DEFENDANT SIDLEY AUSTIN LLP’S REPLY IN SUPPORT OF MOTION TO 

DISMISS THE SECOND AMENDED COMPLAINT

David B. Markowitz, OSB #742046

DavidMarkowitz@MarkowitzHerbold.com

Jeffrey M. Edelson, OSB #880407

JeffEdelson@MarkowitzHerbold.com

MARKOWITZ HERBOLD PC

1211 SW Fifth Avenue, Suite 3000

Portland, OR 97204-3730

Telephone: (503) 295-3085

Fax: (503) 323-9105

Brad D. Brian (admitted pro hac vice)

brad.brian@mto.com

Bruce A. Abbott (admitted pro hac vice)

bruce.abbott@mto.com

Trevor N. Templeton (admitted pro hac vice)

trevor.templeton@mto.com

MUNGER, TOLLES & OLSON LLP

350 South Grand Avenue, Fiftieth Floor

Los Angeles, California 90071-3426

Telephone: (213) 683-9100

Facsimile: (213) 687-3702

Attorneys for Defendant Sidley Austin LLP

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

PORTLAND DIVISION

LAWRENCE P. CIUFFITELLI, for himself 

and as Trustee of CUIFFITELLI 

REVOCABLE TRUST, et al.,

Plaintiffs,

vs.

DELOITTE & TOUCHE LLP, et al.,

Defendants.

Case No. 3:16-cv-00-580-AC

DEFENDANT SIDLEY AUSTIN LLP’S 

REPLY IN SUPPORT OF MOTION TO 

DISMISS THE SECOND AMENDED 

COMPLAINT 

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TABLE OF CONTENTS

Page

I. INTRODUCTION .................................................................................................................1

II. ARGUMENT.........................................................................................................................3

A. Plaintiffs Have Abandoned Their Allegations of Secondary Liability 

Based on Bank Loan-Related Work and Sidley’s Provision of Unspecified 

Legal Services............................................................................................................3

1. Wells Fargo and Bank of America Credit Facility Allegations.....................4

2. Unspecified Legal Services............................................................................5

B. The Court Should Also Dismiss Without Leave to Amend Plaintiffs’ 

Remaining Allegations, Which Fail to Plausibly Allege Sidley’s 

“Participation” or “Material Aid” in Any Identifiable Securities Offering. ..............6

1. 1940 Act Compliance Work ..........................................................................6

(a) Failure to Identify Any Securities Sale Materially Aided by 

Securities 1940 Act Services .............................................................7

(b) Inability to Plausibly Allege a Causal Relationship ..........................8

2. The Unspecified AIOF-II Structure .............................................................12

3. Unspecified Services to AMLF ...................................................................14

III. CONCLUSION....................................................................................................................15

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TABLE OF AUTHORITIES

Page(s)

FEDERAL CASES

Bojorquez v. Wells Fargo Bank, NA,

No. 6:12-CV-02077-AA, 2013 WL 6055258 (D. Or. Nov. 7, 2013) ........................................5

Curry v. Yelp Inc.,

875 F.3d 1219 (9th Cir. 2017) .............................................................................................3, 15

Schneider v. California Dep’t of Corr.,

151 F.3d 1194 (9th Cir. 1998) .................................................................................................13

STATE CASES

Adams v. Am. W. Sec., Inc.,

265 Or. 514 (1973).....................................................................................................................9

Ainslie v. First Interstate Bank of Oregon, N.A.,

148 Or. App. 162 (1997)..........................................................................................................12

Ainslie v. Spolyar,

144 Or. App. 134 (1996)..........................................................................................................10

Cox v. Holcomb Family Ltd. P’ship,

No. 1308-12201, slip op. (Multnomah Cty. Cir. Ct., Dec. 14, 2009)......................................10

Prince v. Brydon,

307 Or. 146 (1988).........................................................................................................9, 11, 12

FEDERAL STATUTES

15 U.S.C. § 80a-3(a)(1)(C) ............................................................................................................11

STATE STATUTES

ORS 59.115(3).................................................................................................................................9

FEDERAL RULES

Rule 12(b)(6)..................................................................................................................................13

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I. INTRODUCTION

Plaintiffs have now filed three complaints in this action, most recently with the benefit of 

this Court’s Order on Defendants’ motions to dismiss the First Amended Complaint (“FAC”). 

(See Amended Findings & Recommendation (“F&Rs”), Dkt. No. 242, report and 

recommendation adopted, Dkt. No. 250 (D. Or. July 5, 2017).) In detailing the FAC’s 

deficiencies, the Court’s Order gave Plaintiffs a detailed roadmap for pleading a secondary 

liability claim under the Oregon securities statutes. Despite this Court’s guidance, and the 

addition of more than 100 pages of allegations to the Second Amended Complaint (“SAC”), 

Plaintiffs still cannot plausibly allege that Sidley materially aided sales by any entity other than 

ACOF. Because the fundamental defects in Plaintiffs’ non-ACOF claims remain, the SAC 

should be dismissed without leave to amend.1

Plaintiffs’ Opposition does not try to defend several purported bases of secondary 

liability against Sidley in the SAC, effectively conceding that they have now abandoned these 

theories. Specifically, Plaintiffs do not defend their claims that Sidley’s representation of an 

Aequitas operating company that did not sell securities (CarePayment LLC) in connection with 

credit facilities from Bank of America and Wells Fargo somehow constitutes “participation” or 

“material aid” in securities offerings by other Aequitas entities. Nor do they connect that credit 

facility work to any specific securities sales by any Aequitas entity. Plaintiffs also fail to defend 

their various allegations of unspecified legal services provided by Sidley as a basis for secondary 

liability or connect that unspecified work to an actual securities transaction. 

In defending their non-ACOF claims against Sidley, Plaintiffs point to three sets of 

allegations that likewise fail to constitute “participation” or “material aid” in securities offerings: 

(1) Sidley advised ACF on the requirements of the Investment Company Act of 1940 (“1940 

Act”) and drafted an April 5, 2013 memorandum regarding ACF’s compliance at the request of 

 

1 Sidley incorporates and joins all arguments made in the reply brief in support of the Joint 

Motion. This separate reply addresses the arguments made by Plaintiffs in response to Sidley’s 

separate motion to dismiss, which identifies additional reasons why Plaintiffs’ claims are 

particularly deficient as to Sidley.

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its auditor, EisnerAmper; (2) Sidley advised AIOF-II on how to structure its sales of securities to 

Integrity Bank & Trust (“Integrity”) in a manner consistent with AIOF-II’s claimed exemption 

from 1940 Act registration; and (3) Sidley served as counsel for AMLF and advised unspecified 

Aequitas entities in connection with a so-called “Note Manufacturing Program.” None of these 

allegations suffices to state a secondary liability claim against Sidley. 

First, with respect to Sidley’s 1940 Act compliance work, Plaintiffs fail to identify any 

specific securities sales that Sidley’s April 5, 2013 memorandum enabled, despite this Court’s 

previous ruling requiring such allegations. (See, e.g., F&Rs at *69 (“[A] plausible claim of 

participation or material aid requires identifying the services provided and how they related to 

the Aequitas entities’ sale of securities.”)). Instead, the Opposition argues that Sidley’s April 5, 

2013 memorandum was somehow used by EisnerAmper and (without specific allegations in the 

SAC supporting reliance) Deloitte in performing financial statement audits which, in turn, 

generally facilitated unspecified securities sales. But Plaintiffs do not cite a single Oregon case 

supporting a finding that a memorandum addressing the 1940 Act, which (at most) was reviewed 

by auditors performing a year-end audit of a seller’s financial statements, constitutes “material 

aid” in all securities sales by that entity. No such case exists, and for good reason. Under 

Plaintiffs’ theory, any work product provided by a law firm to a client that, in turn, provides that 

work product to another professional could give rise to secondary liability claims against the law 

firm. That claim is simply a variant on Plaintiffs’ (now discarded) theory that professional 

services in connection with a credit facility that provides funds to an operating company (which 

does not sell securities) somehow results in secondary liability for (still) unspecified securities 

sales. Predicating secondary liability on such a claim is particularly inappropriate where the 

SAC alleges that another law firm, not Sidley, handled the legal work in connection with the 

PPMs for those offerings.

Second, as for Sidley’s alleged work on the AIOF-II “structure,” the SAC fails to identify 

any specific services Sidley provided to AIOF-II or explain how such services related to a 

securities transaction. In their Opposition, Plaintiffs assert that they do allege that Sidley’s 

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“structure” work enabled sales by AIOF-II because “Aequitas could not have sold the AIOF-II 

securities . . . without Sidley’s specialized skills in structuring the transaction.” (See Opp. to 

Sidley’s Mot. to Dismiss the SAC (“Opp.”), Dkt. No. 288, at 8.) But no such allegations actually 

appear in the SAC. Moreover, even this (fourth) effort to state a claim is insufficient, as 

Plaintiffs’ theory rests on a but-for standard of causation that finds no support in this Court’s 

Order or Oregon case law. It also ignores the separately alleged fact that the AIOF-II PPM was 

handled by Tonkon Torp, not Sidley. 

Third, and finally, Plaintiffs’ AMLF allegations fare no better. The SAC’s bare 

allegation that Sidley “represented AMLF” ignores the Court’s ruling requiring Plaintiffs to 

identify the particular legal services Sidley provided and how those services related to an 

identifiable securities sale. The Opposition’s attempt to connect Sidley’s work on the alleged 

“Note Manufacturing Program” to any AMLF securities sales fails because the SAC does not 

allege that Sidley advised AMLF, as opposed to another Aequitas entity, in connection with the 

Program. 

In sum, Plaintiffs’ inability to state a claim of secondary liability unrelated to ACOF 

justifies dismissal of all claims against Sidley relating to any other Aequitas entity. As shown by 

Plaintiffs’ continuing inability to address the deficiencies already identified by the Court (as well 

as their continuing “discovery” of new, equally generalized and unsupportable allegations), 

granting leave to amend here would be futile. See Curry v. Yelp Inc., 875 F.3d 1219, 1228 (9th 

Cir. 2017) (holding that granting leave to amend was futile after the amended complaint failed to 

remedy problems identified by the court). 

II. ARGUMENT

A. Plaintiffs Have Abandoned Their Allegations of Secondary Liability Based 

on Bank Loan-Related Work and Sidley’s Provision of Unspecified Legal 

Services. 

Despite ample opportunity to do so, Plaintiffs’ Opposition fails to respond to Sidley’s 

argument regarding its alleged work on two alleged credit facilities or its unspecified work for 

other entities. This failure to respond amounts to a concession that these allegations are 

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insufficient—a concession that is well taken given this Court’s prior rulings and Plaintiffs’ many 

chances to correct these defects in their claims. 

1. Wells Fargo and Bank of America Credit Facility Allegations

In the SAC, Plaintiffs allege that Sidley materially aided unspecified sales by unspecified 

Aequitas entities by providing a legal opinion and other services that facilitated an Aequitas 

operating company’s (CarePayment LLC) obtaining of separate credit facilities from Wells 

Fargo and Bank of America. (SAC ¶ 192(j).) This allegation merely rehashes allegations from 

the FAC, which this Court previously held were insufficient to support a secondary liability 

claim. (Compare FAC ¶ 30(d), with SAC ¶ 192(j).) When these allegations were last before the 

Court, the Court rejected them, reasoning that “the lack of details regarding the specific . . . 

timing of this transaction is fatal.” (F&Rs at *69.) The Court directed Plaintiffs to “specify [in 

an amended complaint] when Sidley enabled this transaction, which security or securities the 

transaction related to, and which sales the transaction enabled.” Id. 

As explained in Sidley’s Motion, the SAC does not contain the specifics that the Court’s 

Order requires. While the SAC identifies an additional lender (Bank of America) and an opinion 

that Sidley prepared for Wells Fargo, the SAC (like the FAC) neither connects Sidley’s work on 

the credit facilities to any particular securities offering, nor explains how Sidley’s services had 

the requisite causal, material connection to an actual securities transaction.2 (See Sidley Mot. to 

Dismiss the SAC, Dkt. No. 272, at 13–14.) Plaintiffs’ Opposition does not even mention the 

credit facility allegations, much less defend them against Sidley’s Motion or suggest additional 

facts that could salvage their credit facility-related theory of liability. Accordingly, Plaintiffs 

now effectively concede that Sidley’s alleged work on the Wells Fargo and Bank of America 

loans is insufficient to establish material aid in the sale of securities by any Aequitas entity. See 

 

2 The SAC also fails to allege that the Aequitas entity that received the credit facilities offered 

any securities for sale or used the funds in furtherance of a securities offering. (SAC ¶ 192(j).) 

Nor could it. The credit facilities were issued not to a fund that sold securities, but to an 

operating company (CarePayment LLC), whose business involved purchasing patient receivables 

from partner hospitals. 

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Bojorquez v. Wells Fargo Bank, NA, No. 6:12-CV-02077-AA, 2013 WL 6055258, at *5 (D. Or. 

Nov. 7, 2013) (“If a party fails to counter an argument that the opposing party makes in a 

motion, the court may treat that argument as conceded.” (citation and brackets omitted)). 

2. Unspecified Legal Services

Like the FAC, the SAC makes vague allegations about Sidley’s provision of unspecified 

legal services without specifying an identifiable connection to any securities offering. In 

particular, Plaintiffs allege that Sidley “provided legal services to AIM in connection with AIM’s 

role as an SEC-registered investment advisor and the manager of numerous investment 

vehicles. . . .”—an allegation which is unchanged from the previous complaint. (Compare FAC 

¶ 30(d), with SAC ¶ 192(i).) Similarly, Plaintiffs allege that Sidley “was engaged by ASFG 

LLC” and “represented CP Lending I, LLC, and its affiliates” (SAC ¶ 192(g)), without any 

further description of the work or connection to a specific securities transaction. Other 

allegations in the SAC are equally non-descriptive. (See id. ¶ 192(a) (alleging Sidley “provided 

legal services to ACF and other Aequitas entities in connection with the sale of securities”); id.

¶ 192(b) (alleging Sidley “provided legal papers necessary for Aequitas to complete the sale of 

its securities”).)

None of these allegations identifies the nature of Sidley’s representation or the services 

that Sidley provided, and Plaintiffs likewise fail to connect those services to any particular sale 

of securities in either the SAC or their Opposition. This Court has previously rejected similar 

allegations as insufficient to state a plausible claim. (See F&Rs at *69 (“While providing legal 

services can have a material, causal relationship with the sale of securities, a plausible claim of 

participation or material aid requires identifying the services provided and how they related to 

the Aequitas entities’ sale of securities.”).) As with the credit facility allegations, the Opposition 

does not attempt to defend these allegations or argue that Plaintiffs have pled a secondary 

liability claim based on them. Accordingly, these allegations cannot sustain Plaintiffs’ claims.

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B. The Court Should Also Dismiss Without Leave to Amend Plaintiffs’ 

Remaining Allegations, Which Fail to Plausibly Allege Sidley’s 

“Participation” or “Material Aid” in Any Identifiable Securities Offering. 

Plaintiffs’ Opposition now argues that three sets of allegations suffice to state a claim 

against Sidley for securities sales by entities other than ACOF: (1) Sidley advised ACF on 

compliance with the 1940 Act and drafted a legal opinion3 regarding ACF’s compliance at the 

request of its auditor, EisnerAmper; (2) Sidley advised AIOF-II on how to structure its sales of 

securities to Integrity consistently with AIOF-II’s claimed exemption from 1940 Act registration; 

and (3) Sidley represented AMLF and advised unspecified Aequitas entities in connection with 

the alleged “Note Manufacturing Program.” (See Opp. at 3–9.) None of these allegations is 

sufficient to state a secondary liability claim regarding the sale of securities. 

1. 1940 Act Compliance Work

Plaintiffs’ first set of allegations concerns services that Sidley allegedly provided to ACF 

regarding that entity’s compliance with the registration requirements of the 1940 Act. Plaintiffs 

do not allege that Sidley drafted PPMs or had any other involvement in any of ACF’s securities 

offerings. Indeed, the SAC confirms that the ACF offerings were handled by Tonkon Torp, not 

Sidley. (SAC ¶¶ 136, 137, 138, 140, 144.) 

Instead, Plaintiffs allege that Sidley drafted a memorandum dated April 5, 2013, not 

addressed to EisnerAmper, “confirming ACF’s [1940 Act] compliance.” (SAC ¶ 192(d).) They 

further allege that Sidley advised ACF on how to regain compliance with the 1940 Act after a 

period of noncompliance and that “Deloitte relied on this fact in proceeding with its audit 

engagement.” (SAC ¶ 192(e).) As such, Plaintiffs allege that Sidley’s legal advice was received 

in the course of financial statement audits performed by EisnerAmper (and, Plaintiffs argue but 

 

3 In their Opposition and SAC, Plaintiffs characterize Sidley’s April 5, 2013 memorandum as a 

“legal opinion” (see Opp. at 3), misleadingly suggesting it was equivalent to the formal 1940 Act 

opinion that Sidley allegedly provided to Wells Fargo in connection with the CarePayment LLC 

credit facility. (See SAC ¶ 192(j).) That is incorrect. As the SAC itself makes clear, Sidley 

provided its analysis of 1940 Act issues through a “Memorandum,” not a formal opinion of the 

firm based on, inter alia, a sworn statement from an Aequitas officer attesting to the accuracy of 

the underlying financial data. (SAC ¶ 192(d).) The April 5, 2013 memorandum cannot 

constitute “material aid” in a securities offering for the reasons discussed below.

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do not allege, Deloitte), whose fiscal year-end audits, in turn, facilitated the sale of securities by 

unspecified Aequitas entities.4

 These latest allegations fail for two independent reasons. 

(a) Failure to Identify Any Securities Sale Materially Aided by Securities 

1940 Act Services

Simply stated, the SAC does not identify a single specific securities sale that was 

materially aided by Sidley’s April 5, 2013 memorandum and other unspecified 1940 Act 

services. The SAC instead alleges that Sidley’s memorandum was used in EisnerAmper’s yearend audit of ACF’s financial statements, which itself facilitated unspecified securities sales by 

“Aequitas” as a whole—even though (as noted above) Sidley’s “memorandum” regarding the 

1940 Act was not a formal “legal opinion,” and there is no allegation that it was. (See SAC 

¶ 192(d) (“Without this legal opinion, EisnerAmper would not have issued a clean audit opinion 

and Aequitas would not have been able to sell securities.” (emphasis added)).) The Opposition 

doubles down on this lack of specificity, arguing that Sidley’s April 5, 2013 memorandum on the 

1940 Act enabled “all [post-April 5, 2013] sales of Aequitas securities” for “all of the Aequitas 

funds.” (Opp. at 3, 6 (emphasis added).) 

Plaintiffs’ continued reference to securities sales by “Aequitas,” rather than specific 

Aequitas entities, runs afoul of this Court’s previous rulings. In its Order, the Court dismissed 

the FAC’s allegations against Sidley for failure to identify “which security or securities the 

transaction related to, and which sales the transaction enabled.” (F&Rs at *69.) Relatedly, the 

Court held that Plaintiffs could not rely on the so-called integrated offering theory to assert 

claims against Defendants based on references to “Aequitas” as an undifferentiated entity. The 

Court reasoned that “Defendants have varying relationships to different Aequitas entities and 

their securities offerings, and thus lack sufficient notice of the claims against them where 

 

4 While Plaintiffs claim this issue was somehow important to the year-end financial statement 

audits of Aequitas entities, there is no allegation that Deloitte ever requested any information 

from Sidley relating to any Aequitas entity’s 1940 Act status in connection with its audits. Nor 

does the SAC allege that Deloitte ever received or relied on the April 5, 2013 memorandum or 

any other information provided by Sidley. The SAC also does not allege that Sidley ever 

provided a formal opinion or other specific advice regarding 1940 Act compliance to any 

Aequitas entity or to EisnerAmper or Deloitte. 

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Plaintiffs use ‘Aequitas Securities.’” (F&Rs at *30–31; see also id. at *29 (rejecting the FAC’s 

general references to “Aequitas” because “Defendants did not work with ‘Aequitas’—

Defendants worked with individual Aequitas entities”).) 

Despite these rulings, the SAC does not identify any specific securities sales enabled by 

Sidley’s April 5, 2013 memorandum or any other alleged advice provided by Sidley. (See SAC 

¶¶ 192(d), (e).) And despite the Court rejecting their integrated offering theory, Plaintiffs’ 

Opposition shows that they are still attempting to allege Sidley’s services enabled “all” Aequitas 

securities sales, without distinction. (See Opp. at 2, 3, 6.) This pleading approach impermissibly 

groups legally and functionally distinct entities, depriving Sidley of notice and the opportunity to 

defend Plaintiffs’ secondary liability allegations. 

(b) Inability to Plausibly Allege a Causal Relationship 

Plaintiffs’ 1940 Act allegations fail for the independent reason that Plaintiffs cannot 

establish the requisite causal relationship between Sidley’s alleged services and any specific sale 

of securities. Plaintiffs’ Opposition does not resolve that defect but instead demonstrates how far 

Plaintiffs must stretch the Oregon statute and case law to assert their claims against Sidley. 

Regarding the April 5, 2013 memorandum that Sidley allegedly prepared for an Aequitas 

entity at EisnerAmper’s request, Plaintiffs posit a tortured chain of inferences necessary to move 

from Sidley’s work to any securities sale. (See Opp. at 5–7; SAC ¶ 192(d).) The alleged causal 

relationship runs as follows: 

 Sidley provided the April 5, 2013 memorandum to an unspecified Aequitas entity—

not EisnerAmper—regarding the 1940 Act status of a single Aequitas fund (ACF) 

(SAC ¶ 192(d)); 

 EisnerAmper used the April 5, 2013 memorandum in the course of its year-end audit 

of ACF’s financial statements (id. ¶¶ 192(d), 189(b)); 

 After completing its year-end audit, EisnerAmper, in turn, provided a clean audit 

opinion for ACF (id.); 

 That year-end audit opinion provided a “stamp of legitimacy” for unspecified 

Aequitas funds (id.); 

 The audit opinion also enabled Aequitas to qualify for an exception from certain 

oversight requirements of the Investment Advisors Act of 1940 (id.); and

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 Some combination of the legitimacy conferred by the audit opinion and the lack of 

regulatory oversight enabled unspecified Aequitas funds to continue selling 

unspecified securities (id.).

Plaintiffs trace an equally circuitous path from Sidley’s alleged advice to “Aequitas” on 

how to regain 1940 Act compliance, to the financial statement audits performed by Deloitte, to 

the securities transactions at issue in this lawsuit. Although the Opposition includes even less 

detail on Sidley’s alleged connection (if any) to Deloitte’s audits, the SAC alleges the supposed 

causal chain as follows: 

 Sidley provided legal advice to “Aequitas” on how to regain 1940 Act compliance 

after a period of noncompliance (SAC ¶ 192(e)); 

 Deloitte relied on the fact that Sidley was advising “Aequitas” on 1940 Act 

compliance issues in proceeding with its audit engagement (id.); 

 After conducting its audit of ACF’s financial, Deloitte issued a clean year-end audit 

opinion (id. ¶¶ 190(a), (b));

 Deloitte’s opinion secured for unspecified Aequitas entities the “stamp of legitimacy” 

and freedom to operate free of regulatory oversight (id. ¶ 190(b)); and

 Those Aequitas entities used the legitimacy and freedom from oversight to sell 

unspecified securities to investors (id.). 

In short, Sidley’s April 5, 2013 memorandum and other unspecified 1940 Act compliance 

work is—even as alleged—several steps removed from any (as yet unspecified) securities 

transaction and separated from those (as yet unspecified) securities transactions by multiple 

independent actors, including EisnerAmper and Deloitte. But Oregon courts have held only that 

specified legal services provided directly to an entity offering identified securities constitute 

material aid in the sale of those securities. See, e.g., Prince v. Brydon, 307 Or. 146, 148 (1988) 

(attorney may be liable under ORS 59.115(3) where he “drafted the limited partnership 

agreement and major portions of the offering circular,” and “gave an opinion on the tax status of 

the partnership, which the partnership included in the information that it provided prospective 

investors” (brackets omitted)); Adams v. Am. W. Sec., Inc., 265 Or. 514, 529 (1973) (attorney 

may be liable under ORS 59.115(3) where he “prepares, attends to the execution of, and 

personally delivers and files documents required for the registration of a security”). 

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Plaintiffs have not cited a single Oregon case that supports imposing secondary liability 

based on legal services this far removed from particular securities sales. Even Ainslie I and 

Cox—the two cases that define “material aid” most broadly—are clearly distinguishable. In 

Ainslie I, secondary liability was extended to an attorney who stopped a foreclosure that would 

have prevented a specific offering from going forward and also helped at least one investor 

finance his securities purchase in that same offering. Ainslie v. Spolyar (“Ainslie I”), 144 Or. 

App. 134, 139 (1996). While the legal work necessary to avoid the foreclosure was further 

removed from the offering process than, for example, filing documents necessary to register the 

securities, the attorney’s actions were nonetheless related to, and intended to facilitate, a specific,

identifiable securities offering by a particular fund. 

Similarly, in Cox, an Oregon trial court held that a bank that provided loans to a company 

that sold securities could be secondarily liable for some (but not all) of the company’s securities 

sales. Cox v. Holcomb Family Ltd. P’ship, No. 1308-12201, slip op. at 6–9 (Multnomah Cty. 

Cir. Ct., Dec. 14, 2009). Significantly, while the court permitted certain investor claims to 

proceed against the bank, it ordered the investors to file an amended complaint specifying which 

particular securities transactions were materially aided by the bank loans. See id. at 8 (granting 

bank’s motion for more definite statement and ordering plaintiffs to provide details regarding 

“[w]hat underlying sales will be specifically presented to the jury in support of plaintiffs’ claims 

against [the bank]”).5 

Here, by contrast, Plaintiffs do not allege any comparable connection between Sidley’s 

April 5, 2013 memorandum and any securities sale. There are no allegations, for instance, that 

 

5 Further, the loans at issue in Cox were not alleged to have been general purpose loans unrelated 

to the borrower’s securities business. They were directly connected to particular securities 

offerings because they were used to fund redemption payments to investors. See id. at 6–7 

(noting that the loans “provided a credit line to [the offering entity] that it used to pay investors 

when investors ‘withdrew money’ on demand” in connection with the offering). Moreover, the 

Cox investors alleged numerous facts reflecting the bank’s deep understanding of the offering 

company’s Ponzi-like behavior—allegations which are nowhere to be found in the SAC. See id.

at n. 2 (noting that bank officials allegedly referred to the borrower’s securities sales as “risky,” 

“worrisome,” and “a big (by Eugene standards) Ponzi scheme”).

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Sidley’s work was related to a particular securities offering. Nor do Plaintiffs allege that the 

April 5, 2013 memorandum or its contents were disclosed to investors or included in any 

offering documents. Indeed, no such allegations are possible, as none of the ACF PPMs 

referenced in the SAC even mentions Sidley, much less Sidley’s alleged April 5, 2013 

memorandum or other unspecified services relating to ACF’s claimed exemption from 1940 Act 

registration. (See, e.g., Declaration of Gavin Masuda, Ex. 3 at 39 (November 30, 2013 ACF 

PPM) (referencing ACF’s claimed exemption from registration under the 1940 Act without 

mentioning Sidley).) With respect to Deloitte’s financial statement audit of ACF, the SAC does 

not even allege that Deloitte received or relied on Sidley’s April 5, 2013 memorandum or other 

unspecified legal services in performing its fiscal year-end audits.6 Rather, the totality of 

Sidley’s alleged connection to Deloitte’s audit is that Deloitte relied on the fact that Sidley was 

representing “Aequitas” on compliance matters in proceeding with its audit engagement. (See 

SAC ¶¶ 192(d), (e).) However one slices it, the April 5, 2013 memorandum and other 

unspecified work by Sidley are alleged (or, in Deloitte’s case, merely argued) to have (at most) 

been used in the performance of year-end financial audits by EisnerAmper and Deloitte—a 

standard business function that has no direct connection to identifiable securities sales.7 

 

6 The breadth of this position also defies common sense. The SAC does not allege, and the 

Opposition does not explain, how an auditor could rely on an April 5, 2013 memorandum to 

reach the conclusions necessary to issue an audit opinion on the financial statements for any 

fiscal year—2013 or otherwise—given the nature of the analysis relevant to 1940 Act issues. 

Whether a company qualifies for the 1940 Act exemption claimed by ACF as of a particular 

point of time depends on the specific assets held by the company at that date. See 15 U.S.C. 

§ 80a-3(a)(1)(C) (defining “investment company” as an issuer that “is engaged or proposes to 

engage in the business of investing . . . in securities, and owns or proposes to acquire investment 

securities having a value exceeding 40 per centum of the value of such issuer’s total assets”). A 

company’s eligibility for an exemption from registration at one point, based on the composition 

of its assets at that date, does not guarantee the exemption will continue to apply when future 

transactions change its asset composition.

7 In their Opposition, Plaintiffs point to the Court’s ruling that whether conduct is “attenuated 

from the transaction is not determinative.” (Opp. at 3 (quoting F&Rs at *59).) The Court did 

not rule, however, that the distance between a non-seller’s services and a securities transaction is 

irrelevant to the liability analysis—only that attenuation alone does not determine the issue. 

This is consistent with Prince and Ainslie II, which require courts to examine all non-seller 

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Yet another defect in Plaintiffs’ Opposition is its reliance on a but-for standard of 

causation—a position that finds no support in this Court’s Order or any other Oregon case. 

Under this theory, any service affecting the chain of events that culminates in a sale of securities 

“materially aided” the eventual sale, regardless of how far removed or how important the service 

was to the eventual securities transaction. That is not the law. Indeed, the foundational Oregon 

cases confirm that liability requires a substantial connection between the non-seller and the 

challenged securities offering. In Prince, the Oregon Supreme Court explained that material aid 

“depends on the importance of one’s personal contribution to the transaction.” Prince, 307 Or. 

at 149 (emphasis added). Similarly, in Ainslie II the Court of Appeals cited Prince and Ainslie I

for the proposition “that liability as a participant or a provider of material aid depends on 

the extent and importance of the defendant’s involvement.” Ainslie v. First Interstate Bank of 

Oregon, N.A. (“Ainslie II”), 148 Or. App. 162, 184 (1997). Thus, a non-seller does not 

“materially aid” a securities offering merely because his or her professional services contributed 

in some way to the seller’s general business operations. Rather, to give rise to a secondary 

liability claim, the non-seller must have made an “important” and “personal” contribution to a 

specific securities transaction. Prince, 307 Or. at 149; Ainslie II, 148 Or. App. at 184.

In addition, although the Court has recognized that these cases require some “causal 

relationship” between the non-seller and an identifiable securities sale (F&Rs at *54), the Court’s 

Order never stated that the requirement is merely but-for causation. If it were, secondary 

liability would extend not only to law firms, like Sidley, who advise a business on matters 

unrelated to the sale of securities, but also a host of other professionals who provide services to 

the seller using their knowledge, skills, and experience. That is not Oregon law.

2. The Unspecified AIOF-II Structure

As with their 1940 Act allegations, Plaintiffs’ allegations concerning AIOF-II also fail to

heed the Court’s rulings requiring more specificity in an amended complaint. Notably, the SAC 

 conduct, even if attenuated, to determine whether it qualifies as an important contribution to an 

identified securities sale. Here, the combination of attenuation and the lack of a direct, important 

contribution to a sale should be determinative. 

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does not allege that Sidley drafted the offering documents necessary for AIOF-II to sell 

securities. Nor could it. Tonkon is alleged to have drafted the PPM for AIOF-II. (SAC ¶¶ 150, 

151, 152.) Instead, the SAC alleges that “Sidley worked with Aequitas to create a structure that 

would allow Integrity to do what was originally intended—that is, to act as an aggregator of 

individual investments—via AIOF-II.” (SAC ¶ 192(f).)

In response to Sidley’s argument that this allegation still misses the mark, Plaintiffs offer 

a new theory in their Opposition, arguing that they did allege Sidley’s “structure” work enabled 

sales by AIOF-II because “Aequitas could not have sold the AIOF-II securities . . . without 

Sidley’s specialized skills in structuring the transaction.” (Opp. at 7.) Not so. The SAC never 

alleges whether—much less how—Sidley’s alleged work for AIOF-II enabled any securities 

sales. (See SAC ¶ 192(f).) Plaintiffs cannot, of course, introduce new allegations into a 

complaint through their Opposition. Schneider v. California Dep’t of Corr., 151 F.3d 1194, 

1197 n.1 (9th Cir. 1998) (“The ‘new’ allegations contained in the . . . opposition motion, 

however, are irrelevant for Rule 12(b)(6) purposes. In determining the propriety of a Rule 

12(b)(6) dismissal, a court may not look beyond the complaint to a plaintiff's moving papers, 

such as a memorandum in opposition to a defendant's motion to dismiss.” (emphasis in 

original)). This “allegation” is also inconsistent with Plaintiffs’ actual allegation in the SAC that 

the AIOF-II offering was handled by Tonkon Torp, not Sidley.8 

In any event, this new theory is not enough to state a claim against Sidley with respect to 

the AIOF-II offering. Plaintiffs’ argument that Aequitas “could not have” sold securities relies 

on a but-for causation standard, which, as discussed above, is not supported by Oregon case law 

or this Court’s Order. 

 

8 Sidley had no involvement in the AIOF-II offering. Sidley did assist a different fund, AIPF, in 

self-reporting a regulatory violation to the SEC in July 2014, four months before AIOF-II began 

selling securities. (See SAC ¶ 53 (alleging that the AIOF-II offering began in November 2014); 

id. ¶ 192(f) (alleging that Aequitas informed the SEC of a compliance issue involving AIPF in 

July 2014).) Indeed, AIPF made that self-disclosure on the advice of Sidley. Plaintiffs have not 

explained how counseling an entity on how to comply with securities statutes by disclosing a 

regulatory violation to the SEC can possibly constitute “participation” or “material aid” in 

securities sales by other Aequitas entities handled by a different law firm.

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3. Unspecified Services to AMLF

The allegations concerning services that Sidley provided to AMLF fare no better. While 

the SAC alleges that Sidley “represented” AMLF, it neither identifies any legal services that 

Sidley provided to AMLF, nor connects those services to any securities sales involving AMLF. 

(SAC ¶ 192(g).) In their Opposition, Plaintiffs argue that their claim relating to AMLF is 

nonetheless viable because “Sidley provided legal advice to AMLF that enabled AMLF to sell 

securities” through the “Note Manufacturing Program.” (Opp. at 7.) As before, however, 

Plaintiffs read allegations into the SAC that are not there. Although the SAC alleges Sidley 

advised unspecified “Aequitas” entities under that Program (SAC ¶ 192(h)), it does not allege 

that Sidley provided any legal advice to AMLF regarding that Program, nor does it allege any 

other connection between Sidley’s supposed Program work and any sale of securities by AMLF. 

When it comes to identifying specific allegations to support this Plaintiffs’ theory of secondary 

liability, the SAC is silent. 

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III. CONCLUSION

The Court should either dismiss all claims against Sidley for failure to show a primary 

violation or dismiss all claims unrelated to ACOF for failure to show a secondary violation. 

Sidley’s potential secondary liability—if any—should not extend past its work for ACOF. Given 

Plaintiffs’ inability to state a claim of secondary liability against Sidley after more than tripling 

the length of their original complaint and following an extensive roadmap provided by the Court, 

granting leave to amend would be futile. The Court should thus dismiss the claims without leave 

to amend. See Curry, 875 F.3d at 1228.

DATED this 20th day of December, 2017.

MARKOWITZ HERBOLD PC

By: s/ Jeffrey M. Edelson

David B. Markowitz, OSB #742046

Jeffrey M. Edelson, OSB #880407

(503) 295-3085

Brad D. Brian

Brad.brian@mto.com

Bruce A. Abbott

Bruce.abbott@mto.com

Trevor N. Templeton

Trevor.templeton@mto.com

MUNGER, TOLLES & OLSON LLP

Admitted Pro Hac Vice

Of Attorneys for Defendant Sidley Austin 

LLP

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