not comply with the particularity

requirements of Rule 9(b). Plaintiffs also assert that they are not required to plead facts establishing

7 - FINDINGS AND RECOMMENDATION ON DEFS.’ MOTIONS TO DISMISS

Case 3:16-cv-00580-AC Document 340 Filed 08/01/18 Page 7 of 62
that the securities were exempt from regulation because under ORS § 59.275, Defendants have the 

burden of proving a Rule 506(b) exemption. In their Reply, Defendants argue that Plaintiffs continue

to assert that Aequitas misled investors about the Disputed Securities’ registration status, and

therefore they must plead all such allegations under Rule 9(b). 

In the SAC, Plaintiffs clearlyallege two distinct theories of primary liability. First, Plaintiffs

allege Aequitas failed to register the Disputed Securities as required under ORS §§ 59.055 and

59.115(1)(a). SAC ¶¶ 33-67. Second, Plaintiffs allege Aequitas sold securities by making untrue

statements of material facts or omissions under ORS §§ 59.115(1)(a) and (b) and 59.135(2). SAC 

¶¶ 68 to 180. As the court noted in the April F&R, a claim of failing to properly register securities

under ORS § 59.055 is one of strict liability under the statute, and therefore requires no allegations

of fraud, misleading statements, or intentional wrongdoing. April F&R at 23. Thus, the court

determined Rule 8 applies to Plaintiffs’ non-registration claims of primary liability. Id. 

Additionally, in the April F&R the court concluded that Plaintiffs’ allegations of primary liability

under ORS §§ 59.115(1)(b) and 59.135(2) for untrue statements and omissions sound in fraud, and

thus must be pleaded in accordance with Rule 9(b). April F&R at 23-24. 

In the Joint Motion, Defendants conflate the court’s earlier rulings. Defendants insist that

because Plaintiffs have alleged Aequitas made misleading disclosures about the registration status

of some of the Disputed Securities under their second theory of primary liability, all of the

allegations concerning non-registration under their first theoryof primaryliabilitymust comportwith

Rule 9(b). The court rejected this contention in the April F&R. Notably, the court specifically

indicated that “[c]laims for non-registration which do not allege fraud are not made subject to Rule

9(b) by the presence of separate claims alleging fraud.” April F&R at 24. The court adheres to its

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previous rationale. Therefore, Plaintiffs’ allegations of Aequitas’s primary liability for failing to

properly register the Disputed Securities under ORS §§ 59.055 and 59.115(1)(a) must comport with

Rule 8.4 

Next, the court must resolve which party bears the burden of pleading and proving that the

Disputed Securities were, or were not, “federal covered securities” under ORS § 59.055. Under that

statute, it is unlawful to offer or sell any security in the state of Oregon unless:

(1) The security is registered and the offer or sale is not in violation of any rule . . . 

(2) The security is exempt under ORS 59.025 or the sale is exempt under ORS

59.035; or

(3) The security is a federal covered security for which a notice has been filed and

fees have been paid under ORS 59.049. 

ORS § 59.055. Oregon Revised Statute § 59.115(1)(a) establishes civil liability for violations of the

registration requirements. See Houston v. Seward & Kissel, LLP, Case No. 07-cv-6305(HB), 2008

WL 818745, *9 (S.D.N.Y. Mar. 27, 2008). Thus, to avoid liability under the statute, a securitymust

be registered, be exempt under Oregon law, or be a “federal covered security.” Defendants here do

not dispute that the securities at issue were not registered and they do not assert that the securities

were exempt under state law. 

A “federal covered security” is defined as any security that is covered by under Section 18

of the Federal Securities Act of 1933. ORS § 59.015(5) (referring to 15 U.S.C. § 77r(b)). Under 15

U.S.C. § 77r(b)(4)(F), a “covered security” may be one that is exempt from registration under 

4

 Defendants’ suggestion that the court dismiss allegations against Aequitas for failing to

register AETC and APCF because they do not comport with Rule 8 should be rejected as moot. 

Plaintiffs do not allege non-registration claims concerning AETC and APCF as a theory of

primary liability against Aequitas. See SAC ¶¶ 33-67. 

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Case 3:16-cv-00580-AC Document 340 Filed 08/01/18 Page 9 of 62
§ 77d(2). Section 77d(2) exempts from registration “transactions by an issuer not involving any

public offering.” 15 U.S.C. § 77d(a)(2); see also 17 C.F.R. § 230.506 (exempting transactions not

involving public offerings). A security is sold pursuant to 17 C.F.R. § 230.506 when it is offered

for sale to a small number of sophisticated, accredited investors, and is often referred to as the

“private offering exemption” or “Rule 506” exemption. See, e.g., S.E.C. v. Murphy, 626 F.2d 633,

640-41 (9th Cir. 1980) (describing private offering exemptions); S.E.C. v. Schooler, 106 F. Supp.

3d 1157, 1162 (S.D. Cal. 2015), appeal filed (9th Cir. Feb. 2, 2016) (noting that there are four

exemptions under federal law for selling an unregistered security: Rule 504, Rule 505, Rule 506(b),

and Rule 506(c), and discussing requirements of the private offering exemption under Rule 506(b)).

Defendants argue that Plaintiffs have failed to sustain their burden under Rule 8 of pleading

that the Disputed Securities in question were not sold under a Rule 506(b) exemption at the time any

Aequitas entity asserted that they were necessary to set forth a violation of ORS § 59.055. Defs’

Joint Mot. Dimiss SAC at 13, ECF No. 278. Plaintiffs contend that they have satisfied Rule 8 and

that it is Defendants who bear the burden of pleading and proving a Rule 506(b) exemption pursuant

to ORS § 59.275. Plaintiffs maintain that the court erred as a matter of law when it determined in

the April F&R that ORS § 59.275 is not a substantive pleading rule. April F&R at 41. Plaintiffs are

correct. 

In the April F&R, the court concluded “[u]nder ORS § 59.055, that a security is not a federal

covered security or statutorily exempt from registration are elements of a violation, not affirmative

defenses to a violation.” April F&R at 42 (emphasis added). 

Oregon Revised Statute § 59.275 provides:

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It is not necessary to negative any of the exemptions or classifications in the Oregon

Securities Law in a complaint . . . brought under the Oregon Securities Law; and the

burden of proof of an exemption or classification shall be upon the party claiming the

benefit of such exemption or classification.

In the April F&R, the court intended to require Plaintiffs to plead sufficient facts showing a violation

of ORS § 59.055 pursuant to Rule 8. However, the court erred in further stating that whether a

security is exempt from registration is not an affirmative defense. See State v. Crooks, 84 Or. App.

440, 445-46 (1987) (“In view of the plain language of ORS § 59.275, the existence of an exemption

is not an element of the offense of selling an unregistered security. Rather, it is equivalent to an

affirmative defense. Whether a security falls within the class of exempt securities is a fact peculiarly

within the personal knowledge of the seller. It is not unreasonable to require the seller to present

proof of the exemption.”) (footnote omitted); Lewelling v. First California Corp., 564 F.2d 1277,

1281 (9th Cir. 1977) (stating that under ORS § 59.275, burden is on defendants to show sales exempt

from registration in defending claim for violating ORS § 59.055); Aero Marine Engine, Inc. v.

Transporter, Inc., Case No. 05-cv-01469-AS, 2007 WL 3128500, at *9 n.4 (D. Or. Oct. 23, 2007)

(discussing that the private offering exemption is an affirmative defense citing ORS § 59.275);

accord S.E.C. v. Ralston Purina Co., 346 U.S. 119, 124-26 (1953) (holding that imposing burden

of proof on party claiming exemption supports remedial purpose of federal securities legislation).

“State rules that define the elements of a cause of action, affirmative defenses, presumptions,

burdens of proof, and rules that create or preclude liability are so obviously substantive that their

application in diversity actions is required.” Computer Economics, Inc., v. Gartner Group, Inc., 50

F. Supp. 2d 980, 990 (S.D. Cal. 1999) (citing Dick v. New York Life Ins. Co., 359 U.S. 437, 446-47

(1959)). “Rules governing presumptions and burdens of proof are generally regarded as substantive

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for purposes of Erie R.R. v. Tompkins, 304 U.S. 64 (1938).” Johnston v. Pierce Packing Co., 550

F.2d 474, 476 n.1 (9th Cir. 1977). Thus, the court concludes that it erred in determining that ORS

§ 59.275 was not substantive and was not akin to an affirmative defense. 

Therefore, it is incorrect to require Plaintiffs not only to plead but also prove that the

Aequitas securities were exempt from registration under Rule 506(b), and thus qualified as a federal

covered security as this case proceeds. Under ORS § 59.275, “[i]t is not necessary to negative any

of the exemptions . . . in a complaint” and “the burden of proof of an exemption or classification

shall be upon the party claiming the benefit of the exemption or classification.” (emphasis added). 

If Aequitas were a party to this litigation, clearly Aequitas would bear the burden of pleading and

proving an exemption. Here, “the part[ies] claiming the benefit of the exemption” are Defendants

who seek to void an assertion of Aequitas’s primary liability. ORS § 59.275; see Ainslie v. First

Interstate Bank of Oregon, N.A., 148 Or. App. 162, 175-76 (1997) (noting that under ORS §

59.115(3), derivative liability of nonseller for participation or material aid can be established if the

seller committed a violation); Anderson v. Carden, 146 Or. App. 675, 683 (1997) (noting liability

of a nonseller participant is predicated on the violation of the seller). Thus, it is clear that

Defendants have the burden of pleading and proving the Disputed Securities were “federal covered

securities” and thus exempt from registration under Rule 506(b). Accord S.E.C. v. Platforms

Wireless Int’l Corp., 617 F.3d 1072, 1085-86 (9th Cir. 2010) (after evidence of registration violation

is introduced, defendant has burden of proof in showing entitlement to exemption); Murphy, 626

F.2d at 641 (same); S.E.C. v. Alternate Energy Holdings, Inc., Case No. 1:10-cv-00621-EJL-REB,

2014 WL 2515710, at *5 (D. Id. May 13, 2014) (determining under federal parallel Section 5 that

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where defendants alleged offers were not public and no registration violation occurred, defendants

had burden of showing entitlement to private offering exemption). 

In the SAC, Plaintiffs allege that Defendants do not qualify for a Regulation D exemption

because all offers and sales of the Disputed Securities during the class period should be integrated

and because Aequitas engaged in general solicitations and advertising. 17 C.F.R. § 230.502(a)

(providing that to satisfy Regulation D exemption, the court considers whether all offers and sales

should be integrated); 17 C.F.R. § 230.502(c) (providing that to satisfy Regulation D exemption,

issuers may not engage in general solicitation or advertising); 17 C.F.R. § 230.506(b) (providing that

to satisfy private offering exemption, offers and sales must satisfy the general conditions of Rule

502, and specific conditions in Rule 506); Schooler, 106 F.3d at 1163 (“The first issue under Rule

506(b) is to determine the number of offerings.”). As the parties acknowledge, the court employs

a multi-factor test to determine whether discrete offerings should be integrated for purposes of

evaluating compliance with the registration requirements. Defs.’ Reply Supp. Joint Mot. at 7, ECF

No. 300; Pls.’ Mem. Opp’n Joint Mot. at 8, ECF No. 287; see Murphy, 626 F.2d at 644-45

(examining test for private offering exemption, including the number of offerees, theirsophistication,

the size and manner of the offering, and the relationship of the offerees to the issuer); Alternate

Energy Holdings, 2014 WL 2515710, at *5 (same). Those factors include: “(a) Whether the sales

are part of a single plan of financing; (b) Whether the sales involve issuance of the same class of

securities; (c) Whether the sales have been made at or about the same time; (d) Whether the same

type of consideration is being received; and (e) Whether the sales are made for the same general

purpose.” 17 C.F.R. § 230.502(a). 

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Defendants argue that the court should reject Plaintiffs’ attempts to plead an “integrated

offering” for two reasons: (1) the court rejected it as a matter of law in the April F&R; and (2)

Plaintiffs have not pleaded sufficient facts to show integration under Rule 8. The court disagrees.

In the April F&R, the court rejected Plaintiffs’ integrated offering theory as means of

determining secondary liability. April F&R at 30-31. However, the court’s ruling did not foreclose

Plaintiffs from alleging that the assorted Aequitas offerings be integrated to assess whether they

satisfy an exemption to determine Aequitas’s primary liability for failing to properly register the

Disputed Securities. Thus, the court rejects Defendants’ first argument. 

Turning to Defendants’ second argument, the court concludes Plaintiffs have plausibly

alleged sufficient facts to set forth non-registration violations of ORS § 59.055. Plaintiffs’ pleadings

satisfy Rule 8 and amply put Defendants on notice of their contention that the offerings should be

integrated and that Defendants engaged in solicitations and advertising in evaluating whether the

disputed securities were private offerings exempt from the registration requirements. 

Contrary to Defendants’ arguments, Plaintiffs have alleged facts that go beyond mere

recitation of the elements that the Disputed Securities were not registered under federal or Oregon

law, including alleging particularized facts for each Aequitas security. In the SAC, Plaintiffs allege

that ACF owned all or part of equity interests in AIOF, AIOF-II, AEIF, and AMLF, and that AIPF

and ACF expressly guaranteed all of the AMLF notes. SAC ¶ 32. Additionally, Plaintiffs allege that

Aequitas created ACOF with the express purpose of swapping funds for ownership interests in

various entities. Id. Plaintiffs allege that the ACF Notes were sold as part of a single plan of

financing and the same class of securities and for the purposes of funding ACF, AIM, Holdings and

other Aequitas entities. SAC ¶¶ 33(a). Plaintiff’s contend that ACF and other affiliated companies

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relied on investor funding, and senior secured institutional credit to finance their operations, and

shifted funds around through inter-companyloans and asset transfers. SAC ¶ 33(b). Plaintiffs assert

the sales of ACF Notes occurred on or about the same time as the sales of other securities, and that

they were substantially the same class of securities. SAC ¶¶ 33(b)-(c). Plaintiffs allege that the

securities came in different forms, such as promissory notes and limited liability company and

partnership interests, they all were reliant on ACF for repayment, and all were subordinate to the

senior secured institutional lenders. SAC ¶ 33(d). And, Plaintiffs assert that the ACF Note

purchasers all received substantially the same type of consideration. SAC ¶ 33(e). Plaintiffs have

made similarly specific allegations for each security about which a non-registration violation is

asserted. SAC ¶¶ 38, 43, 48, 53, 58, 63 (making similar allegations for AIOF Notes, AIPF Interests,

ACOF Interests, AIOF-II Notes, AEIF Interests, and AMLF Notes). Thus, the non-registration

violation allegations in the SAC more than adequately give Defendants fair notice of the nonregistration claims asserted and allege specific facts concerning the integration of the various

Aequitas offerings. 

Likewise, Plaintiffs allege that the Disputed Securities do not qualify for a Regulation D

exemption because the issuers of Aequitas securities engaged in general solicitations or advertising.

Plaintiffs assert that issuers of ACF Notes, including Defendant Integrity, engaged in general

solicitations and general advertising, promoted ACF Notes to prospective investors or their advisors

via road shows. SAC ¶¶ 36 (a)-(c). Plaintiffs allege that issuers of ACF Notes widely disseminated

promotional and marketing materials to investors with whom they did not have a preexisting

relationship. SAC ¶¶ 36 (a)-(c). Plaintiffs allege that ACF Notes were marketed and sold between

January 2006 and December 2015, to persons with whom the issuer did not have a preexisting

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relationship. SAC ¶¶ 33, 36(a)-(b). Plaintiffs allege the issuer of ACF Notes and persons acting

on its behalf engaged in roadshows and widely disseminated promotional, marketing, offering and

sales materials to investors or investment advisors with whom the issuers did not have a substantial

prior existing relationship. SAC ¶¶ 36(b)-(c). Plaintiffs make similarly specific allegations for each

security about which a non-registration violation is asserted. See SAC ¶¶ 41, 46, 51, 56, 61, 66

(making similar allegations for AIOF Notes, AIPF Interests, ACOF Interests, AIOF-II Notes, AEIF

Interests, and AMLF Notes). Defendants’ contention that they are unable to understand the factual

underpinnings of Plaintiffs’ non-registration claims to sufficientlyprepare a defense isflatlyrejected. 

To summarize, the court concludes after reviewing the non-registration allegations in

paragraphs 33 to 67 of the SAC, Plaintiffs plausibly allege violations of ORS §§ 59.055 and

59.115(1)(a). Defendants may include as an affirmative defense allegations as to whether any of the

Disputed Securities are federal covered securities and thus exempt from registration should they

choose to do so in their Answers. Defendants’ motion to dismiss on this basis should be denied. 

B. Allegations of Aequitas’s Primary Liability for Untrue Statements of Material Fact

or Omissions under ORS §§ 59.115(1)(b) and 59.135(2) Comport with Rule 9(b)

In their second theory of primary liability, Plaintiffs contend Aequitas successfully solicited 

or sold securities “by means of” untrue statements of material fact or omissions, and “directly or

indirectly, in connection with the purchase or sale of any security” made untrue statements of

material fact or omissions violating ORS §§ 59.115(1)(b) and 59.135(2). In the April F&R, the court

determined that Plaintiffs must plead these claims with particularity under Rule 9(b) because such

allegations sound in fraud. April F&R at 24. Additionally, the court determined that Plaintiffs are

required to “allege actions by specific Aequitas entities and differentiate between the securities sold

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by Aequitas entities.” April F&R at 32. The court also stated that under ORS § 59.115(1)(b),

Plaintiffs must plead actionable misrepresentations or omissions connected to a sale or group of sales

of a security, and need not plead individual receipt of or reliance upon the misleading

communication. April F&R at 48. The court dismissed numerous allegations from the FAC, and

instructed Plaintiffs that to comport with Rule 9(b) they must allege “which Aequitas entity made

a misrepresentation or material omission, when and where the statement was made, and what was

misleading about the statement when made” and that the alleged misleading statement must “precede

the sale.” April F&R at 48-49. 

In the instant Joint Motion, Defendants contend that Plaintiffs’ allegations of misleading

statements and omissions fail to connect any PPM with any particular sales transaction, and fail to

connect a specific PPM to Plaintiffs’ specific purchases. Defs.’ Joint Mot. Dismiss at 15. 

Defendants argue that although the court determined that Plaintiffs do not need to plead they

personally received or relied upon any given misstatement, they are required to identify “the specific

document ‘by means of which’ securities were sold to them.” Defs. Joint Mot. Dismiss at 16. 

According to Defendants, Plaintiffs in effect have alleged all of them have been misled by all of the

misstatements in all of the PPMs. 

Plaintiffs respond that they have identified the specific misstatements, untrue statements, or

material omissions in each PPM and investment documentation, and have identified which Disputed

Security each Plaintiff purchased, and when their purchases were made. According to Plaintiffs,

requiring them to provide additional detail linking a specific PPM to their purchases imposes a

reliance requirement, contrary to controlling law. 

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As the court discussed in the April F&R, a primary violation of ORS § 59.115(1)(b) does not

require reliance on a misrepresentation or omission. April F&R at 44; Everts v. Holtmann, 64 Or.

App. 145, 152 (1983) (“ORS 59.115(1)(b) imposes liability without regard to whether the buyer

relies on the omission or misrepresentation.); Sanders v. John Neuveen &Co., 619 F.2d 1222, 1226-

27 (7th Cir. 1980) (cited with approval in Everts) (“To require a plaintiff to have received a

commercial paper report before purchasing, as defendants would have us do, would tend toward

erroneously imposing a reliance requirement”). The corresponding federal statute, 15 U.S.C. § 77l,

also does not require a plaintiff to plead reliance. Sanders, 619 F.2d at 1226 (finding that under the

federal corollary section 12(2) “its terms do not require that the particular sale to an individual

plaintiff be directly by means of the prospectus alleged to be misleading”); Everts, 64 Or. App. at

152. Adopting Defendants’ interpretation of the “by means of” language in ORS § 59.115(1)(b)

would improperly insert a reliance element into the statute. 

Defendants’ reliance on In re Galena Biopharma, Inc. Sec. Litigation, 117 F. Supp. 3d 1145

(D. Or. 2015), is misplaced. There, the court was examining securities fraud violations under section

10(b), codified at 15 U.S.C. § 78j. Galena, 117 F. Supp. 3d at 1163. Section 10(b) claims must be

pleaded under the heightened requirements of the Private Securities Litigation Reform Act and must

contain elements of reliance, loss, and causation. Id. In contrast, here Plaintiffs allege

misrepresentations under ORS §§ 59.115(b) and ORS 59.135(2), and their relevant parallel federal

statute, section 12(2), codified at 15 U.S.C. § 77l, does not require Plaintiffs to plead the type of

reliance or causation as those claims arising under section 10(b). See Casella v. Webb, 883 F.2d 805

(9th Cir. 1989) (distinguishing between causes of action under sections 12(2) and 10(b)); Hudson

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Case 3:16-cv-00580-AC Document 340 Filed 08/01/18 Page 18 of 62
v. Sherwood Sec. Corp., Case No. C-86-20344 WHI, 1993 WL 165645, at *6 (N.D. Cal. May 14,

1993) (same, citing Sanders with approval).5

Yet, the “by means of” language in ORS § 59.115(1)(b) implies some nexus between the

untrue statement of material fact or omission and the subsequent sale or solicitation. Thus, Plaintiffs

must allege some connection, less than receipt or reliance, between their purchases and the specific

statements or omissions. Therefore, as the court determined in the April F&R, to properly plead

their claims under ORS § 59.115(1)(b) in this case, Plaintiffs must plead facts sufficient to show (1)

which Aequitas entitymade amisrepresentation or material omission, when and where the statement

was made, and what was misleading about the statement when made, and (2) the allegedly

misleading communication preceded their purchases from particular Aequitas entities. April F&R

at 48-49; see also Wurster et al v. Deloitte &Touche, LLP, Case No. 16CV25920 (Mult. Co. Circuit

Court Mar. 1, 2018), Op. & Order re: Mot. Dismiss at 3 (“Wurster Op. & Order”) (“Thus, the Court

holds that for Plaintiffs to adequately plead that securities are sold ‘by means of’ a false or

misleading statement, each Plaintiff in this case must allege (1) which fund theypurchased from, and

(2) that a false or misleading statement relating to that fund existed at the time of each Plaintiff’s

purchase.”).

5

 Defendants appear to move to strike allegations that there are false and misleading

statements in PPMs issued by AEIF and APCF because no Plaintiff is alleged to have purchased

any AEIF or APCF security. Defs’ Joint Mot. Dismiss at 19-20. The court concludes that

Plaintiffs have sufficiently alleged that AEIF and APCF are connected to ACF, AIM, and

Holdings to avoid dismissal of these allegations at this stage. SAC ¶¶ 31, 58-62. Additionally,

the allegations are relevant to Plaintiffs’ assertion that the offerings should be integrated.

Defendants’ motion to dismiss or strike the allegations against AEIF and APCF should be

denied. 

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In the SAC, Plaintiffs have identified various PPMs and investment documentation that are

alleged to contain numerous untrue statements of material fact and/or omissions of material fact

necessary to make the statements made, in light of the circumstances under which they were made,

not misleading. Broadly speaking, Plaintiffs allege the various Aequitas securities were marketed

as stable, secure, and liquid investments that had strong asset coverage, and were backed by

guarantees and recourse agreements, when in realityassetswere overstated, underlying collateral was

worthless, and new investments were used to satisfy existing obligations to other Aequitas entities.

The SAC identifies ACF PPMs dated June 9, 2010; December 1, 2011; November 30, 2012;

November 30, 2013; September 9, 2015; and October 27, 2015; as well as ACF Supplements dated

March 1, 2013; and October 16, 2015. SAC ¶¶ 136-141, 144, 146. The SAC identifies AIOF PPMs

dated July 1, 2011; March 1, 2012; December 31, 2012; and February 12, 2012. SAC ¶¶ 147-150. 

The SAC identifies an AIOF-II PPM dated October 31, 2014. SAC ¶¶ 151-152. The SAC identifies

an ACOF PPM dated February 2014, and ACOF Supplements dated August 2014; November 2014;

and February 2015. SAC ¶¶ 153-156. The SAC identifies AIPF PPMs dated September 30, 2011;

December 14, 2011; February 15, 2012; June 1, 2012; and December 31, 2012. SAC ¶¶ 158-162. 

The SAC identifies AEIF PPMs dated October 1, 2014; January 1, 2015; and December 14, 2015. 

SAC ¶¶ 163-165. The SAC identifies AMLF Note investment documentation and marketing

materials beginning in April 2015. SAC ¶ 63. For each of the ACF, AIOF, AIOF-II, ACOF, AIPF,

AEIF PPMs and their relevant Supplements, and the AMLF Note investment documentation,

Plaintiffs allege either specific affirmative untrue statements that were false when included in the

PPMs or investment documentation, or materially omitted information that because such facts were

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not included in the PPMs or investment documentation, the PPMs and investment documentation

were misleading. 

Moreover, Plaintiffs have each identified a specific Aequitas security they purchased, and

the dates of the sales. SAC ¶¶ 196-202. Plaintiffs’ allegations satisfy the “by means of” language

in the statute because the alleged untrue statements or material omissions in the PPMs and

investment documentation preceded Plaintiffs’ purchases from those particular funds. 

In summary, the court has examined Plaintiffs’ allegations under ORS §§ 59.115(1)(b) and

59.135(2) and, construing the facts and all reasonable inferences in Plaintiffs’ favor, concludes that

Defendants’ Joint Motion to Dismiss on this basis should be denied.6 

C. Plaintiffs’ Allegations Adequately Invoke the Discovery Rule

1. Standards

 The statute of limitations for Plaintiffs’ non-registration claims under ORS §§ 59.055 and

59.115(1)(a) is three years. See ORS § 59.115(6). Additionally, the statute of limitations for

Plaintiffs’ allegations under ORS §§ 59.115(1)(b) and 59.135 is three years from the date of the sale,

or two years from the date the action should have been discovered, whichever date is later. See ORS

§ 59.115(6). “Failure to commence an action on a timely basis is an affirmative defense.” ORS §

59.115(6). 

6

 In their Joint Motion, Defendants additionally contend that Plaintiffs have failed to

adequately allege scienter on the part of each particular Aequitas entity involved in the

challenged transactions. Defs.’ Joint Mot. Dismiss at 15 n.8. In the April F&R, the court

concluded that Plaintiffs had alleged facts supporting a plausible inference of scienter. April

F&R at 24. Having carefully reviewed the allegations in the SAC, the court concludes that the

SAC also generally alleges facts supporting a plausible inference of scienter. 

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“A claim may be dismissed under Rule 12(b)(6) on the ground that it is barred by the

applicable statute of limitations only when ‘the running of the statute of limitations is apparent on

the face of the complaint.’” Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 

969 (9th Cir. 2010) (quoting Huynh v. Chase Manhattan Bank, 465 F.3d 992, 997 (9th Cir. 2006));

Stewart v. Rock Tenn CP, LLC, Case No. 3:13-cv-02147-AC, 2015 WL 1883910, at *3 (D. Or. Apr.

24, 2015). “To dismiss a claim as untimely on a motion to dismiss, it must be clear from the

complaint and any adjudicative facts properly before the court on judicial notice that a plaintiff’s

claims are untimely.” Port of Portland v. Monsanto Co., Case No. 3:17-cv-00015-PK, 2017 WL

4236561, at *4 (D. Or. Sept. 22, 2017) (denying motion to dismiss on statute of limitations grounds);

accord Supermail Cargo, Inc. v. United States, 68 F.3d 1204, 1207 (9th Cir. 1995) (a “complaint

cannot be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts that

would establish the timeliness of the claim”). 

The parties agree that Oregon law sets forth the appropriate statute of limitations period. 

Defendants contend, however, that Plaintiffs have failed to sufficientlyplead facts to invoke the twoyear discovery rule of ORS § 59.115(6). Loewen v. Galligan, 130 Or. App. 222, 115 (1994)

(discussing statute of limitations for securities fraud under ORS § 59.115(1)(b)); TRM Corp v.

Paulsell, Case No. CV-02-215-ST, 2002 WL 31549112, at *2 (D. Or. June 4, 2002) (noting

generally that fraud and deceit claims are governed by a two year statute of limitations, and that

plaintiffs must plead facts justifying their delayed discovery); see also Kastle v. Salem Hospital, et

al., 284 Or. App. 342, 353 (2017) (holding that to withstand a motion to dismiss, “it is enough if

[the] complaint does not show itself to be untimely”). The court must accept as true all well pleaded

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allegations of fact and infer all reasonable inferences in Plaintiffs’ favor. See Zucco Partners, LLC

v. Digimarc Corp., 552 F.3d 981, 989 (9th Cir. 2009). 

2. Analysis

In their Joint Motion, Defendants argue that Plaintiffs’ non-registration claims are timebarred for sales occurring before April 4, 2013. Plaintiffs do not assert non-registration claims under

ORS §§ 59.055 and 59.115(1)(a) occurring before April 4, 2013. SAC ¶ 213. Thus, the court

addresses Defendants’ arguments only as they pertain to allegations of untrue statements of material

fact and omissions. Defendants argue that the fraud claims for sales occurring between June 9, 2010,

and April 3, 2013, are barred by the three-year statute of limitations and that Plaintiffs’ allegations

are insufficient to invoke the two-year discoveryrule under ORS § 59.115(6) because Plaintiffs have

failed to plead sufficient facts demonstrating that they could not have discovered the alleged

violations earlier. Defendants maintain that Plaintiffs should have been on notice of their claims by

June 2013 when there was widespread criticism of Corinthian’s business practices, and that by late

2013, federal regulators were going to stop Corinthian’s ability to obtain federal student loan

financing as alleged in SAC paragraphs 95 and 138(j). The court disagrees. 

In the SAC, Plaintiffs allege that they discovered the potential securities law violations on

or about February 2, 2016, when they received a letter from ACF informing them that ACF had been

unable to satisfy redemption requests since November 2015. SAC ¶ 184. Plaintiffs argue that their

delay in discovering the alleged securities violation was not their lack of diligence, but rather the

complex web of companies created by Aequitas that manufactured an appearance of financial

strength and their manipulation of the asset values carried on their books that hid Aequitas’s true

financial picture. Plaintiffs contend that the bulk of their misrepresentations and omissions

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allegations set out undisclosed facts about Aequitas’s business failures (SAC ¶¶ 68-69), use of

investor funds to repay other investors (SAC ¶¶ 70-77), dependence upon renewals (SAC ¶¶ 78-79),

and overstated asset valuations (SAC ¶¶ 80-135). 

For example, with respect to Corinthian, Plaintiffs allege that in June 2011, ACF entered into

a Student Loan Program Agreement (“SLPA”) with Corinthian whereby ACF purchased private

student loans that bore no risk of loss, and ACF retained the right to require Corinthian to repurchase

any loans that were more than 90 days past due. SAC ¶ 93. Additionally, Plaintiffs allege that a

wholly owned subsidiary of ACF bought $561 million in face value of Corinthian student loan debt

between 2011 and 2014. SAC ¶ 64. And, Plaintiffs further allege that ACF overstated the value of

its student loan receivables and admitted as much in later 2013-2014 financial statements. SAC ¶

97. Furthermore, Plaintiffs allege that had the true value of the student loan receivables been

reported in 2012, ACF would have been rendered insolvent. SAC ¶¶ 97-98. Indeed, Plaintiffs allege

that ACF continued to improperly overstate the value of the Corithian loans well into 2014. SAC

¶¶ 100-106. Contrary to Defendants’ contention, Plaintiffs allege that due to ACF’s asset value

manipulation and ACF’s complex inter-connectedness of its subsidiaries, the potential securities

fraud violations related to Corithian were not discoverable in late 2013. Based on these allegations,

the court cannot conclude that only one interpretation reasonably can be drawn and/or that it is clear

on the face of the complaint that Plaintiffs’ claims are untimely. Therefore, the court concludes that

Plaintiffs have alleged facts that, if true, would establish the timeliness of their claims. Supermail,

68 F.3d at 1207; Port of Portland v. Monsanto, 2017 WL 4236561, at *4 (recognizing that where

there is a question of fact about when a claim accrued, dismissal on statute of limitations grounds

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Case 3:16-cv-00580-AC Document 340 Filed 08/01/18 Page 24 of 62
is improper). Accordingly, Defendants’ motion to dismiss Plaintiffs’ claims as untimely should be

denied. 

 In summary, Defendants’ Joint Motion to Dismiss the Second Amended Complaint (ECF

No. 278) should be DENIED. 

IV. Deloitte’s Mot. Dismiss (ECF No. 277), Plaintiffs’ Response (ECF No. 289), Deloitte’s

Reply (ECF No. 299)

Deloitte was the external auditor for certain Aequitas entities for fiscal years ending

December 31, 2013, and December 31, 2014. In the April F&R, the Court denied Deloitte’s earlier

motion to dismiss, finding that Plaintiffs had plausibly alleged Deloitte’s “participation and material

aid in at least some securities transactions by ACF, AIOF, AIOF-II, ACOF, and Motolease.” April

F&R at 61, 63-64. Additionally, the court indicated Plaintiffs plausibly alleged Deloitte’s

“participation and material aid in securities transactions conducted by means of PPMs and

promotional materials identifying Deloitte as auditor, and use of Deloitte-audited financial

statements as promotional materials.” April F&R at 63-64. However, the court concluded that the

FAC “insufficiently differentiates between the Aequitas entities, the securities they sold, and the

groups of securities sold by means of misleading securities, and therefore “deferred determination

of the sufficiency of Deloitte’s alleged acts of participation and material aid to an amended

complaint.” April F&R at 61. Deloitte now moves under Rules 8 and 12(b)(6) to dismiss the

secondary liability claims against it asserted by Plaintiffs under ORS § 59.115(3). 

In its current motion, Deloitte makes two arguments: (1) Plaintiffs have failed to specifically

identify which PPMs and promotional materials identified Deloitte as auditor “by means of” which

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they purchased their investments; and (2) Plaintiffs have failed to allege a causal relationship

between it and the sales of securities to Plaintiffs. Deloitte Mot. Dismiss at 2-3. 

Plaintiffs respond that in the April F&R, they were given leave to amend their allegations of

primary liability against the various Aequitas entities, and that they have now done so. Plaintiffs

argue they were not required to identify a causal relationship between Deloitte and Plaintiffs’

particular purchases and that Deloitte’s argument otherwise misconstrues the Court’s April F&R. 

The court detailed the legal standards for non-seller liability in the April F&R and repeats

those standards here only as relevant to this discussion. See April F&R at 53-59. As the court

observed, “a non-seller’s liability depends upon the importance of their conduct – participation or

aid – to the sale.” April F&R at 54. Thus, when considering secondary liability for participation and

material aid under ORS § 59.115(3), the court examines whether (1) the non-seller’s conduct

reflected some knowledge, judgment or specialized skill that materially aided the transaction, and

(2) whether the non-seller’s interactions with a seller have a causal relationship with an unlawful

securities transaction. April F&R at 58; Prince v. Brydon, 307 Or. 146, 149, 151 (1988); Adams v.

American Western Secs., 265 Or. 514, 529-30 (1973). Accord Wurster Op. & Order at 6, ECF No.

322-2 (explaining that to state a claim for relief for secondary liability under ORS § 59.115(3)

plaintiff must plead: (1) each Defendant aided the sale in that the extent and importance was

material; and (2) an allegation of causality – that each Defendant aided the sale).

Deloitte’s first argument – that Plaintiffs have failed to allege that any of the sales were

conducted “by means of” PPMs and promotional materials identifying Deloitte as auditor – is not

well-taken. Deloitte’s Mot. Dismiss at 10-11. To begin, the language “bymeans of” does not appear

in ORS § 59. 115(3). The “by means of” language appears in the section of the statute setting out

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primary liability; secondary liability is premised on the non-seller’s participation and material aid. 

Next, as discussed above, the court has rejected Deloitte’s narrow construction of the “bymeans of”

language. See infra at 15-18. Contrary to Deloitte’s contention, Plaintiffs are not required to plead

reliance and receipt of its work product to state a proper claim under ORS § 59.115(3). Plaintiffs

may plead a sufficient causal nexus by alleging that Deloitte audited the financial information of an

Aequitas entity or that Deloitte’s name appeared in promotional materials prior to the sales. See

infra at 15-18; April F&R at 58; Wurster Op. & Order at 11. 

In the SAC, Plaintiffs identify numerous PPMs and promotional materials identifying

Deloitte as auditor, beginning on November 30, 2013. See SAC ¶¶ 140, 144, 146, 151, 152, 153,

157, 163, 164, 165, 166. Plaintiffs distinguish among the various Aequitas entities and they

separatelyidentifythose entities and investment vehicles for which Deloitte provided auditing. SAC

¶ 190(a). Furthermore, Plaintiffs allege that Deloitte’s auditing permitted Aequitas to undertake

transfers with other Aequitas entities outside of the Deloitte-audited fundraising group that allowed

Aequitas as whole to appear financially healthy. SAC ¶ 190(b). Plaintiffs allege that Deloitte’s

“clean audits” enabled Aequitas to attract new investors and retain current investors, and comply

with the Investment Advisors Act of 1940. SAC ¶ 190(b). Plaintiffs also allege that SEC rules

require the distribution of audited financials, and that Deloitte knew it was identified as the auditor

for Aequitas funds in public disclosures filed with the SEC, including AIM’s Form ADVs (Part 1A)

dated March 24, 2014. SAC ¶¶ 190(d)-(f). Moreover, Plaintiffs allege that by permitting Aequitas

entities to use Deloitte’s name in marketing and promotional materials, Deloitte gave Aequitas

entities clout with prospective and existing investors. SAC ¶ 190(c). Considering these allegations

in the light most favorable to Plaintiffs, the court concludes that Plaintiffs plausibly allege that

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Deloitte provided professional services to Aequitas as a whole that reflected Deloitte’s particular

skill and judgment that materially aided unlawful securities transactions. 

Deloitte’s second argument – that Plaintiffs have failed to plead a “causal connection” – 

similarly fails. Plaintiffs allege Deloitte’s participation and material aid began September 13, 2013. 

In its briefing, Deloitte acknowledges that it issued 2013 year-end financial audit opinions for ACF,

ACOF, AMLF, AIPF, and AIOF, but contends it did not do so until April and May of 2014. 

Deloitte’s Mot. Dismiss SAC at 4. Additionally, Deloitte acknowledges that it issued 2014 year-end

financial audit opinions for ACF, ACOF, AIPF, AOIF, and AIOF-II, but completed that work in

March, April, and May of 2015. Id. Although Deloitte signed an engagement letter with Aequitas

on September 13, 2013, Deloitte’s name is not alleged to appear in any promotional or marketing

materials until November 30, 2013, when its name appeared as auditor in an ACF PPM. SAC ¶¶

140, 190(a); Masuda Decl. Ex. 3 at 7, ECF No. 279-3. Based on these detailed allegations, the court

determines that Plaintiffs plausibly allege a causal connection between Deloitte and all sales

occurring after November 30, 2013. Therefore, Plaintiffs’ claims based on sales before November

30, 2013 should be dismissed as alleged against Defendant Deloitte. 

In short, Plaintiffs plausibly allege Deloitte’s participation and material aide in the sale of

securities after November 30, 2013 under ORS § 59.115(3). Deloitte’s Motion to Dismiss the SAC

(ECF No. 277) should be GRANTED IN PART as to sales occurring before November 30, 2013,

specifically: SAC ¶¶ 196(a), 197 (first sentence only), 198(a), 199(b), 200(a), and 201(a)&(b). 

Deloitte’s Motion should be DENIED on all other grounds. 

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V. Sidley’s Motion to Dismiss (ECF No. 272), Plaintiffs’ Response (ECF No. 288), Sidley’s

Reply (ECF No. 296)

 

Defendant Sidley is alleged to have participated and materially aided the sale of securities

beginning no later than April 5, 2013. SAC ¶ 192. Plaintiffs generally allege Sidley provided legal

services to ACF and other Aequitas entities in connection with the sale of securities, including

preparing a PPM for the sale of securities in ACOF in February 2014. SAC ¶¶ 153, 192(a)-(c). 

In the April F&R, the court dismissed claims against Sidley with leave to amend because

Plaintiffs’ allegations of Aequitas’s primary liability were insufficient, thereby rendering the

secondary liability allegations against it also insufficiently alleged. April F&R at 68. In the FAC, 

the sole allegation of a misleading statement by ACOF was an alleged omission in a 2014 PPM, and

the court concluded that the statement failed to identify an affirmative statement made false by the

omission. April F&R at 69. The court also dismissed the secondary liability claim against Sidley

for participation and material aid under ORS § 59.115(3) because the allegations that it provided

unspecified legal services to AIM failed to set forth with particularity how its services related to the

sale of Aequitas entities’ sale of securities. April F&R at 69. Finally, the court determined that

Plaintiffs provided some detail about Sidley’s actions promoting an image of success byalleging that

Sidley provided legal services to an unspecified Aequitas entity that enabled it to isolate its

healthcare receivables from investors and pledge those assets as collateral to receive a bank loan to

aid further securities sales. April F&R at 69. However, the court instructed Plaintiffs to specify

when Sidley enabled the transaction, which security(ies) the transaction related to, and which sales

the transaction enabled. April F&R at 69. 

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In its current motion, Sidley argues that other than allegations concerning ACOF, Plaintiffs

have failed to correct any of the deficiencies identified by the court. Pursuant to Rules 8 and

12(b)(6), Sidley moves to dismiss all allegations against it, except those concerning ACOF. As

discussed above, the court has determined that Plaintiffs have alleged plausible claims of primary

liability. And, as Sidley acknowledges, Plaintiffs’ allegations against it concerning ACOF readily

sets out a plausible claim of participation and material aid under ORS § 59.115(3) for all sales after

February 2014. SAC ¶ 192(c). 

With respect to Sidley’s argument that Plaintiffs have failed to plead a causal connection

between it and various non-ACOF entities’ securities offerings to establish secondary liability, the

court concludes Plaintiffs have plausibly set forth a claim for relief for Sidley’s participation and

material aid for sales occurring after April 5, 2013. The court concludes that Plaintiffs: (1) plausibly

allege that Sidley’s material aid or participation reflected its knowledge, judgment, or specialized

skill that enabled the non-ACOF securities transactions; and (2) plausibly allege that Sidley’s

interactions with Aequitas have a causal connection to their securities transactions occurring after

April 5, 2013. 

In SAC paragraph 192(d), Plaintiffs allege that Sidley prepared a legal opinion confirming

that Aequitas, and ACF specifically, was in compliance with the Investment CompanyAct. See also

SAC ¶ 191 (alleging failure to comply with an exemption to the Investment Company Act prohibits

further business). Plaintiffs allege that Sidley prepared the legal opinion confirming ACF’s

compliance on April 5, 2013, at the request of EisnerAmper, and that absent the opinion,

EisenerAmper could not have issued a clean audit, and Aequitas could not have continued selling

any securities. SAC ¶ 192(d). Plaintiffs allege that on June 21, 2011, Defendant Tonkon provided

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a legal opinion about ACF’s apparent compliance with an exemption to the Investment Company

Act, and advising ACF to seek additional guidance from the SEC. SAC ¶ 191(b). Additionally,

Plaintiffs allege that Sidley knew at the end of 2014 that ACF was no longer in compliance with the

Investment Company Act, that Sidley advised Aequitas how to regain compliance, and that Deloitte

relied upon Sidley’s repeated assurances in an SEC investigation into the matter. SAC ¶ 192(e). 

Plaintiffs have plausibly alleged that Sidley’s conduct reflected its knowledge, judgment, and skill

that materially aided or participated in the sales of securities with respect to ACF and Aequitas as

a whole. Thus, contrary to Sidley’s contention, Plaintiffs have plausibly alleged specific actions –

providing legal advice and opinions to ACF regarding compliance – that causally connects Sidley

to ACF and Aequitas as a whole to all securities offerings occurring after April 5, 2013. 

Plaintiffs have set forth specific allegations of Sidley’s conduct with respect to AIPF, AIOF,

AIOF-II, and AMLF to state a claim of material aid and participation. In SAC paragraph 192(f),

Plaintiffs allege that Sidley learned of Integrity’s interpretation of an exemption to the Investment

Company Act was incorrect, and therefore AIPF was not in compliance. Plaintiffs allege in July

2014, Aequitas liquidated AIPF. SAC ¶ 192(f). Plaintiffs also allege that Sidley then assisted

Aequitas to create a structure that would permit Integrity to act as an aggregator of individual

investments (the intent behind AIPF) via AIOF-II. SAC ¶ 192(f). Plaintiffs allege that AIOF-II was

set up to retain AIPF investor money to avoid a liquidity crisis. SAC ¶ 192(f). Again, the court

concludes that Plaintiffs plausiblyallege that Sidley’s conduct required its knowledge, judgment, and

skill that materially aided the sale of securities in AIPF and AIOF-II and that are causally connected

to sales occurring after July 2014. 

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Regarding AMLF, Plaintiffs allege that Sidley advised Aequitas that the notes it sold

pursuant to its “Note Manufacturing Program” were not securities, and thus sold the notes without

PPMs or other risk disclosures. SAC ¶ 192(h). Plaintiffs allege that Aequitas acted as its own

investment advisor through Aequitas Investment Management (“AIM”). SAC ¶ 189(f). Plaintiffs

allege that to do so, Aequitas needed to comply with the Investment Advisors Act, which required

it to obtain an annual audit for each of the Aequitas funds and distribute the annual audited

statements to investors. SAC ¶ 189(f). Plaintiffs further allege that Sidley advised AIM with respect

to its management of various funds, including AIPF, AIOF, AIOF-II, ACOF, AETC, and AEIF. 

SAC ¶ 192(i). Plaintiffs allege that the promise of annually audited financial statements featured

prominently in AIM’s marketing and disclosure materials, including Form ADV, Part 2A. SAC ¶

190(d). Plaintiffs allege that Sidley’s actions with respect to Aequitas’s compliance with the

Investment Advisors Act and the Investment Company Act were material to the ability of Aequitas

to sell any securities after April 5, 2013. SAC ¶ 192(d). And, Plaintiffs allege that Sidley’s written

opinions in 2013 and 2014 enabled Aequitas to obtain clean audits from EisnerAmper and Deloitte.

SAC ¶¶ 192(d)-(e). Accepting these factual allegations as true and in the light most favorable to

Plaintiffs, the court concludes Plaintiffs have plausibly alleged Sidley’s actions reflected its

knowledge, judge, and particularized skill that materially aided the transactions with respect to

various AIM entities, including but not limited to ACF, ACOF, AMLF, AIPF, AIOF, and AIOF-II,

that causally connect Sidley to sales of all AIM securities after April 5, 2013. 

The court rejects Sidley’s contention that simply because law firm Tonkon is identified as

legal counsel in the PPMs for AIPF and AIOF, Plaintiffs have failed to allege Sidley played any role

in the offering of securities. A lawyer’s participation and material aid is not limited to the drafting

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of offering documents, and a causal relationship may exist even if the interaction is a routine part

of the professional’s work with the sellers of securities. See April F&R at 58-59; Prince, 307 Or.

at 149; Adams, 265 Or. at 528. Assuming the veracity of all allegations in the complaint, as the court

must at this stage, the court concludes that Plaintiffs have plausibly pleaded Sidley provided material

aid to Aequitas, ACF, AIPF, AIOF, AMLF, and AIM byissuing opinions and structuring entities that

lent stability and crediblity, reflecting Sidley’s knowledge and judgment for all sales of securities

after April 5, 2013. 

Furthermore, Plaintiffs have plausibly alleged a causal connection between Sidley’s alleged

material aid and participation and the sales of securities after April 5, 2013. To be sure, Plaintiffs

have alleged that Sidley was instrumental in confirming ACF’s compliance with the Investment

Company Act on April 5, 2013, without which ACF and Aequitas could not have continued selling

any securities. SAC ¶ 192(d). Plaintiffs also allege that in July 2014, Sidley assisted in creating a

structure by which Integrity could act as an aggregator for AIOF-II investments to avoid a liquidity

crisis. Accordingly, Plaintiffs have plausibly alleged a causal connection necessary to set forth a

claim of participation and material aid under ORS § 59.115(3) for sales after April 5, 2013. Thus,

Sidley’s motion to dismiss Plaintiff’s claims based on sales occurring before April 5, 2013 should

be granted. 

Likewise, the court is not persuaded bySidley’s arguments concerningPlaintiffs’ allegations

involving Wells Fargo and Bank of America. SAC ¶ 192(j). As noted above, the court dismissed

this claim in the April F&R with leave to amend to include additional detail. April F&R at 69. 

Plaintiffs have done so. Plaintiffs have alleged that Sidley provided a legal opinion in 2015 about

ACF’s status under the Investment Company Act that enabled Aequitas to isolate its health care

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receivable assets from investors and pledge them as assets. SAC ¶ 192(j). Plaintiffs assert Sidley’s

advice enabled Aequitas to pledge those assets as collateral for loans with Wells Fargo and Bank of

America, which promoted the illusion of success and legitimacy to perpetuate continued sales of

securities. SAC ¶ 192(j). These allegations are sufficient to establish a causal connection between

Sidley and the sale of securities to survive a motion to dismiss. Again, accepting such allegations

as true, the court concludes Plaintiffs plausibly allege Sidley’s participation and material aid that is

causally connected to securities sales after April 5, 2013, under ORS § 59.115(3). Sidley’s motion

to dismiss on this basis should be denied. 

Finally, Sidley contends that Plaintiffs do not have standing to assert any claim against it

involving an Aequitas security they did not purchase. Sidley Mot. Dismiss at 16. The allegations

concerning AEIF are relevant to Plaintiffs’ non-registration violations and the AEIF and APCF

allegations may be relevant to Plaintiffs’ assertion that the various securities offerings be integrated. 

Therefore, Sidley’s motion on this basis should be denied. 

In summary, Sidley’s Motion to Dismiss the SAC (ECF No. 272) should be GRANTED IN

PART as against Sidley for sales occurring before April 5, 2013; specifically, SAC ¶¶ 197 (first

sentence only), 198(a), 199(b), 200(a), and 201(a). Sidley’s Motion should be DENIED on all other

grounds. 

VI. Duff’s Motion to Dimiss (ECF No. 269), Plaintiffs’ Response (ECF No. 291), Duff’s Reply

(ECF No. 297)

Duff moves to dismiss under Rules 12(b)(2) and 12(b)(6) on the following bases: (1) the

court lacks personal jurisdiction because Duff lacks minimum contacts with Oregon; (2) under

Bristol-Myers Squibb v. Superior Court California, 137 S. Ct. 1773 (2017), the court lacks personal

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jurisdiction over claims asserted by non-Oregon residents; (3) applying Oregon securities law extraterritorially violates the dormant Commerce Clause; (4) applying Oregon choice of law principles

requires dismissal of Plaintiffs’ claims; (5) other than ACOF, Plaintiffs have failed to state a

plausible claim that Duff participated or materiallyaided the sale of other securities; and (6) the court

should dismiss all claims based on the sale of any securities before February 2014, the first time

Aequitas communicated with investors in the ACOF PPM concerning Duff’s work. 

In response, Plaintiffs concede that the SAC alleges Duff’s joint and several liability

commences February 2014, but contend that the motion should be denied on all other grounds. 

A. The Court Has Specific Personal Jurisdiction

1. Legal Standards 

A party opposing a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2)

bears the burden of establishing that jurisdiction exists. Ranza v. Nike, Inc., 793 F.3d 1059, 1068

(9th Cir. 2015). When the defendant’s motion is based on written materials rather than an

evidentiary hearing, plaintiff need only make a prima facie showing of jurisdictional facts to

withstand a motion to dismiss. Id. A plaintiff may not rest on the bare allegations in the complaint,

but uncontroverted allegations may be taken as true. Schwarzenegger v. Fred Martin Motor Co., 374

F.3d 797, 800 (9th Cir. 2004). The court may not assume the truth of allegations that are

controverted, but resolves factual disputes contained in affidavits in a plaintiff’s favor. Mavrix

Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1223 (9th Cir. 2011); Schwarzenegger, 374 F.3d

at 800. 

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2. Jurisdictional Facts 

Duff is a Delaware company with its headquarters and principal place of business in New

York. Decl. Rebecca Macfie Supp. Duff’s Mot. Dismiss (“Macfie Decl.”) ¶ 3, ECF No. 270. Duff

is a financial services company specializing in valuing commercial assets. Id. at ¶ 4. Duff does not

maintain an office in Oregon, and does not own or lease property in Oregon. Id. at ¶ 5. Duff is

registered in the State of Oregon as a foreign limited liability company with an agent in Oregon for

receiving service of process. Id. at ¶ 9. 

In September 2013, William Ruh of AIM called Jack Clemens of Duff to discuss Duff

providing certain valuation services. Decl. Johnathan L. Jacobs Supp. Duff’s Mot. Dismiss (“Jacobs

Decl.”) ¶ 6, ECF No. 271. Clemens was then a Managing Director in Duff’s Atlanta, Georgia office. 

Decl. Jack Clemens Supp. Duff’s Mot. Dismiss (“Clemens Decl.”) ¶ 2, ECF No. 273; Jacobs Decl.

¶ 9. In December 2013, Duff sent an engagement letter to Craig Froude of AIM in Lake Oswego,

Oregon, in which it agreed to provide estimates of the fair value of three portfolio companies to be

held by ACOF, namely CarePayment/CPTI (“CPTI”), EDPlus Holdings /Unigo (“EDPlus”), and

ETC Global Holdings LLC (“ETC”). Jacobs Decl. ¶ 7. In the letter, Duff acknowledged that the

valuations were required for certain financial reporting requirements. Clemens Decl. Ex. A at 1. 

In the letter, Duff also agreed that its name and the nature of its services could be used in the ACOF

offering documentation, SEC filings, and investor conference calls. Id. at 8. Duff provided

valuations for CPTI, EDPlus, and ETC on three occasions: December 2013, July 2014, and

February-March 2015. SAC ¶ 195(c); Jacobs Decl. ¶ 10; Clemens Decl. ¶ 9. CPTI and EDPlus are

Oregon companies. SAC ¶ 135. Aequitas first disclosed the valuations and referenced Duff in

ACOF’s February 2014 PPM. Duff’s Mot. Dismiss at 3; SAC ¶ 195(c). In conducting the

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valuations, no Duff employee traveled to Oregon, but instead communicated with various Aequitas

individuals via email and telephone. Jacobs Decl. ¶¶ 11-15; Clemens Decl. ¶¶ 10-15. The

completed valuations were sent to Aequitas by email. Clemens Decl. ¶ 14. 

In 2016, Duff acquired Tregin Solutions, a legal management consulting company, which is

domesticated in Oregon. Macfie Decl. at ¶ 11. Tregin’s former thirteen employees now are

employed by Duff. Id. at ¶ 13. In 2017, Duff hired two new employees that reside and work from

their homes in Oregon. Id. ¶ 17. 

Plaintiffs are investors who purchased Disputed Securities from Aequitas, including ACF

Notes, ACOF Interests, AMLFNotes, AIOFNotes, AIPF Interests, and AIOF-IINotes. SAC ¶¶ 196-

202. Plaintiffs purport to represent a class of more than 1,500 Oregon and non-Oregon investors

who lost more than $600 million by purchasing assorted Aequitas securities. SAC ¶ 1; Pls.’ Mem.

Opp’n Duff’s Mot. Dismiss at 2, ECF No. 291. Of the thirteen named Plaintiffs, two are Oregon

residents and eleven are California residents. SAC ¶¶ 9-15.

3. Analysis – Specific Personal Jurisdiction

“Federal courts ordinarily follow state law in determining the bounds of jurisdiction over

persons.” Daimler AG v. Bauman, 571 U.S. 117, 124 (2014); Axiom Foods, Inc., v. Acerchem

International, Inc., 874 F.3d 1064, 1067 (9th Cir. 2017). Oregon Rule of Civil Procedure (“ORCP”)

4J(2) extends personal jurisdiction to “[a]ny person, a resident or nonresident of this state, who has

engaged in conduct prohibited or made actionable under the Oregon Securities Law.” Additionally,

Oregon’s long-arm provision, ORCP 4L, confers personal jurisdiction to the fullest extent permitted

by the federal Constitution. Therefore, Oregon’s personal jurisdiction is co-extensive with federal

due process, and the court proceeds directly to the federal due process analysis. Boschetto v.

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Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008); Helicopter Transp. Servs., LLC v. Sikorsy Aircraft

Corp., 253 F. Supp. 3d 1115, 1123 (D. Or. 2017). 

“Due process ‘constrains a State’s authority to bind a nonresident defendant to a judgment

of its courts.’” Axiom, 874 F.3d at 1068 (quoting Walden v. Fiore, 571 U.S. 277, 283 (2014)

(internal quotations omitted)). A nonresident defendant must have “certain minimum contacts with

[the forum]such that the maintenance of the suit does not offend ‘traditional notions of fair play and

substantial justice.’” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v.

Meyer, 311 U.S. 457, 463 (1940)). The fundamental issue is whether a “defendant’s conduct and

connection with the forum [S]tate are such that he should reasonably anticipate being haled into

court there.” Haisten v. Grass Valley Med. Reimbursement Fund, Ltd., 784 F.2d 1392, 1397 (9th

Cir. 1986) (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)). 

Plaintiffs do not assert general jurisdiction over Duff, therefore the court confines its analysis

to specific personal jurisdiction. In conducting this analysis, the Ninth Circuit has articulated a

three-part test to determine whether a nonresident defendant is subject to specific jurisdiction: 

(1) the defendant must either purposefully direct his activities toward the forum or

purposefully avail[ ] himself of the privileges of conducting activities in the forum;

(2) the claim must be one which arises out of or relates to the defendant’s

forum-related activities; and (3) the exercise of jurisdiction must comport with fair

play and substantial justice, i.e. it must be reasonable. 

Axiom, 874 F.3d at 1068-69 (quotations omitted and alterations in original). It is Plaintiffs’ burden

to establish the first two prongs. Schwarzenegger, 374 F.3d at 802. If Plaintiffs establish the first

two prongs, the burden shifts to Duff to present a “compelling case” that the exercise of jurisdiction

would not be reasonable. Picot v. Weston, 780 F.3d 1206, 1212 (9th Cir. 2015); Schwarzenegger,

374 F.3d at 802 (citing Burger King Corp. v. Rudzeqicz, 471 U.S. 462, 476-78 (1985)). The specific

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jurisdiction inquiry focuses on “the relationship among the defendant, the forum, and the litigation.”

Walden, 134 S. Ct. at 1121 (quotations and citations omitted). 

a. purposeful direction

The first prong encompasses two concepts: “purposeful direction” and “purposeful

availment.” Axiom, 874 F.3d at 1068; Helicopter Transp. Servs., 253 F. Supp. 3d at 1124; Adidas

America, Inc. v. Cougar Sport, Inc., 169 F. Supp. 3d 1079, 1087 (D. Or. 2016). Purposeful

availment is often used to analyze suits sounding in contract, and purposeful direction is most often

used for actions sounding in tort. Axiom, 874 F.3d at 1069; Picot, 780 F.3d at 1212. Duff is alleged

to have materially aided and participated in the fraudulent securities activities of Aequitas. Some

cases have noted minimum contacts in securities fraud cases may be established under either

purposeful direction or purposeful availment. See, e.g., S.E.C. v. Ficeto, Case No. CV 11-1637-

GHK(RZx), 2013 WL 1196356, at *4 (S.D. Cal. Feb. 7, 2013) (“The fraud aspects of a securities

case may establish purposeful direction, as in a tort case, while the transactional aspects of a

securities case may establish purposeful availment.”). In their briefing, and at oral argument, the

parties focused on purposeful direction. Nike, Inc. v. Lombardi, 732 F. Supp. 2d 1146, 1153 (D. Or.

2010) (utilizing purposeful direction test to examine jurisdiction in case where defendant alleged to

have made misleading statements false representations in licensing agreement); Chassin Holdings

Corp. v. Formula VC Ltd., Case No. 15-cv-02294-MEJ, 2016 WL 1569986, at *5 (N.D. Cal. April

19, 2016) (examining both purposeful direction and purposeful availment in securities fraud action).

The evidence required to establish purposeful direction usually centers on a defendant’s

actions outside the forum state that are directed at the forum state “such that personal jurisdiction

could be exercised even without physical contacts with the forum.” Lazar v. Kroncke, 862 F.3d

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1186, 1202 (9th Cir. 2017); Schwarzenegger, 374 F.3d at 803. Under purposeful direction,

sometimes referred to as the “effects test,” is satisfied when a defendant: (1) commits an intentional

act; (2) expressly aimed at the forum state; (3) which causes harm that the defendant knew was likely

to be suffered in the forum state. Axiom, 874 F.3d at 1069 (citing Calder v. Jones, 465 U.S. 783, 788

(1984)); Dole Food Co. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002).

The “intentional act” requirement refers to an intent to perform an actual, physical act,

instead of an intention to accomplish that act. Schwarzennegger, 374 F.3d at 806. In the SAC,

Plaintiffs allege Duff committed numerous intentional acts. In December 2013, Duff entered into

an engagement letter with an Oregon company (AIM) and consented to the use of its name and its

valuations in marketing and promotional materials used to sell securities to its investors. SAC ¶

195(a); Jacobs Decl. ¶ 7. Duff provided estimations of the fair market value of CPTI, EDPlus, and

ETC on three separate occasions, December 2013, July 2014, and February-March 2015. SAC ¶

195(c). Thus, there is no question that Duff committed intentional acts when it valued the portfolio

companies, a point Duff concedes. Duff’s Mot. Dismiss at 9. See Axiom, 874 F.3d at 1069 (finding

intentional act where unauthorized use of logos included in newsletter sent to mailing list recipients);

Schwarzenegger, 374 F.3d at 806 (finding intentional act when unauthorized advertisement was

placed in newspaper). The first prong is statisfied. 

To satisfy the second prong, the court examines whether the defendant’s intentional conduct

was “expressly aimed” at the forum state. Axiom, 874 F.3d at 1069; Picot, 780 F.3d at 1214; Dole

Food, 303 F.3d at 1111-12 (finding the defendants expressly aimed their wrongful conduct at the

forum state because they knew Dole’s principle place of business was in California, Dole’s decision

makers were in California, and they communicated with those California decision makers). The

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court is mindful that its personal jurisdiction analysis must focus on Duff’s contacts with Oregon,

“not the defendant’s contacts with persons who reside there.” Picot, 780 F.3d at 1214. To determine

whether the defendant expressly aims at the forum state, “[t]he proper question is not where the

plaintiff experienced a particular injury or effect but whether the defendant’s conduct connects him

to the forum in a meaningful way.” Walden, 571 U.S. at 290. The court’s analysis depends upon

the type of tort alleged. Picot, 780 F.3d at 1214. Here, Plaintiffs allege that Duff materially aided

and participated in the fraudulent sale of securities. SAC ¶ 195. Thus, the court must inquire

whether Duff expressly aimed its alleged material aid and participation in the sale of securities at

Oregon. Id.

Plaintiffs contend that this requirement is met because Duff knew, and agreed, that its name,

clout and valuations would be used in Oregon offering documents, by an Oregon seller, to sell

securities from Oregon, to Oregon purchasers. Pls.’ Mem. Opp’n at 8, ECF No. 291. Duff argues

that it did not expressly aim its conduct at Oregon because it did not “target” any Oregon investors. 

Duff argues that of the thirteen Plaintiffs, only two are Oregon residents. Duff’s Mot. Dismiss at 9. 

Additionally, Duff contends that it has had no contact with Oregon because it never traveled to

Oregon, and instead completed its valuations in New York and sent them via email. Duff also

contends that its connection to a third party – Aequitas – cannot form the basis of its jurisdictional

contacts. 

Here, Plaintiffs allege conduct by Duff that meaningfully connects it to Oregon, not simply

the particular Oregon Plaintiffs. In the SAC, Plaintiffs allege that the two most significant vehicles

used byAequitas to create and inflate asset value were CPTI and EDPlus, the two Oregon companies

valued by Duff. SAC ¶¶ 135, 195(c). Plaintiffs allege that Duff agreed that its name and valuations

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could be used in the ACOF 2014 PPM, which lent credibility the values accorded to ACOF’s

existing portfolio investments, and that those values were critical because they were ACOF’s only

assets. SAC ¶ 195(c). Plaintiffs allege that Duff’s valuations also were used in ACF’s consolidated

financial statements to give investors confidence in ACF and ACOF and encourage continued

investments. SAC ¶¶ 195. Although Duff conducted its appraisal reports outside of Oregon and did

not travel to Oregon, “physical entry is not a prerequisite to jurisdiction.” Walden, 571 U.S. at 285 

(noting that contact with the forum state through “goods, mail, or some other means, is a relevant

contact”). Duff directly communicated via email and telephone with various Aequitas decision

makers about its valuations of the portfolio companies, and sent draft and final versions of its

valuations to Aequitas’s Oregon headquarters. Clemens Decl. ¶ 10. Furthermore, Duff’s contact

with Oregon was not on a single occasion, but instead Duff provided services to Oregon entities over

an 18-month relationship during which it provided the fair value estimate of CPTI, EDPlus, and ETC

three times. Thus, Duff’s connection to the forum is based on its own affiliation, and its “conduct

connects [it] to the forum in a meaningful way.” Walden, 571 U.S. at 290. 

Thus, Duff’s actions here are readily distinguishable from those in Walden. In Walden,

Nevada plaintiffs sued a Georgia police officer whom they alleged unlawfully seized their cash as

they awaited a plane bound for Nevada from Atlanta, Georgia. Walden, 571 U.S. at 288-89. The

Walden court concluded that a Nevada court could not exercise specific personal jurisdiction over

the Georgia police officer because he “never traveled to, conducted any activities within, contacted

anyone in, or sent anything to or anyone to Nevada.” Id. In this case, Duff’s connection to Oregon

is not the “random, fortuitous, or attenuated” contact that was found to be insufficient in Walden. 

Unlike Walden, Duff’s jurisdictionally relevant contacts with Oregon have been formed by its own

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actions, not simply Plaintiffs’ residence or Aequita’s presence in Oregon. Rather, Plaintiffs have

sufficiently alleged that Duff materially aided or participated in the sale of securities by means of

untrue statements of fact or omissions of material fact concerning its inflated valuations of CPTI and 

EDPlus – Oregon companies. Plaintiffs assert that Duff necessarily communicated with Aequitas

decision makers in Oregon on multiple occasions about those valuations over a period of 18 months,

and Duff knew that Aequitas was headquartered in Oregon. Contrary to Duff’s suggestion, it

reached out beyond its home state into Oregon by agreeing to permit Aequitas to use its name in the

ACOF offering documents and other marketing materials. Thus, Plaintiffs have sufficiently alleged

that Duff’s actions were “expressly aimed” at Oregon to satisfy this prong. Dole, 303 F.3d at 1112. 

To establish the third prong of the effects test, a defendant’s actions must cause harm that

the defendant knows is likely to be suffered in Oregon. Axiom, 874 F.3d at 1069; Mavrix, 647 F.3d

at 1228. This element is satisfied if a “jurisdictionally sufficient amount of harm is suffered in the

forum state.” Yahoo! Inc. v. La Ligue Contre Le Racisme Et L’Antisemitisme, 433 F.3d 1199, 1207

(9th Cir. 2006). “The ‘brunt’ of the harm need not be suffered in the forum state,” and this element

may be established even if “the bulk of the harm” occurs outside the forum. Id. 

As alleged by Plaintiffs, it was not only foreseeable, but entirely predictable, that by

overstating the value of Oregon entities for an Oregon seller of securities that economic harm was

likely to result in Oregon. See Hawes v. Kabani & Co., 182 F. Supp. 3d 1134, 1141 (W.D. Wash

2016) (finding that “economic harm is likely to result from a factually incorrect audit, especially

where that audit overstates a company’s financial health.”). A similar fact pattern was presented in

Hawes. There, the plaintiffs were Florida investors in a Washington-based company, L&L. Id. at

1138. Plaintiffs brought claims of negligent misrepresentation and Washington securities law

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violations against defendants Hamid Kabani and Kabani & Co., California residents who conducted

the allegedly overstated audit of L&L. Id. Defendants moved to dismiss the complaint, contending

the Washington court did not have specific personal jurisdiction because the defendants conducted

most of their work from California and traveled to Washington only on a few occasions. Id. at 1141. 

The Hawes court concluded that the defendants expressly aimed their actions at Washington. Id. 

Moreover, the court concluded that the defendants’ actions caused harm likely to be suffered in

Washington:

Although L&L, not plaintiffs, is the injured corporation, plaintiffs’ injuries as

shareholders are intrinsically related to L&L’s failure. Plaintiffs allege that, but for

defendants’ improper audit, L&L and its stock could have avoided a precipitous

decline in value. 

Id. The Hawes court determined that “an accounting firm that knowingly or negligently produces

an incorrect audit should anticipate financial implications for the company and its shareholders.” 

Id. And, the Hawes court concluded that the defendants, auditing a Washington company, should

have foreseen that it would be haled into court in Washington, not Florida. Thus, “[i]f defendants

are subject to specific jurisdiction anywhere, that place is Washington.” Id. 

The same rationale should be applied here. As alleged by Plaintiffs, by providing a company

headquartered in Oregon with overstated values of two Oregon companies, CPTI and EDPlus, it is

foreseeable that Duff would be held accountable in Oregon by investors for any harm resulting from

its alleged actions. Additionally, by permitting its name to be included in offering documents and

promotional materials generated by and emanating from an Oregon seller of securities, it was also

likely that economic harm would be suffered in Oregon. Therefore, the court concludes that the third

prong is of purposeful direction is satisfied. 

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b. “arising out of”

Under the second part of the specific personal jurisdiction test, a plaintiff must show that the 

claim asserted in the litigation “arises out of or relates to the defendant’s forum-related activities.” 

Menken v. Emm, 503 F.3d 1050, 1058 (9th Cir. 2007); Adidas America, 169 F Supp. 3d at 1092. 

The Ninth Circuit relies “on a ‘but for’ test to determine whether a particular claim arises out of

forum-related activities and thereby satisfies the second requirement for specific jurisdiction.” 

Ballard v. Savage, 65 F.3d 1495, 1500 (9th Cir. 1995). Thus, the relevant question for the court is

whether, “but for” Duff’s contacts with Oregon, would Plaintiffs’ claims against Duff have arisen.

Id.; RHUB Communications, Inc. v. Karon, Case No. 16-cv-06669-BLF, 2017 WL 3382339, at *7

(N.D. Cal. Aug. 7, 2017). 

Plaintiffs argue that but for Duff’s forum related activities, their claims against Duff would

not have arisen. Plaintiffs allege that Duff’s valuations were used to continue to promote the sale

of securities by Aequitas and give the illusion that Aequitas was a stable investment with valuable

assets. SAC ¶¶ 195(c)-(e). And, Plaintiffs assert that Duff agreed to the use of its name in offering

documents and marketing materials that lent credibility and clout to Aequitas’s financial

representations. Indeed, each Plaintiff is alleged to have purchased at least one Disputed Security

after Duff’s name first appeared in ACOF’s February 2014 PPM. Thus, the court concludes

Plaintiffs have satisfied the “arising out of” requirement of specific personal jurisdiction. Hawes,

182 F. Supp. 3d at 1142 (finding that allegations that company misrepresented financial health of

company that was endorsed by defendants’ inaccurate audit of company sufficiently demonstrated

“arising out of” prong of specific personal jurisdiction); RHUB Communications, 2017 WL8832339

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at *8 (finding RHUB’s fraud claim would not have arisen but for the defendant’s contacts with the

forum state). 

Duff contends that Plaintiffs improperly impute Aequitas’s contacts with Oregon to Duff,

citing In Re Countrywide Fin. Servs., Case Nos. 2:11-ML-02265-MRP (MANx), 2:11-cv-10414-

MRP (MANx), 2012 WL 1322884, at *7 (C.D. Cal. Apr. 16, 2012). The court finds Countrywide

distinguishable. In that case, individual defendants, who were officers of Countrywide Securities

Corporation (“CSC”), were challenging personal jurisdiction over them as individuals. Id. Plaintiff

MassMutual alleged that because the individual defendants controlled the actions of CSC, it had

demonstrated that the individual defendants specifically targeted the forum state. The court rejected

that argument, noting that control liability should not be conflated with minimum contacts to

establish personal jurisdiction. Thus, because the complaint did not set out specific allegations

connecting the individual defendants with the forum, MassMutual failed to establish personal

jurisdiction over the individual defendants. Id. at *9. 

Here, unlike Countrywide, there are no allegations of agency between Duff and Aequitas in

this action. Duff cannot avoid its contacts with the forum by using Aequitas as a shield against

personal jurisdiction. As detailed above, Plaintiffs have not conflated control liabilitywith minimum

contacts to establish jurisdiction. Rather, it is Duff’s own actions that connect it to Oregon that

drives this court’s analysis. Thus, the court concludes that Plaintiffs have established the first two

prongs of specific personal jurisdiction.

c. jurisdiction is reasonable

The burden now shifts to Duff to present a “compelling case” that exercising personal

jurisdiction is unreasonable. Schwarzenegger, 374 F.3d at 802. Jurisdiction is unreasonable if it

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does not comport with the notion of fair play and substantial justice. Burger King Corp. v.

Rudzewicz, 471 U.S. 462, 476 (1985). The Ninth Circuit has identified seven specific factors to

consider in making the reasonableness determination:

“(1) the extent of the defendant’s purposeful interjection into the forum state’s

affairs; (2) the burden on the defendant in defending in the forum; (3) the extent of

the conflict with the sovereigntyof the defendant’s state; (4) the forum state’s interest

in adjudicating the dispute; (5) the most efficient judicial resolution of the

controversy; (6) the importance of the forum to the plaintiff’s interest in convenient

and effective relief; and (7) the existence of an alternative forum.”

CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1080 (9th Cir. 2011) (quoting Dole Food,

303 F.3d at 1114). The court examines these factors below.

The first factor favors jurisdiction. If a court determines that a defendant has purposefully

directed its actions at the forum state, as discussed above, then the purposeful interjection factor

favors plaintiff. See CollegeSource, 653 F.3d at 1080 (“Actions directed at a forum resident

expected to cause harm in the forum constitute purposeful injection.”). 

The second factor looks at the cost of litigation. Duff argues that the burden of litigating in

Oregon would be heavy because it has no offices in Oregon, its witnesses reside in New York, and

it would incur significant cost. The court is unpersuaded that defending this lawsuit will impose a

“substantial hardship” on Duff. “‘[W]ith the advances in transportation and telecommunications and

the increasing interstate practice of law, any burden [of litigation in a forum other than one’s

residence] is substantially less than in days past.’” CollegeSource, 653 F.3d at 1080 (quoting

Menken, 503 F.3d at 1060). As important a consideration is that Duff is a large, multi-national

company with 70 offices in 20 countries around the world. Not only must Duff have anticipated

defending lawsuits in other parts of the country, it currently is engaged in defending similar lawsuits

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within Oregon. Moreover, now that Duff has acquired Tregin Solutions and its employees formally

work for Duff, it must have considered the possibility of defending lawsuits in Oregon. Macfie Decl.

¶ 14. Thus, this factor favors finding jurisdiction. 

The third factor concerns the extent of any risk that the court’s exercise of jurisdiction in

Oregon might conflict with Duff’s home state, New York. Duff contends that exercising jurisdiction

will conflict with the sovereignty of New York, its principal place of business. Duff argues that its

engagement letter with Aequitas provided that any claims arising out of its contract would be

litigated in New York. Panavision Intern., L.P. v. Toeppen, 141 F.3d 1316, 1323 (9th Cir. 1998),

overruled on other grounds by Yahoo!, 433 F.3d at 1207. Plaintiffs’s claims do not arise out of

Duff’s contractual agreement with Aequitas, but instead are separate state law claims, thus, the risk

of a conflict with New York is minimal. This factor weighs in favor of jurisdiction.

The fourth factor examines the state’s interest in adjudicating its own laws. The Ninth

Circuit assumes that a forum state “‘maintains a strong interest in providing an effective means of

redress for its residents tortuously injured.’” Id. (quoting Gordy v. Daily News, L.P., 95 F.3d 829,

836 (9th Cir.1996)). Oregon has a substantial interest in ensuring its securities laws are properly

adjudicated. Accordingly, this factor favors jurisdiction.

The fifth factor considers efficiency of litigation. This factor focuses on the location of the

evidence and witnesses. Id. As with the factor considering the burden on the defendant, this factor

“is no longer weighed heavily given the modern advances in communication and transportation.” 

Id.; accord CollegeSource, 653 F.3d at 1080. As Plaintiffs correctly highlight, the bulk of the

evidence and witnesses surrounding Aequitas’s alleged primary securities liability are located in

Oregon. Although not weighing as heavily as other factors, this factor tilts in favor of jurisdiction. 

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Duff concedes that the sixth factor – Plaintiffs’ interest in convenient and effective relief – 

favors jurisdiction. However, as the parties acknowledge, the Ninth Circuit does not give much

weight to this factor. CollegeSource, 653 F.3d at 1080. Thus, this factor is neutral. 

The seventh factor looks at the existence of an alternative forum. This factor is relevant only

“when the [original] forum state is shown to be unreasonable.” Id. Duff has not established that

Oregon is an unreasonable forum. 

Weighing these seven considerations favors finding of personal jurisdiction in this District. 

Duff has failed to present a “compelling case” that the exercise of jurisdiction would be

unreasonable. Thus, the Court has specific personal jurisdiction over Duff. Accordingly, the Court

should deny Duff’s motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2).

B. Bristol-Myers Is Inapplicable

Duff contends that if the court finds specific jurisdiction, the court should dismiss all claims

against it alleged by the non-Oregon Plaintiffs. In the present action, eleven Plaintiffs are California

residents and two are Oregon residents. Duff argues that under Bristol-Myers, the court can assert

specific jurisdiction only over the Oregon Plaintiffs and that “all the conduct giving rise to the

nonresidents’ claims occurred elsewhere.” Bristol-Myers, 137 S. Ct. at 1782; Duff’s Mot. Dismiss

SAC at 16. According to Duff, because the non-Oregon residents did not experience their harm

within Oregon, the nonresidents’ relationship with third-party Aequitas cannot give rise to specific

jurisdiction over Duff. Bristol-Myers, 137 S. Ct. at 1781 (“a defendant’s relationship with a third

party, standing alone, is an insufficient basis for jurisdiction”). 

On the facts alleged here, the court is not convinced that Bristol-Myers prevents the court’s

exercise of specific jurisdiction over Duff. Bristol-Myers did not involve a class action; it was a

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mass tort action. Id. at 1778. The Bristol-Myers court reasoned that because the non-residents were

not prescribed, did not purchase, did not injest, and were not injured by Plavix in California, there

was no connection between the non-resident defendant and the non-resident plaintiffs to California. 

As the Bristol-Myers court itself acknowledged, “we leave open the question whether the Fifth

Amendment imposes the same restrictions on the exercise of personal jurisdiction by a federal

court.” Id. at 1784. Numerous other courts have determined that Bristol-Myers does not extend to

class actions in federal court. See In Re Morning Song Bird Food Litig., Lead Case No.

12cv01592JAH-AGS, 2018 WL 1382746, at *5 (S.D. Cal. Mar. 19, 2018) (finding Bristol-Myers

did not deprive court of jurisdiction over non-resident plaintiffs in class action); Thomas v. Kellogg

Co., Case No. C13-5136RBL, 2017 WL 5256634, at *1 (W.D. Wash. Oct. 17, 2017) (same). See

also Sobol v. Imprimis Pharm., Civ. Action No. 16-14339, 2018 WL 2424009, at *2 (E.D. Mich.

May 29, 2018) (collecting cases discussing application of Bristol-Myers to federal cases and class

action cases). 

Duff in essence asserts that its relationship with Aequitas plays no role in this action and

contends it is “of no moment” that it contracted with Aequitas. The court disagrees. Duff contracted

with Aequitas, a company headquartered in Oregon, to provide valuation services for two Oregon

entities. Duff further agreed with the Oregon company that the Oregon company could use its name

in marketing Oregon products (securities). Moreover, all Plaintiffs, resident and non-resident,

purchased securities from that Oregon company and the securities purchased were investments in

Oregon entities. Thus, Duff’s contacts and on-going relationship that it created with an Oregon

company have created a meaningful relationship with Oregon, and its forum-related activities give

rise to the litigation at issue. Thus, the court concludes that on the facts alleged, Bristol-Myers does

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not deprive the court of specific personal jurisdiction over Duff with respect to the non-Oregon

Plaintiffs. The non-Oregon Plaintiffs have sufficientlylinkedDuff’sforum-related activities to their

injuries necessaryto satisfyspecific personal jurisdiction. Cortina v. Bristol-Myers Squibb Co., Case

No. 17-cv-00247-JST, 2017 WL 2793808, at *4 (N.D. Cal. June 27, 2017) (finding defendant’s

contacts with California were part of the causal chain leading to New York plaintiff’s injury

sufficient to establish specific personal jurisdiction in California). Accordingly, Duff’s motion

should be denied.

C. ORS § 59.115(3) and Dormant Commerce Clause

Duff argues that applying ORS § 59.115(3) extra-territorially to its conduct violates the

dormant Commerce Clause. Duff contends that the dormant Commerce Clause prohibits imposing

Oregon law on persons engaged in conduct wholly occurring in other states. Thus, Duff maintains

that all claims by non-Oregon residents must be dismissed. Duff’s Mot. Dismiss SAC at 17-20. 

Duff appears to contend that ORS § 59.115(3) violates the extra-territoriality principle first

articulated by the plurality in Edgar v. MITE Corp., 457 U.S. 624, 642-43 (1982) (stating that this

principle “precludes the application of a state statute to commerce that takes place wholly outside

of the State’s borders, whether or not the commerce has effects within the State.”). In its Motion and

Reply, Duff suggests that ORS § 59.115(3) directlyregulates interstate commerce and per se violates

the Commerce Clause, citing NCAA v. Miller, 10 F.3d 633, 638-39 (9th Cir. 1993), and Sam Francis

Found. v. Christies, Inc., 784 F.3d 1320, 1323-24 (9th Cir. 2015). Duff’s Mot. Dismiss SAC at 17-

18; Duff’s Reply at 16-17. 

In the Ninth Circuit, whether a state’s statute discriminates or unduly burdens interstate

commerce is analyzed using the Supreme Court’s two-tiered approach. Pharm. Research Mfrs. v.

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County of Alameda, 768 F.3d 1037, 1041 (9th Cir. 2014) (citing Brown-Forman Distillers Corp. v.

New York State Liquor Auth., 476 U.S. 573, 578-79 (1986)). First, the court examines whether the

statute discriminates against or directly regulates interstate commerce. Id. If the statute does either,

“‘it violates the Commerce Clause per se, and we must strike it down without further inquiry.’” Id.

(quoting NCAA v. Miller, 10 F.3d at 638); accord Brown-Forman, 476 U.S. at 579. Second, if a

statute has indirect effects on interstate commerce but regulates evenhandedly, the court examines

whether the State’s interest is legitimate and whether the burden on interstate commerce clearly

exceeds the local benefits. Brown-Forman, 476 U.S. at 579; Pike v. Bruce Church, Inc., 397 U.S.

137, 142 (1970) (employing balancing test to assess state’s interest and burden on commerce).

“A statute violates the dormant Commerce Clause per se when it directly regulates interstate

commerce.” Assoc. des Eleveurs de Canards et d’Oies du Quebec v. Harris, 729 F.3d 937, 949 (9th

Cir. 2013). Direct regulation occurs when a state law directly affects transactions that take place

across state lines or entirely outside of the state’s borders. S.D. Myers, Inc. v. City and Cnty. San

Francisco, 253 F.3d 461, 467 (9th Cir. 2001) (internal quotation marks omitted). Broadly speaking,

states may not regulate transactions that occur “wholly outside” the boundaries of the state. Healy

v. Beer Institute, Inc., 491 U.S. 324, 336 (1989). “The critical inquiry is whether the practical effect

of the regulation is to control conduct beyond the boundaries of the State.” Id. However, a statute

is not invalid because it “affects in some way the flow of commerce between the States.” Assoc. des

Eleveurs, 729 F.3d at 948-49 (internal quotes omitted). 

Duff argues that ORS § 59.115(3) is per se invalid because it directly regulates conduct

occurring outside of Oregon. Duff argues that Plaintiffs have not alleged that any sale of Aequitas

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securities took place within the borders of Oregon, and it argues that all of its conduct also occurred

outside of Oregon. 

Plaintiffs respond that the State of Oregon has legitimate interests in regulating the sale of

securities. According to Plaintiffs, ORS § 59.115(3) does not violate the dormant Commerce Clause

because it applies only to non-sellers when they participate or materially aid in the sale of a security

originating in Oregon. Plaintiffs contend that Duff engaged in such conduct, and therefore Duff’s

conduct did not occur wholly outside of Oregon. 

The court should reject Duff’s motion premised on the dormant Commerce Clause. Under

ORS § 59.055, it is unlawful to “offer or sell any security” and under ORS § 59.115(1), a person is

liable to a purchaser if the person “sells or successfully solicits the sale of a security.” Under ORS

§ 59.115(3), “every person who participates or materially aids in the sale” is jointly and severally

liable with the seller. In the SAC, Plaintiffs each allege that they purchased their security or

investment “from Aequitas.” SAC ¶¶ 9-15, 196-202. It is undisputed that Aequitas Investment

Management, LLC, Aquitas Commercial Finance, LLC, and Aequitas Holdings, LLC, were Oregon

companies, and that Aequitas was headquartered in Oregon. See, e.g., Masuda Decl. Ex. 3, at 3. In

its Motion, Duff insists that the California residents purchased their Aequitas securities outside of

Oregon and that all of its activities occurred outside of Oregon. Duff Reply at 20. Duff asks the

court to presume the California residents purchased their securities in California because they are

domiciled there. Duff’s Mot. Dismiss SAC at 22 (“all Plaintiffs except Nowak are domiciled in

California, and there is no basis in the [SAC] to infer that their injuries resulting from Aequitas’s

securities fraud occurred elsewhere”). 

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The facts as alleged here belie this contention. On a motion to dismiss, the court must

presume the veracityof all pleaded allegations. Thus, as alleged, Plaintiffs purchased their securities

“from Aequitas,” an Oregon company. See Houston, 2008 WL 818745, at *5 (rejecting dormant

Commerce Clause challenge to ORS § 59.115(3) because evidence established that the plaintiff

received the offering materials at his home in Oregon and purchased there); see also In re Nat’l

Century Fin. Enters. Inc., 755 F. Supp. 2d 857, 880-83 (S.D. Ohio 2010) (discussing dormant

Commerce Clause challenge to non-seller liability and differentiating between offer, sale, purchase,

and issuance of security). The only allegations before the court are that all the Plaintiffs purchased

their securities from an Oregon company; thus, Duff has failed to establish that ORS § 59.115(3) is

directly regulating conduct that occurred “wholly outside” of Oregon. Accordingly, Duff’s motion

should be denied on these grounds.7

 D. Choice of Law 

Duff contends that the court should apply California law to the secondary liability claims

asserted by the California Plaintiffs. Duff Mot. Dismiss SAC at 21. Duff argues that the court must

infer that the named California Plaintiffs purchased their Aequitas securities in California, and that

under the Oregon choice of law principles, California law applies. 

As discussed above, the only allegations before this court are that all of the Plaintiffs

purchased their securities from an Oregon company – Aequitas. SAC ¶¶ 9-15, 196-202. Simply

because some Plaintiffs are California residents does not mean that the court must presume the offer,

sale, issue, or purchase of their securities occurred in California. Rather, on a motion to dismiss, the

7

 The court likewise rejects Duff’s extra-territoriality Due Process arguments premised on

the same basis.

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court must presume the truth of all factual allegations and construe them in the light most favorable

to Plaintiffs as the non-moving party. Northstar, 779 F.3d at 1042. Duff has not sufficiently

demonstrated that a conflict exists. In short, Duff’s motion on this basis should be denied.

E. ACOF and ACF Are Allegations Sufficiently Pleaded

Duff argues that the court should dismiss all non-ACOF allegations, or in the alternative,

non-ACF allegations, against it for material aid and participation because its valuation services

related only to ACOF. According to Duff, Plaintiffs have failed to plead facts connecting it to ACF,

ACF Notes, or any other ACF entities. Plaintiffs respond that they have plausibly pleaded numerous

facts connecting Duff’s valuations to numerous Aequitas entities in the SAC and that Duff’s motion

should be denied. 

The court concludes Plaintiffs plausibly allege Duff’s material aid and participation in the

sale of ACF and ACOF securities. Plaintiffs allege that Duff’s valuations were included in ACF’s

consolidated financial statements in order to support ACF’s value and present ACF as a low-risk

investment. SAC ¶ 195(d). Plaintiffs allege that ACOF’s assets were included in ACF’s

consolidated financial statements, and that Duff’s valuations were critical because the entities valued

by Duff were ACOF’s only assets. SAC ¶ 195(c)-(d). Plaintiffs assert that Duff’s values of the

ACOF assets were included in ACF’s June 2014 marketingmaterials and financial summaries given

to ACF and ACOF investors in order to encourage investors to invest in ACF and ACOF. SAC ¶

195. These allegations sufficiently allege that Duff provided professional services to ACF and

ACOF that enabled unlawful securities transactions reflecting Duff’s particular skills and judgment. 

Moreover, Plaintiffs have plausibly alleged the Duff’s actions are causally connected to the sale of

ACF and ACOF securities after Duff’s name appeared in the February 2014 ACOF PPM. Plaintiffs

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have plausibly alleged that Duff’s valuations gave ACF and ACOF the illusion of solvency and

prosperity in order to continue its operations for the sale of ACF and ACOF securities occurring after

February 2014. SAC ¶ 195(d). 

However, Plaintiffs have not plausibly pleaded how Duff materially aided or participated in

the unlawful sale of securities other than ACF and ACOF. Plaintiffs contend that ACF owned all

or part of AIPF, AIOF, AIOF-II, ACOF, AETC, AEIF and AMLF, and that all of the entities looked

to or relied upon ACF for financial support. See SAC ¶¶ 25, 33, 38, 43, 53, 58, 63. Plaintiffs assert

that Aequitas used receivables (including CPTI and EDPlus) as assets as collateral for loans, which

it then used to fund all Aequitas operations. SAC ¶ 135. Yet, Plaintiff’s allegations do not

specifically provide how Duff’s valuations materially aided the sale of those non-ACF and nonACOF securities to plausibly set out a claim under ORS § 59.115(3). Thus, the court should grant

Duff’s motion to dismiss as to sales of securities other than ACF and ACOF, with leave to re-plead. 

In summary, Duff’s Motion to Dismiss the SAC (ECF No. 269) should be GRANTED IN

PART as to sales of securities occurring prior to February 2014; specifically SAC ¶¶ 196(a), 197

(first sentence only), 198(a), 199(b), 200(a), and 201(a)&(b). Duff’s Motion also should be

GRANTED IN PART as to sales of securities other than ACOF and ACF; specifically SAC ¶¶

196(c), 198(d), 199(c) and 202(a)&(b). Plaintiffs should be given leave to re-plead their non-ACOF

and non-ACF claims. Duff’s Motion should be DENIED on all other grounds. 

VII. Ameritrade’s Motion to Dismiss (ECF No. 275), Plaintiffs’ Response (ECF No. 290),

Ameritrade’s Reply (ECF No. 301), Ameritrade’s Supplemental Authority (ECF No. 286)

Defendant Ameritrade moves to dismiss the SAC in its entirety with prejudice pursuant to

Rules 8, 12(b)(2) and 12(b)(6). Ameritrade’s Mot. Dismiss SAC at 1-2, ECF No. 275. Ameritrade

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makes three primary arguments: (1) the court lacks personal jurisdiction under a new standard

announced in Bristol-Myers; (2) extraterritorial application of ORS § 59.115(3) to it violates the

dormant Commerce Clause; and (3) applying choice-of-law principals requires the application of

California law to the claims asserted by non-Oregon Plaintiffs. Id. at 7-8. In its Notice of

Supplemental Authority, Ameritrade reiterates that Rule 12(g) does not preclude it from asserting

the defense of lack of personal jurisdiction because that defense was previously unavailable and

Bristol-Myers represented an intervening change in the law. Ameritrade Supp. Auth. at 1-3, ECF

No. 286. 

Plaintiffs respond that Ameritrade has waived its argument to contest personal jurisdiction

because it failed to contest personal jurisdiction in its initial motion to dismiss. Plaintiffs argue that

Ameritrade’s remaining arguments mirror those asserted by Duff and should be denied on the same

basis. Pls.’ Opp. at 5, ECF No. 290.

Ameritrade’s contention that the court lacks personal jurisdiction over it is summarily

rejected. “A fundamental tenet of the Federal Rules of Civil Procedure is that certain defenses under

[Rule] 12 must be raised at the first available opportunity or, if they are not, they are forever

waived.” American Ass’n Naturopathic Physicians v. Hayhurst, 227 F.3d 1104, 1106 (9thCir. 2000)

(holding defense of lack of personal jurisdiction waived because it was not asserted in party’s prior

motion to dismiss); FED. R. CIV. P. 12(g), (h). Rule 12(h) provides that a party waives the defense

of lack of personal jurisdiction by failing to assert it in a motion or responsive pleading. Rule 12(g)

provides that if a party files a motion under Rule 12, the party may not make “another motion under

this rule raising a defense or objection that was available to the party and omitted from its earlier

motion.” Courts interpret these provisions strictly. “Thus, under Rule 12, if a party does not raise

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the defense of lack of personal jurisdiction in its first response before the court, the party loses its

chance to raise the defense later.” MTEC, LLC v. Nash, Case No. CV-08-563-AC, 2008 WL

4723483, at *2-3 (D. Or. Oct. 20, 2008); American Ass’n, 227 F.3d at 1106. 

Here, Ameritrade filed a motion to dismiss on July 22, 2016. Ameritrade’s Mot. Dismiss

FAC, ECF No. 113. It did not assert the lack of personal jurisdiction as a defense in that motion. 

Because Ameritrade failed to raise a defense of lack of personal jurisdiction in its first defensive

move, it has waived the opportunity to do so now. American Ass’n, 227 F.3d at 1107. 

Ameritrade insists that it has not waived the defense because the Supreme Court established

a new standard for personal jurisdiction in Bristol-Myers. Ameritrade contends that its personal

jurisdiction defense was not available at the time of its earlier motion, and that Bristol-Myers

requires dismissal of all claims against it. Alternatively, Ameritrade contends that Bristol-Myers is

an intervening change in the law that requires an exception to waiver. Ameritrade’s arguments are

without merit. 

A defense is considered “available” for Rule 12 purposes unless its legal basis did not exist

at the time of the answer or earlier pre-answer motion. Tinn v. EMM Labs, Inc., Case No. 07-cv00963-AC, 2008 WL 3861889, at *3 (D. Or. Aug. 19, 2008) (noting exception to Rule 12(h) applies

only to defenses available at the time of defendants first defensive move); accord Gilmore v.

Palestinian Interim Self-Gov’t Auth., 843 F.3d 958, 964 (D.C. Cir. 2016) (rejecting argument that

personal jurisdiction defense was unavailable until decision in Daimler AG v. Bauman, 571 U.S. 117

(2014)). Even assuming arguendo that Bristol-Myers applies to federal cases and class actions,

Ameritrade has not demonstrated that its personal jurisdiction defense was unavailable prior to that

decision on June 19, 2017. 

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As other courts have recognized, Bristol-Myers did not alter the landscape of personal

jurisdiction, or represent an intervening change in the law, such that a personal jurisdiction defense

was unavailable under Rule 12, consequently excusing the waiver of that defense. Instead, in

deciding Bristol-Myers, the Supreme Court conducted a “straightforward application in this case of

settled principles of personal jurisdiction[.]” Bristol-Myers, 137 S. Ct. at 1783. See Sloan, et al.,

v. General Motors LLC, 287 F. Supp. 3d 840, 854 (N.D. Cal. 2018) (holding Bristol-Myers did not

excuse defendant’s failure to raise lack of personal jurisdiction defense in initial motion to dismiss);

Sobol, 2018 WL 2424009, at *2-3 (finding Bristol-Meyers was not intervening change in law to

excuse failure to raise lack of personal jurisdiction defense in earlier motion); In Re Morning Song, 

2018 WL 1382746, at *2 (rejecting argument that Bristol-Myers was an intervening change in the

law); Alvarez v. NBTY, Inc., Case No. 17-cv-00567-BAS-BGS, 2017 WL 6059159, at *3-6 (S.D.

Cal. Dec. 6, 2017) (rejecting argument that defense of lack of personal jurisdiction asserted for the

first time in a reply to a motion to dismiss was excused under Bristol-Myers); Thomas, 2017 WL

5256634, at *1 (rejectingargument that Bristol-Myers was “transformative” and warranted revisiting

specific personal jurisdiction in ongoing litigation under Rule 12); R. Prasad Indus. v. Flat Irons

Evntl. Solutions Corp., Case No. CV-12-08261-PCT-JAT, 2017 WL 4409463, at *2 (D. Ariz. Oct.

4, 2017) (rejecting argument that Bristol-Myers provided basis for challenging personal jurisdiction

well into litigation). 

Moreover, as indicated in Alvarez, a lack of personal jurisdiction has been available to

Ameritrade “because it is well settled law that a defendant can challenge personal jurisdiction

relating to each named plaintiff in a class action.” Alvarez, 2017 WL 6059159, at *4 (citing Abrams

Shell v. Shell Oil Co., 165 F. Supp. 2d 1096, 1107 n.5 (C.D. Cal. Sept. 18, 2001). Ameritrade’s

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arguments to the contrary are rejected. To the extent Ameritrade’s Supplemental Authority (ECF

No. 286) could be construed as a motion, it should be denied. 

Ameritrade’s remaining arguments concerning the dormant Commerce Clause,Due Process,

and application of choice of law principles to non-Oregon-resident Plaintiffs echo those asserted by

Duff. For the reasons discussed above, the court likewise rejects those arguments as asserted by

Ameritrade. In short, Ameritrade’s Motion to Dismiss the SAC (ECF No. 275), should be DENIED. 

Conclusion

Based on the foregoing the court resolves these Motions as follows:

1. Deloitte’s Request for Judicial Notice (ECF No. 280) is GRANTED;

2. Defendants’ Joint Motion to Dismiss the SAC (ECF No. 278) should be

DENIED; 

3. Deloitte’s Motion to Dismiss the SAC (ECF No. 277) should be GRANTED

IN PART as to claims against Deloitte for sales occurring before November

30, 2013, specifically SAC ¶¶ 196(a), 197 (first sentence only), 198(a),

199(b), and 200(a), and 201(a)&(b); Deloitte’s Motion should be DENIED

on all other grounds; 

4. Sidley’s Motion to Dismiss the SAC (ECF No. 272) should be GRANTED

IN PART as to claims against Sidley for sales occurring before April 5, 2013,

specifically SAC ¶¶ 197 (first sentence only), 198(a), 199(b), 200(a), and

201(a); Sidley’s Motion should be DENIED on all other grounds;

5. Duff’s Motion to Dismiss the SAC (ECF No. 269) should be GRANTED IN

PART as to claims against Duff for sales occurring prior to February 2014,

specifically SAC ¶¶ 196(a), 197(first sentence only), 198(a), 199(b), 200(a),

and 201(a)&(b); Duff’s Motion should be GRANTED IN PART as to claims

against Duff for the sale of securities other than ACOF and ACF, specifically

SAC ¶¶ 196(c), 198(d), 199(c), and 202(a)&(b); Plaintiffs should be given

leave to re-plead their non-ACOF and non-ACF claims; Duff’s Motion

should be DENIED on all other grounds; and

6. Ameritrade’s Motion to Dismiss the SAC (ECFNo. 275)should be DENIED.

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The court further recommends that no further motions to dismiss be entertained. To the

extent that Defendants’ Motions herein should be granted with leave for Plaintiffs to re-plead, the

court observes that what is required of Plaintiffs to comport with this Findings and Recommendation 

is minimal and does not prevent Defendants from filing Answers. Accordingly, the court

recommends that anyremaining issues concerning the sufficiencyof the claims presented in the SAC

be addressed on class certification (if appropriate) or summary judgment (if appropriate). 

Scheduling Order

The Findings and Recommendation will be referred to the Honorable Michael W. Mosman

for review. Objections, if any, are due August 20, 2018. If no objections are filed, then the Findings

and Recommendation will go under advisement on that date. 

If objections are filed, then a response is due fourteen (14) days after being served with a

copy of the objections. When the response is due or filed, whichever date is earlier, the Findings and

Recommendation will go under advisement. 

DATED this __1st__ day of August, 2018. 

 /s/ John V. Acosta 

 JOHN V. ACOSTA

 United States Magistrate Judge

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