Opinion ID: 571318
Heading Depth: 3
Heading Rank: 2

Heading: Alexander Mitchell

Text: 57
58
59 Neither lawyers nor accountants are required to tattle on their clients in the absence of some duty to disclose. Barker, 797 F.2d at 497. Because we find no fiduciary relationship between Mitchell and Camp, we find no duty to disclose existed under the facts. 60 We find no Kansas law that imposes a fiduciary duty on a lawyer under the circumstances of this case. Nor does the relationship rise to that of a fiduciary under the Roberts tests. First, Mitchell's relationship with Camp was an adversarial one and not one of trust and confidence. Second, although Mitchell may have had greater access to information concerning the sale of CPI than Camp, the information was confidential and its possession alone could not create a fiduciary duty to Camp. Third, Mitchell did not benefit from the purchase of Camp's stock. True, Mitchell and his firm did receive a fee for representing Dema, Millwee, and CPI. However, that fee was part of a much larger representation, including the settlement of Camp's suits against CPI and the review of documents pertaining to the First Actuarial/CPI negotiations. In most situations, a lawyer's receipt of fees for transacting a deal will not be considered a benefit under the Roberts test. Fourth, competent counsel represented Camp, and he did not rely on Mitchell during the stock transactions. Mitchell did not offer advice, counsel, or opinions to Camp and Camp did not seek any from him. Finally, Mitchell did not initiate the purchase of Camp's stock; to the contrary, it was Camp who alerted Mitchell to the offer made by Dema and Millwee to purchase Camp's stock. 61
62 Because Mitchell had no duty of disclosure, Camp, again, may not rely on recklessness to satisfy the knowledge standard. Camp must show that Mitchell had at minimum a general awareness of a securities laws violation. In this, Camp has failed. 63 Mitchell was unaware of the negotiations with CPI until after the Camp sale was final. Millwee sent Mitchell a letter of intent and other documents from First Actuarial, which Mitchell stated he did not review. Although Mitchell's inaction may be considered grossly negligent, it does not rise to the necessary level of scienter. See Stokes, 644 F.2d at 784. To hold otherwise would risk bringing simple malpractice into the embrace of the securities laws. See Broad, 642 F.2d at 962 (stating that simple or even inexcusable negligence is insufficient). Mitchell's lack of knowledge is also demonstrated by the actions he took upon discovering that negotiations with First Actuarial had taken place while the Camp purchase was in progress. Rather than attempt to hide this information, as one who was intentionally aiding a securities laws violation would presumably do, Mitchell contacted Dema and Millwee and then released the information to Camp's attorney. Mitchell's actions, along with the inferences that can be drawn from the evidence presented, support a finding that Mitchell had no knowledge of the primary securities laws violation.b. Substantial Assistance 64 We discuss substantial assistance merely to make several points. Attorneys are intimately involved in many, if not most, transactions involving securities. Because of this, we will not easily find actions routinely engaged in by lawyers associated with these types of transactions to constitute substantial assistance without a greater showing of scienter. See id.; Woodward v. Metro Bank of Dallas, 522 F.2d 84, 97 (5th Cir.1975) (stating that when transactions constitut[e] the daily grist of the mill courts should be loathe to find 10b-5 liability without clear proof of intent to violate the securities laws.); Schatz, at 497 (holding as a matter of law that when a lawyer offers no legal opinions or affirmative misrepresentations ... and merely acts [as] a scrivener ... the lawyer cannot be liable ... [as an] aider and abettor ... under the securities laws). Here, Mitchell's actions were those necessary to consummate the sale of stock. He transmitted documents, contacted the title insurance company, and had the needed waivers and other documents signed. His actions represent the daily grist of the mill in this type of transaction. Woodward, 522 F.2d at 97. We cannot hold that these actions constitute knowing substantial assistance without a showing of a conscious intent to substantially assist a securities laws violation. Cf. Metge, 762 F.2d at 625 (where liability is predicated on silence, a high standard of intent is needed where no duty to disclose exists).