Opinion ID: 571318
Heading Depth: 3
Heading Rank: 5

Heading: the defendant's activity in initiating the transaction in question.

Text: 29 Roberts v. Peat, Marwick, Mitchell & Co., 857 F.2d 646, 653-54 (9th Cir.1988), cert. denied, 493 U.S. 1002, 110 S.Ct. 561, 107 L.Ed.2d 556 (1989); see also Arthur Young & Co. v. Reves, 937 F.2d 1310, 1330 (8th Cir.1991). 2. Substantial Assistance 30 If a defendant's knowledge of the securities laws violation is established, we move to the third prong of the analysis--substantial assistance. The assistance must be such that it is  'a substantial factor in causing the resulting'  violation. Metge, 762 F.2d at 624 (quoting Landy v. FDIC, 486 F.2d 139, 163 (3rd Cir.1973), cert. denied, 416 U.S. 960, 94 S.Ct. 1979, 40 L.Ed.2d 312 (1974)). There must be a  'substantial causal connection between the culpable conduct of the alleged aider and abettor and the harm to the plaintiff.'  Id. (quoting Mendelsohn v. Capital Underwriters, Inc., 490 F.Supp. 1069, 1084 (N.D.Cal.1979)). By culpable conduct we mean conduct that has some element of blameworthiness. The defendant must have some degree of knowledge that his actions are aiding the primary violator. [I]t is not sufficient that [the defendant] ... engage in acts which, as it turned out, did give assistance ... to the [plaintiff]. Wayne R. LaFave & Austin W. Scott, Jr., Criminal Law § 6.7(c), at 580 (2d ed. 1986). If a defendant has a general awareness of his role in the primary violator's wrongful activity, however, this may be sufficient to satisfy the knowledge requirement. FDIC, 885 F.2d at 430-31. 31 Where a duty to disclose exists, we again allow a recklessness standard to fulfill the knowledge requirement implicit in the substantial assistance element. Additionally, silence is included in the substantial assistance calculus if a duty to disclose exists. Metge, 762 F.2d at 625. Therefore, if the defendant has a duty to disclose, the court may deem recklessness in failing to disclose information as substantial assistance. 32 However, the recklessness involved must be severe recklessness 33 limited to those highly unreasonable omissions or misrepresentations that involve not merely simple or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and that present a danger of misleading buyers or sellers which is either known to the defendant or is so obvious that the defendant must have been aware of it. 34 Woods, 765 F.2d at 1010 (quoting Broad v. Rockwell Int'l Corp., 642 F.2d 929, 961-62 (5th Cir.) (en banc), cert. denied, 454 U.S. 965, 102 S.Ct. 506, 70 L.Ed.2d 380 (1981)).