Full opinion text
REDDEN, District Judge: Plaintiffs in these actions are holders of 30 day variable rate demand notes issued by Tradex, Inc. (Tradex), an Oregon corporation. They seek relief based on numerous alleged violations of federal and state security laws, as well as on certain other statutory and common law claims. Plaintiffs move for partial summary judgment in their favor. All defendants have filed cross motions for partial summary judgment. Background I. Parties and Posture of the Litigation I am consolidating these four cases for all purposes (see pp. 69-70). In each case there are four separate groups of defendants: (1) former Tradex officers (defendant officers); (2) former Tradex directors (defendant directors); (3) Nicholas Fisher and Touche Ross & Co. (defendant accountants); and (4) Robert Simpson and Schwabe, Williamson, Wyatt, Moore & Roberts (defendant attorneys). The defendants are the same in each case, except that in Civil No. 83-1167 {Ahern), defendant officers include only David Fearn and Clyde Kaneshero. In Civil No. 83-1963, 1964 and 1965 {Silver Eagle cases), defendant officers include Fearn, Kaneshiro, Russell Brown, Jr. and Kenneth Delzer. II. Facts I find it unnecessary to recite all the details of Tradex’s corporate history. It is sufficient to begin by saying that Tradex was originally a non-profit corporation factoring the freight bills of its member freight carriers. Tradex operated, at least primarily, in the Pacific Northwest. Tradex thus provided a service to the carriers by buying their freight bills from them (at a discount); Tradex then collected on the bills itself. Tradex financed its operations through a line of credit with a major bank, most recently Seattle-First National Bank (Sea-First). In the late 1960’s and early 1970’s Tradex began issuing notes to its members, members’ employees and other persons connected with the trucking industry. Through this note program, Tradex obtained additional funds to finance its operations. Note purchasers received interest on their notes. These notes were not registered with the Securities and Exchange Commission (SEC). In mid-1981, Tradex began a process of reorganization, which ultimately became effective June 1, 1982. Pursuant to the reorganization, Tradex became a for-profit corporation. Tradex’s legal counsel, who are the present defendant attorneys, had concluded that the notes were “securities” under federal law. Thus, as part of Tradex’s reorganization, the note program was registered with the SEC. Defendant attorneys, Schwabe, Williamson, Wyatt, Moore & Roberts (Schwabe, Williamson) began preparation of an S-l Registration Statement in the fall of 1981. Tradex filed a preliminary prospectus in the form of an S-l Registration Statement with the SEC on December 11, 1981. Tradex issued a final prospectus, amending the earlier one, on March 29, 1982. On April 19, 1982, Tradex also filed an S-l Registration Statement covering the separate issuance of $30 million in variable rate 30-day demand notes. This registration statement was amended by a prospectus with an effective date of June 1, 1982. Accountant defendants Touche Ross & Co. (Touche Ross) audited Tradex’s financial statement for the fiscal year ending August 31, 1982, and certified the accuracy of that statement in the March 29 and June 1 prospectuses. Touche Ross conducted post-audit reviews of the financial statement in connection with both prospectuses. It also assisted with preparation of certain unaudited interim financial statements dated February 28, 1982. On April 12, 1982, Tradex held its 1981 annual meeting, which apparently had been postponed due to delays connected with the reorganization. At the meeting, the proposed reorganization was presented to Tradex’s members, who approved it. Throughout the relevant time period, Tradex operated pursuant to a line of credit from SeaFirst. Plaintiffs’ notes were subordinated to the SeaFirst loan. The limit on the line of credit from SeaFirst was originally $12 million, and was subsequently increased to $20 million. On January 26, 1983, SeaFirst declared Tradex to be in default of its loan agreement with SeaFirst. Plaintiffs’ notes, which were subordinated to SeaFirst’s lien on Tradex’s receivables, were “frozen” by SeaFirst. Plaintiffs have been unable to redeem the notes. Plaintiffs subsequently filed these actions. The Ahern plaintiffs assert claims under sections 11, 12, 15 and 17(a) of the Securities Act of 1933,15 U.S.C. §§ 77k, 77l, 77o and 77q(a), sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j and 78t(a), and the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961, et seq. The Ahern plaintiffs also assert pendent claims for violations of Oregon securities statutes, the Oregon RICO statute, conversion, fraud, negligence, gross negligence and money had and received. The Silver Eagle plaintiffs assert claims for violations of sections 11, 12 and 17(a) of the Securities Act of 1933, section 10(b) of the Securities Exchange Act of 1934 and O.R.S. 59.115. Plaintiffs’ claims are based on their contentions that various Tradex documents, and certain statements made by defendants, contained fraudulent misrepresentations and omissions. Many of these particulars are better addressed in the discussion of plaintiffs’ specific claims, but certain of them are central to plaintiffs’ claims and to the background of these cases. These are: (1) Tradex’s relationship with Animated Electronics, Inc. (Animated); (2) Tradex’s relationship with IML Freight, Inc. (IML); and (3) an alleged check “kite” employed by Tradex. A. Tradex’s relationship with Animated On or about January 26, 1982, Tradex and Animated entered into an agreement pursuant to which Tradex agreed to factor Animated’s accounts and contracts receivable. Animated was Tradex’s first factoring customer from outside the transportation industry. Animated was a manufacturer and seller of novelty devices. Plaintiffs allege that prior to the agreement, Animated had suffered financial difficulties, and had difficulty obtaining financing. Its source of financing, the Walter Heller Company, had expressed concern with Animated’s slow collection rate and had renewed its annual agreement with Animated on a restricted month-to-month basis. Walter Heller ultimately refused to continue financing Animated in January 1982. Plaintiffs allege that the negotiations culminating in the Animated-Tradex agreement included discussions of Animated’s financial and financing difficulties. Plaintiffs contend the high delinquency rate on Animated’s invoice receivables was specifically discussed and considered. The minutes from the January 26, 1982 meeting which approved the Animated factoring agreement show that the projected revenues from the agreement were anticipated to be $7 million in 1982. Animated’s individual accounts were located in almost every state in the country, as well as Canada and Mexico. Tradex began accepting receivables and machine purchase contracts from Animated. The contracts provided for monthly payments over a 24 to 36 month period, as opposed to the short term accounts receivable. Tradex continued factoring both accounts receivable and contracts during the spring and summer of 1982. On July 27,1982, Tradex President David Fearn advised the Tradex board that Animated’s receivables amounted to $3.5 million. The minutes of that board meeting indicate Tradex’s intention to “phase out” of factoring Animated accounts. The various defendants deny knowledge of Tradex’s factoring of long term contracts but it did become a subject of concern to Tradex’s directors in the fall of 1982. Fearn then reported that Tradex was working on a method for selling factored accounts back to Animated. This problem had not been resolved when SeaFirst declared Tradex in default. In its January 26, 1983 letter to Tradex, SeaFirst claimed Tradex had been improperly including long term contracts in its borrowing base (which the contract provided was 75% of eligible accounts receivable), and had therefore been exceeding the limits of the loan agreement. SeaFirst also declared that: We view your financing of Animated Electronics, Inc. and the existing deterioration of Animated Electronics, Inc.’s ability to meet its obligations to you as a matter not fairly disclosed to us, resulting in a violation of your representations and warranties contained in the Loan Agreement. B. Tradex’s Relationship with IML IML was Tradex’s largest customer. On April 12, 1982, Tradex’s Board of Directors gave permission to IML to collect its own freight bills, obviating factoring them through Tradex. Under this arrangement, Tradex collected directly from IML and had a security interest in their freight bills, but did not own them or have a right to collect directly from IML’s customers should IML become bankrupt. The latter right was available when Tradex factored freight bills. IML did file for bankruptcy in April 1983. Plaintiffs point out that Tradex had not previously financed, rather than factored, a customer’s bill. They argue that by doing so here, Tradex greatly increased its risk. Plaintiffs contend that defendants knew or should have known of IML’s poor financial condition at the time it agreed to finance its bills. C. Check Kite Tradex’s agreement with SeaFirst allowed Tradex to deposit its collections on purchased bills into its account at SeaFirst. These deposits were immediately applied to reduce the balance of the loan line, making more loan funds available to purchase additional freight bills. Tradex also maintained a disbursement bank account in a Missoula, Montana bank to process checks written in settlement of purchased freight bills. Checks written by Tradex on the Montana bank account usually required three business days for presentation for payment. When presented for payment Tradex covered them with funds wired from its SeaFirst account. SeaFirst then recorded these wire transfers as borrowings by Tradex against its operating loan. Because of the time lag, and because Tradex did not cover the checks until presented, there was a substantial “float” in Tradex’s disbursement cycle. Plaintiffs allege that at some point Tradex began issuing checks without any economic basis to allow manipulation of its line of credit and to avoid a default under its loan agreement with SeaFirst. The checks were drawn on the Montana bank, payable to an existing carrier customer, either solely or jointly with Tradex. Thus, the checks appeared to SeaFirst as payments of bills by Tradex (that is, payment to Tradex’s customers for their accounts receivable), and reduced the amount of money applied by SeaFirst to its loan to Tradex. This gave Tradex more money to work with. Tradex endorsed the checks to itself and as the “attorney in fact” for the customer where one was named as a payee. The customer did not receive the checks. Plaintiffs contend that between June 1982, when the “kite” began, and January 26, 1983, Tradex wrote approximately 2,000 such checks for a total of over $300 million. Discussion I. Standard In considering the parties’ motions for partial summary judgment, I view the evidence and the inferences drawn from that evidence in the light most favorable to the parties opposing the motions. Bell v. Cameron Meadows Land Co., 669 F.2d 1278, 1280 (9th Cir.1982). A movant is entitled to summary judgment on a claim only where there are no genuine issues of material fact and the movant is entitled to prevail as a matter of law. See id. In the Silver Eagle cross motions for partial summary judgment, the parties have heavily relied on the memoranda and exhibits submitted in Ahern. I therefore address the Silver Eagle cases only where necessary. I note that the Ahern plaintiffs have moved to strike certain portions of defendants’ reply memorandum, contending it addresses arguments raised by plaintiffs in support of their own motions. There is overlap in the parties’ cross motions. Their briefs run to more than a thousand pages and their supporting affidavits to several thousand more. All parties have had unlimited opportunity to address the issues presented. Plaintiffs’ motion is denied. II. Analysis A. Securities Claims 1. Whether the Notes are Securities The threshold issue is whether the notes constitute securities. All defendants contend that they do not. The Securities Exchange Act of 1934 defines a security as “any note ... or ... any investment contract____” 15 U.S.C. § 78c(a)(10). The definition of a security in the Securities Act of 1933 has been held to be virtually identical, Tcherepnin v. Knight, 389 U.S. 332, 88 S.Ct. 548, 19 L.Ed.2d 564 (1967), and I apply the same analysis in deciding whether a particular transaction is a security under either act. See Wright v. Schock, 571 F.Supp. 642, 646 (N.D.Cal.1983), aff'd, 742 F.2d 541 (9th Cir.1984). Plaintiffs contend that what they hold are securities, either as “notes” or as “investment contracts.” In Securities & Exchange Commission v. W.J. Howey Co., 328 U.S. 293, 299, 66 S.Ct. 1100, 1103, 90 L.Ed. 1244 (1946), the Supreme Court defined an investment contract as “a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profit solely from the efforts of the promoter or a third party.” The critical question is whether there has been the necessary investment of money. That question is answered by applying the risk capital test. See Great Western Bank & Trust v. Kotz, 532 F.2d 1252, 1255-57 (9th Cir.1976). The Ninth Circuit applies the same test to determine whether a note is a security under the 1933 and 1934 Acts. See, e.g., Landreth Timber Co. v. Landreth, 731 F.2d 1348 (9th Cir.1984). The test distinguishes investment transactions, which are covered by the 1933 and 1934 Acts, from routine commercial transactions, which are not. Id. at 1352. Thus, even though notes are specifically included within the definition of a security, the court must look to the “economic realities” underlying the transaction. See Kotz, 532 F.2d at 1256. In determining whether these notes are “risk capital” or merely “risky loans,” I consider the factors identified in Kotz. These factors are: (1) time; (2) collateralization; (3) the form of the obligation; (4) the circumstances of issuance; (5) the relationship between the amount borrowed and the size of the borrower’s business; and (6) the contemplated use of the proceeds. Id. at 1257-58. No one of these factors compels a decision that the notes are or are not securities. See id. at 1258. What matters is the combined effect of the factors. Amfac Mortgage Corp. v. Arizona Mall of Tempe, 583 F.2d 426, 432 (9th Cir.1978). The above list of factors is not exhaustive, and others may be appropriate depending on the particular circumstances of the case. See Kotz, 532 F.2d at 1258. Time. A demand or short-term note is seldom a security unless payment is “dependent upon the success of a risky enterprise, or the parties contemplate indefinite extension of the note or perhaps conversion to stock.” Id. at 1257-58. Plaintiffs’ notes were technically redeemable in thirty days, but were in fact subject to immediate withdrawal and were apparently used by some plaintiffs as a savings deposit. Thus, plaintiffs were not “at risk” for a long period of time. It is not clear from the record, however, whether the parties contemplated that individual noteholders would continue to repurchase new notes, thus effecting an indefinite extension of the notes. For example, a number of the plaintiffs apparently had Tradex automatically transfer its payment for their freight bills to their note accounts. Cf. United California Bank v. THC Financial Corp., 557 F.2d 1351, 1359 (9th Cir.1977) (“[although the loans were renewed several times, there appears to have been no expectation of indefinite extensions or continued roll-overs”). Collateralization. As noted in Kotz, the unsecured lender is more dependent upon the managerial skills of the borrower than is the secured lender. Here, the notes were secured by Tradex’s receivables, but were subordinated to SeaFirst’s rights under the loan agreement. SeaFirst’s default exposes the note holder’s risk. The nature of a particular instrument is to be determined, however, at the time of issuance, not at a later time. Kotz, 532 F.2d at 1255. At issuance, plaintiffs’ secured position protected them with respect to Tradex’s other creditors, but subordinated them to SeaFirst, Tradex’s largest lender. Plaintiffs were more vulnerable than a normal secured creditor. The form of the obligation. The name given to the instrument by the parties is not controlling, Willamette Savings & Loan v. Blake & Neal Finance Co., 577 F.Supp. 1415, 1421 (D.Or.1984), but must be considered. Kotz, 532 F.2d at 1258. Beginning with Tradex’s reorganization, it treated the notes as securities and those associated with Tradex referred to them as securities. Tradex’s SEC registration statement identified the notes as securities. The notes themselves provided that note deposits were “loans.” The circumstances of issuance. In Kotz, the court stated that “[wjhether the obligations were issued to a single party or to a large class of investors sheds light on the nature of the financing.” 532 F.2d at 1258. Tradex registered $30 million of notes with the SEC, advertised the notes by means of prospectuses, mail, and newspaper advertisements and sold them to more than 180 persons. The registration provided for sale of the notes to persons having “some nexus to the transportation industry” and their relatives “not more remote than four places.” Thus, the notes, though not publically offered, were offered and sold to a large number of persons. Cf. Marine Bank v. Weaver, 455 U.S. 551 (1982) (unique agreement negotiated between two parties not a security). Relationship between amount borrowed and size of Tradex’s business. The relationship between the amount borrowed and the size of Tradex’s business is important because the larger the relative amount, the greater the noteholders’ stake in the business and the greater their risk. Kotz, 532 F.2d at 1258. Tradex purchased $386,977,516 in freight bills during fiscal 1982, and had a $20,000,000 commercial line of credit from SeaFirst. The note accounts amounted to $4,135,414 on August 31, 1982. Thus, the note accounts were not particularly large in proportion to the size of Tradex’s business. Contemplated use of the proceeds. In Kotz, the court stated: Proceeds constituting an essential ingredient of capital formation are generally securities. On the other hand, those used to maintain current financial position generally are not. Id. at 1258. Defendants argue that since most note-holders maintained their note accounts both before and after the registration of the note program, the note accounts were used only to document and maintain a current financial structure and position, and not for enterprise formation. One of the purposes of the note program was to assist in the expansion of Tradex’s business. This does not constitute “enterprise formation,” however. The note program was used to maintain a current financial position. The time factor favors defendants, although this may be diminished by an expectation of continual roll-overs or new purchases. The contemplated use of the proceeds and the relationship between the amount borrowed to the size of the borrower’s business both favor defendants. The inadequate collaterialization, form of the instrument and circumstances of issuance factors favor plaintiffs. In this case there are several other factors I consider relevant. The first of these favors defendants and that is the nature of plaintiffs’ return, which was interest at a rate designated on each note. In fact, each note apparently carried an interest rate at a designated percentage above the prime commercial lending rate. The Ninth Circuit has considered this as an additional factor indicating that a commercial loan was contemplated rather than an investment of risk capital. See Amfac, 583 F.2d at 434; United California Bank, 557 F.2d 1351, 1359 (9th Cir.1977). The importance of this factor is somewhat diminished because Tradex was free to determine the amount of interest to be paid on a particular note. Another factor I note is that this is not a situation in which the parties negotiated the terms of the instrument. Those terms were dictated by Tradex. This case is therefore unlike Kotz, Amfac, and United California Bank. In United California Bank, the court stated that: This is not the situation where an unsophisticated investor lacked access to inside financial information. It is not even a syndicated multibank loan participation where even a sophisticated investor may lack access to crucial information____ THCF decided after completing its own credit investigation to enter into a commercial lending arrangement which it thought was relatively risk free and, in the light of hindsight, was not. 557 F.2d at 1359. In his concurring opinion in Kotz, Judge Wright stated: In an investment situation, the issuer has superior access to and control of information material to the investment decision. Rather than relying solely on semi-anonymous and secondhand market information, as do most investors, the commercial bank deals ‘face-to-face’ with the promissor. The bank has a superior bargaining position and can compel wide-ranging disclosures and verification of issues material to its decision on the loan application. The bank here obtained a covenant to permit it to inspect Artko’s property and records ‘at such times as [the bank] may reasonably request.’ Far from purchasing an instrument whose terms were fixed prior to the time of its offering, the bank negotiated the terms of the note in question____ Kotz, 532 F.2d at 1262 (Wright, concurring). Similarly, in Amfac, the plaintiff was a sophisticated commercial lender that entered into a one-on-one deal with its borrower. Plaintiffs here are not commercial lenders, and did not have the access to information the plaintiffs did in Kotz, Amfac and United California Bank. In fact, in 1982 Tradex applied to a number of commercial lenders in an attempt to supplement or replace the SeaFirst line of credit but, after investigation, each of those lenders declined to lend to Tradex. Also, as stated, the parties did not negotiate the terms of the notes, which were set by Tradex. Whether a particular instrument is a security is ultimately a question of law, but where there are disputed facts, the issue may be one for the jury. See Kotz, 532 F.2d at 1255. I conclude that there are sufficient questions of fact to preclude ruling on this issue as a matter of law at this time. Defendants also contend that the notes are “commercial paper” and thus exempt from certain provisions of the 1933 Act and specifically excluded from the definition of a security in the 1934 Act. See 15 U.S.C. §§ 77c(a)(3) and 78c(a)(10) (both of which cover “any note ... which has a maturity at the time of issuance of not exceeding nine months____”). Although the language of the statutes does not discriminate among short term notes, the courts have done so. Thus, the issue remains whether the instrument is in fact an investment. See Baurer v. Planning Group, Inc., 669 F.2d 770, 775 (D.C.Cir.1981); Sanders v. John Nuveen & Co., Inc., 463 F.2d 1075 (7th Cir.), cert. denied, 409 U.S. 1009, 93 S.Ct. 443, 34 L.Ed.2d 302 (1972). Defendants are not entitled to summary judgment on any of plaintiffs’ claims on the grounds that the notes are not securities, or are exempted from coverage by certain of the securities statutes. Finally, I reach the same result with respect to plaintiffs’ claims under the state statutes. Decisions construing the federal securities laws are entitled to deference in applying Oregon law. See, e.g., Karsun v. Kelly, 258 Or. 155,161, 482 P.2d 533 (1971). Moreover, the Oregon courts have approved use of a form of the risk-capital test. See Pratt v. Kross, 276 Or. 483, 555 P.2d 765 (1976); Black v. Corporation Division, 54 Or.App. 432, 634 P.2d 1383 (1981). 2. Whether Plaintiffs are “Purchasers” of Securities A second threshold question is presented by defendants’ contention that many plaintiffs are not “purchasers” within the meaning of the federal securities laws. Sections 11, 12 and 17 of the 1933 Act make relief available only to those who “purchase” a security. See, e.g., Simmons v. Wolfson, 428 F.2d 455 (6th Cir.1970), cert. denied, 400 U.S. 999, 91 S.Ct. 459, 27 L.Ed.2d 450 (1971). Similarly, relief is available under section 10(b) of the 1934 Act only to those who are defrauded in connection with the “purchase” or “sale” of a security. Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975). Defendants acknowledge that those plaintiffs who obtained their notes for the first time after June 1, 1982, the date of the second prospectus, are purchasers under the relevant statutes. Defendants assert, however, that the remaining transactions do not constitute “purchases.” Those transactions are: (1) the exchange of the old, unregistered Tradex notes for new notes, pursuant to the April 29, 1982 prospectus; (2) deposits of freight bill payments made automatically by Tradex into members’ note accounts; and (3) monthly interest accruing on plaintiffs’ note accounts. In general, a “purchase” has occurred where the plaintiff has taken action representing a new decision to invest. See Freschi v. Grand Coal Venture, 551 F.Supp. 1220 (S.D.N.Y.1982). There must be a significant change in the nature of the investment or in the investment risks. Rathborne v. Rathborne, 683 F.2d 914, 920 (5th Cir.1982); Abrahamson v. Fleschner, 568 F.2d 862, 868 (2d Cir.1977), cert. denied sub nom., Harry Goodkin & Co. v. Abrahamson, 436 U.S. 913, 98 S.Ct. 2236, 56 L.Ed.2d 403 (1978). See also Ingenito v. Bermec Corp., 376 F.Supp. 1154,1181 (S.D.N.Y.1974) (creation of new rights or obligations may give rise to purchase or sale). Exchanges pursuant to the March 29, 1982 prospectus Defendants argue that those plaintiffs who exchanged their old notes for new ones had made their decision to obtain Tradex notes at a prior time, and that there was no change in the nature of their investment significant enough to constitute a new investment. Exchanges made pursuant to a “major corporate restructuring” are “purchases.” In re Penn Central Securities Litigation, 494 F.2d 528 (3d Cir.1974). In addition, an exchange is a “purchase” where it places an investor’s money at additional risk. Ingenito v. Bermec Corp., 441 F.Supp. 525 (S.D.N.Y.1977). Here, however, there is no indication that the structure of the new note arrangement placed plaintiffs’ money at additional risk, notwithstanding later developments. Pursuant to the reorganization, though, Tradex became a for-profit corporation with broader corporate powers. This change was a substantial one. Cf. Abrahamson, 568 F.2d 862 (modification of partnership agreement expanding purposes of partnership and its authority to invest in other businesses not a purchase); In re Penn Central, 494 F.2d 528 (reorganization not substantial enough to give rise to purchases of securities). Plaintiffs contend that the new notes were quite different from the old ones, and point out that the March 29, 1982 prospectus stated that they “differ[ed] substantially” from the old ones. Nevertheless, the only differences appear to be relatively minor. The interest rate paid noteholders was now subject to determination “from time to time” by the Tradex board of directors; in practice, however, it was tied to the rate Tradex paid on its SeaFirst loan, as it had been under the old note program. Formerly, the notes had been paid on the last day of the month in which they were issued. The new notes were payable on demand unless Tradex insisted that payment be deferred for 30 days from the date of demand. Finally, the new notes, unlike the old, were collateralized, albeit subject to the SeaFirst loan. In this respect, the new notes may have been less at risk than the old. Plaintiffs also point out that exchange of the notes was not automatic. Rather, Tradex required the holders to enter into an “Exchange Agreement” in order to obtain the new notes. Noteholders who did not enter into such an agreement received cash for their notes, rather than new notes. This suggests the sort of affirmative action — as opposed to inaction or the “mere retention” of securities — that the securities laws require. See Marsh v. Armada Corp., 533 F.2d 978, 980, (6th Cir.1976), cert. denied, 430 U.S. 954, 97 S.Ct. 1598, 51 L.Ed.2d 803 (1977); In re Equity Funding Corp. Securities Litigation, 416 F.Supp. 161, 191 (C.D.Cal.1976). This is a close question. The reorganized Tradex was a substantially different corporate entity, and plaintiffs had to take affirmative steps to obtain notes in that new entity. If the notes are securities, plaintiffs who obtained new notes in exchange for old are “purchasers” under the securities laws. Automatic deposits Many plaintiffs who were Tradex members used their note accounts as depositories for funds. Tradex automatically transferred the sums it paid them for the purchase of their freight bills into their note accounts. Defendants argue that no “new investment decision” was made in connection with these transfers. Plaintiffs argue that after Tradex reorganized it had to obtain their authorization to make transfers, and that the carriers’ authorization of such transfers constituted a “purchase” of notes. Even if Tradex had to obtain such authorization, however, that does not make all subsequent transfers “purchases.” Following the initial authorization, all transfers were automatic, and did not involve a “new investment decision.” Any such transfers were not “purchases” of securities. Monthly interest payments Under the terms of the trust indenture covering the notes, accumulated interest was added to the principal amount of the note each month unless the noteholder chose to receive payment of earned interest instead. Defendants argue that this failure to withdraw accrued interest payments from their accounts does not constitute a “new investment decision.” Plaintiffs argue that they were effectively waiving a right to immediate payment and “reinvesting” the amount of accrued interest. This does not constitute a “new investment decision,” however. The addition of accrued interest to plaintiffs’ note accounts did not significantly change the nature of plaintiffs’ investments. The monthly interest payments were not “purchases.” 3. Section 11 of the 1933 Act Section 11 of the Securities Act of 1933 imposes liability on certain persons involved in the filing of a registration statement, if any part of it contains an untrue statement of a material fact or omits a material fact necessary to make the statements therein not misleading. 15 U.S.C. § 77k(a). Persons liable include: (1) those who signed the registration statement; (2) those who were directors of the issuer at the time of the filing of the registration statement; (3) those who, with their consent, are named in the registration statement as being or about to become a director; (4) every accountant, or any person whose profession gives authority to a statement made by him, who has with his consent been named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement. 15 U.S.C. §§ 77k(a)(l)-(4). Subject to enumerated defenses, section 11 imposes an almost absolute liability for material misstatements or omissions in a .registration statement. A plaintiff need not prove reliance, causation or scienter. In re the Gap Security Litigation, 79 F.R.D. 283 (N.D.Cal.1978). Plaintiffs assert that there were numerous omissions and misrepresentations in the March 29, 1982 and June 1, 1982 prospectuses. Specifically plaintiffs allege that the March 29, 1982 prospectus failed to disclose: 1. the existence of the Animated agreement; 2. that the Animated agreement resulted in expanding Tradex’s business into accounts unrelated to the trucking industry, and into factoring long-term contracts, all of which posed substantially greater risks to Tradex and to plaintiffs; 3. that Tradex intended through reorganization to expand into other business activities; 4. conflicts of interest involving Schwabe, Williamson and one of the Tradex directors; 5. that the Animated agreement violated Tradex’s articles of incorporation; 6. that the Animated agreement violated major covenants and restrictions in the SeaFirst loan agreement; 7. that Animated had substantial financial problems before and during its factoring agreement with Tradex; 8. that Tradex had agreed to lend funds to IML against IML’s accounts receivables, secured only by a security interest in IML’s accounts receivables; 9. that the agreement with IML was also in violation of Tradex’s articles of incorporation; 10. that the IML agreement was in violation of Tradex’s loan ..agreement with SeaFirst; 11. that Tradex assumed substantial risks in entering a new line of factoring with Animated without adequate security; 12. that Tradex was undertaking the Animated agreement as a first time venture without adequate security; 13. that Tradex would need to increase its financing by $6 million as a result of the IML agreement; 14. that it could reasonably be foreseen that Tradex would become insolvent due to its Animated and IML commitments; 15. that Tradex’s allowance for doubtful accounts was grossly understated as to IML and non-existent as to Animated; 16. that Tradex was buying delinquent long-term contracts over 24 and 36 months from Animated for their face value with minimal reserves; 17. that both the Animated and IML transactions jeopardized Tradex’s ability to operate within its SeaFirst loan limit, and that Tradex was exceeding its credit line; 18. that if SeaFirst declared the loan in default, Tradex would not be able to pay principal or interest on the debentures offered to plaintiffs. Plaintiffs allege that the March 29, 1982 prospectus contained the following material misrepresentations: 1. the prospectus falsely stated that management had yet to enter any new lines of business; 2. the prospectus represented that following reorganization, Tradex’s activities would be restricted exclusively to the freight factoring business, when in fact they were not so restricted. Plaintiffs also allege that the June 1, 1982 prospectus contained the following material misrepresentations and omissions: 1. it misrepresented the expansion of Tradex’s business and did not reasonably inform plaintiffs of the nature of the IML and Animated agreements, especially as to long-term contract factoring with Animated; 2. statements made were misleading because Tradex had already entered into an agreement with Animated prior to June 1982; 3. statements made failed to disclose Animated’s financial difficulties and inherent conflicts of interest and the increased risk of financing, as opposed to factoring, accounts; 4. disclosure of Tradex’s increased-loan limit was insufficient and materially misleading and false, when the loan limit was actually increased to accommodate the magnitude of the Animated arrangement, and that Tradex was already in default of its SeaFirst loan agreement by exceeding its credit limit. Plaintiffs seek summary judgment on their section 11 claims against all defendants except officer Clyde Kaneshiro and director Otto Tschanz. Defendant attorneys and defendant accountants also seek summary judgment on these claims, as do Kaneshiro and Tschanz. I have concluded that issues of fact preclude the granting of summary judgment in plaintiffs’ favor on these claims. I have already ruled that questions of fact remain as to whether the notes are securities, and thus plaintiffs are not entitled to summary judgment on these or any of their other securities claims. There are also issues of fact regarding the existence of many of the alleged omissions and misrepresentations, as well as their materiality, which plaintiffs must establish to prevail on their section 11 claims. The Supreme Court has defined an omitted fact as material if there is a substantial likelihood that a reasonable shareholder would consider it important ... There must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the “total mix” of information made available. TSC Industries v. Northway, 426 U.S. 438, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976). This definition also applies to misrepresentations. Kramas v. Security Gas & Oil, Inc., 672 F.2d 766, 769 (9th Cir.) cert. denied, 459 U.S. 1035, 103 S.Ct. 444, 74 L.Ed.2d 600 (1982). TSC involved a different provision of the securities laws, but the standard stated there is also applicable to a section 11 claim. Cf. Feit v. Leasco, 332 F.Supp. 544, 569 (E.D.N.Y.1971) (looking to what average prudent investor ought to know before buying a security). I reject defendants’ contention that the test focuses on a reasonable person in circumstances similar to the plaintiffs’. See Admiralty Fund v. Hugh Johnson, 677 F.2d 1301, 1306 (9th Cir.1982); Cameron Meadows, 669 F.2d at 1281. The materiality of all of the alleged omissions and misrepresentations is vigorously contested. Materiality is ordinarily a question for the jury, Hugh Johnson, 677 F.2d at 1306, and plaintiffs have failed to establish materiality as a matter of law here. In addition, there are issues of fact regarding the affirmative defenses asserted by defendants, specifically plaintiffs’ knowledge of any omissions or misrepresentations, In re Gap, 279 F.R.D. at 297; defendants’ due diligence in investigating the truth and adequacy of the statements in the registration statements, see 15 U.S.C. § 77k(c); and causation, the lack of which may be demonstrated by a defendant to reduce his liability under section 11. See In re Gap, 79 F.R.D. at 297. Plaintiffs’ motions for partial summary judgment are therefore denied as to their section 11 claims. I consider each group of defendants in turn. Defendant Officers Kaneshiro seeks summary judgment in all four cases on the section 11 claims against him on the grounds that he did not sign the registration statements. Defendants Brown and Delzer, who are not parties to the Ahern action, also seek summary judgment on the section 11 claims against them. Kaneshiro was Tradex’s chief financial officer. It is undisputed that he did not sign the registration statements and was not named as a director or as one about to become a director. Plaintiffs argue that he is liable because, as chief financial officer and the person who prepared financial statements for Tradex, he had a duty under section 6 of the 1933 Act to sign any registration statement. Plaintiffs argue that he cannot escape liability by breaching his duty. Whether Kaneshiro breached a duty by not signing is irrelevant here. Plaintiffs agree that Kaneshiro is not liable other than as one who signed the registration statements. The language of section 11 is clear. Kaneshiro did not sign the registration statements and he is therefore entitled to summary judgment on the section 11 claims against him. See McFarland v. Memorex, 493 F.Supp. 631, 642 (N.D.Cal.1980) (nonsigning officers cannot be held liable under section 11). Brown and Delzer have submitted no factual materials establishing that they did not sign the registration statements, and I therefore deny their motion. I note, however, that the Silver Eagle plaintiffs do not allege that these defendants signed the registration statements, and if that fact is not established at trial, Brown and Delzer will be entitled to judgment on plaintiffs’ section 11 claims. Defendant Tschanz Plaintiffs agree that Tschanz is entitled to summary judgment on their section 11 claims. Tschanz’s motion for summary judgment on these claims is granted. Defendant Attorneys Defendant attorneys argue that any section 11 liability must arise from their actions as “experts” with respect to the registration statements. Section 11 imposes liability on: any person whose profession gives authority to a statement made by him, who has with his consent been named as having prepared or certified any part of the registration statement, .or as having prepared or certified any report or valuation used in connection with the registration statement. 15 U.S.C. § 77k(a)(4). Plaintiffs assert that defendant attorneys are liable because they had extensive knowledge of Tradex’s business affairs and a high degree of involvement in the note offering. This argument finds no support in the case law. As the Supreme Court stated in a recent case, “certain individuals who are involved in preparing the registration generally cannot be reached by a section 11 action. These include ... lawyers not acting as ‘experts’____” Herman & MacLean v. Huddleston, 459 U.S. 375, 386 n. 22, 103 S.Ct. 683, 690, 74 L.Ed.2d 548 (1983). Plaintiffs rely primarily on Escott v. BarChris Construction Corporation, 283 F.Supp. 643 (S.D.N.Y.1968), and Feit v. Leasco, 332 F.Supp. at 544. Those cases are clearly distinguishable because the attorney defendants in those eases were also directors and thus specifically subject to section 11. Schwabe, Williamson was described in the December 11, 1981 registration statement and the June 1, 1982 prospectus as having passed on certain legal matters connected with the reorganization and the registration of the notes. Plaintiffs do not seek to hold defendants liable for this work. The remainder of defendants’ activities do not give rise to liability under section 11. See Tirone v. Calderone-Cunan Ranches, Inc., Fed.Sec.L.Rep. (CCH) 1196,-480 at 93,775 (W.D.N.Y.1978) (that defendant attorneys “passed on all legal matters” relative to the registration statement and prospectus does not confer liability on them as experts). Plaintiffs have also asserted that these defendants are liable under section 11 as aiders and abettors. I disagree. Section 11 very specifically limits the categories of persons who may be held liable under it, and it would defeat the purpose of the statute to apply it to persons who do not engage in conduct covered by the statute. See McFarland v. Memorex, 493 F.Supp. at 642. But see Zatkin v. Primuth, 551 F.Supp. 39 (S.D.Cal.1982). I conclude that there is no aiding and abetting liability under section 11. Defendant attorneys’ motions for summary judgment are granted as to plaintiffs’ section 1J. claims. Defendant Accountants If defendant accountants are liable under section 11, it must be in their capacity as experts. That is, their liability is limited to that portion of the registration statements which they are named as having either prepared or certified. See Huddleston, 459 U.S. at 281 n. 11, 103 S.Ct. at 687 n. 11. Touche Ross was identified as an “expert” only with respect to the audited 1981 financial statement. Defendants contend that they cannot be held liable for their failure to mention events occurring after August 31, 1982, and correctly point out that neither the IML nor the Animated transactions at issue here had been discussed as of that date. Accountant defendants are correct in asserting that they are liable only for misrepresentations or omissions contained in the audited financial statement. That does not necessarily mean that subsequent events may not be considered. Subsequent events occurring up to the effective date of the registration statement are relevant to show either that the financial statement was false when made or that it had become misleading. See BarChris, 283 F.Supp. at 698. Defendants attempt to distinguish BarChris on the grounds that there the audited financial statement was false at the time of the audit. Plaintiffs make no such contention about the 1981 Tradex financial statement. In BarChris, though, the court treated as a separate issue what the auditor did in its post-audit S-l review. BarChris, 283 F.Supp. at 698. It found that review to be inadequate. Plaintiffs have raised an issue of fact about whether subsequent events made the 1981 financial statement misleading. Thus, defendants are entitled to summary judgment only if they establish the absence of any material fact as to the adequacy of the post-audit review they conducted in February and March of 1982. Plaintiffs assert that defendants, upon reasonable investigation, would have discovered, prior to the effective date of the registration, that Tradex bought IML’s delinquent accounts for face value; that there were conflicts of interest inherent in the Animated agreement; and that Tradex was having problems collecting on the Animated accounts and contracts it factored. Plaintiffs claim defendants failed to disclose the financial agreement between Tradex and IML, or IML’s financial difficulties in the financial statement they certified. Plaintiffs point out that Touche Ross’s own procedures required that it “determine significant changes in receivable balances of important customers.” Plaintiffs assert that defendants should have checked on IML’s financial condition, and that if they had done so, they would have learned how bad it was. There is testimony that defendant David Fearn, Tradex’s president, asked defendant Fisher, in April 1982, to look into IML’s condition. Fisher does not recall being asked to do so and, in any event, he did not do so. He did learn in mid-June, after the effective date of the registration statements and prospectuses, that IML had lost $6 million in the 19 weeks ending May 15, 1982. In BarChris, the court found that the auditor’s written procedures, which he did not follow, set the required standard for the post-audit investigation. BarChris, 283 F.Supp. at 703. I find that Touche Ross’s established procedures are generally adequate here. Unlike the auditor in BarChris, these defendants do not appear to have failed to meet their procedures. There is no indication in the record that there was any “significant change” in IML’s receivable balance with Tradex, or that any of Touche Ross’s procedures should have uncovered IML’s condition, or that the seriousness of IML’s difficulties was apparent prior to mid-June 1982. The Ninth Circuit has recently stated, however, that: We assume that generally accepted accounting standards do not provide protection from liability when the accountant “fails to reveal material facts which he knows or which, but for a deliberate refusal to become informed, he should have known” should be revealed. Admiralty Fund v. Hugh Johnson & Co., 677 F.2d 1301, 1313 n. 15 (9th Cir.1982). I therefore conclude that, because there is some evidence that Fisher was asked to investigate IML’s condition and failed to do so, the scope of defendants’ duty to review Tradex’s financial situation may have extended beyond following Touche Ross’s established procedures, insofar as IML is concerned. See id. There is no evidence that defendants’ established procedures should have alerted them to any other facts making the financial statement misleading, with one possible exception. The “Description of Business” section of the financial statement certified by Touche Ross stated that Tradex was “a nonprofit corporation organized to purchase freight bills from its commercial carrier members and collect the amounts due on those bills.” This statement was accurate at the time it was made, but inaccurate by the time of the registration statements and prospectuses. By then, the nature of Tradex’s business had expanded. Tradex was no longer purchasing freight bills from only commercial carrier members, and the board had approved a proposal to enter into the IML agreement to finance, rather than factor, its freight bills. I find no cases addressing the possibly misleading nature of such a statement — as opposed to the financial data — in such a financial document. I nevertheless conclude that such a statement can give rise to section 11 liability: it is part of what Touche Ross certified. Substantial issues of fact remain regarding the materiality of these items, as well as plaintiffs’ and defendants’ knowledge of them. With this exception, I find that plaintiffs’ assertions that developments made the audited financial statement false or misleading are unsupported by the evidence in the record. Plaintiffs have alleged that defendant accountants are also liable under section 11 as aiders and abettors. As previously noted, I conclude that the aider and abettor theory is unavailable under section 11. Defendants are entitled to summary judgment on this aspect of plaintiffs’ section 11 claims. Defendants’ motion for summary judgment on the section 11 claims is otherwise denied. 4. Section 12 of the 1933 Act The Ahern plaintiffs assert claims against all defendants for violations of sections 12(1) and 12(2) of the 1933 Act. Plaintiffs also allege that the accountant and attorney defendants aided and abetted violations of these statutes. The Silver Eagle plaintiffs assert claims under section 12(2), but not under section 12(1). All parties seek summary judgment on plaintiffs’ section 12(2) claims. Defendants seek summary judgment on the section 12(1) claims. Section 12(1), in pertinent part, imposes liability for the mailing of a security for the purpose of sale or for delivery after sale unless the security is accompanied or preceded by a valid prospectus. 15 U.S.C. § 77e(b)(2). Section 12(1) imposes liability only on one who offers or sells a security. Section 12(2) imposes liability on any person who offers or sells a security ... by the use of any means or instruments of transportation or communication in interstate commerce or of the mails, by means of a prospectus or oral communication, which includes an untrue statement of material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such truth or omission), and who shall not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission____ 15 U.S.C. § 771 (2). As noted, plaintiffs assert the existence of numerous omissions and misrepresentations in the sale of the notes. All defendants assert that they are not “sellers” of securities within the meaning of section 12. The definition of a seller is generally the same under both section 12(1) and section 12(2). Hill York Corp. v. American International Franchises, Inc., 448 F.2d 680, 692 (5th Cir.1971). Defendants argue for a strict privity requirement. The Ninth Circuit, however, adheres to a judicially expanded definition of “seller” to include “participants” in the sales transaction. Admiralty Fund v. Jones, 677 F.2d 1289, 1294 (9th Cir.1982). “The test is whether the injury flowed directly and proximately from the actions of the defendant. Id. Participant liability extends only to those persons who have played a substantial role in the process leading to the sales transaction at issue. Deneau v. Walker, No. C82-3132 MHP, slip op. (N.D.Cal. Sept. 30, 1983). I consider each set of defendants in turn. Defendant Officers Plaintiffs rely on the following evidence in asserting that Kaneshiro was a “participant” in the note sales: (1) he provided financial data for the registration statement; (2) he conferred with the note-holders regularly; and (3) he accepted note-holders’ checks for additional investments. Plaintiffs have shown no evidence that Kaneshiro solicited their investments. He accepted their checks, but was performing “routine services in the ordinary course of business” in so doing. See Wright v. Schock, 571 F.Supp. at 657. Kaneshiro is entitled to summary judgment on these claims. Defendant Fearn was the registered salesperson for the Tradex notes. It appears to be undisputed that Fearn gave presentations urging people to buy the notes. I, therefore, cannot say as a matter of law that Fearn was not a “seller.” His motion for summary judgment on these claims is denied. Defendant Directors Plaintiffs allege that defendant directors played a substantial role in the note sales based on the following: (1) the directors’ general responsibility, pursuant to bylaws, to manage Tradex’s business; (2) their participation in the April 12, 1982 annual meeting at which the new note program was presented; (3) attendance at board meetings at which promotion of the note program was discussed; and (4) attendance at the December 13, 1982 annual meeting, at which the note program was allegedly touted. Plaintiffs point out that defendant director Harmon Leonard helped distribute promotional literature. With the exception of Leonard, there is no evidence that any of these defendants did anything other than participate generally in Tradex’s business. They did not actively solicit, participate in or arrange for any sales of Tradex notes. See Lawler v. Gilliam, 569 F.2d 1283,1288 (4th Cir.1978). These defendants’ activities are not sufficient to make them “sellers” under section 12. See also Deneau, supra (routine arrangements for issuance of new shares did not make defendants “sellers”). As for Leonard, there is no evidence that he distributed promotional literature to any plaintiff, and thus he cannot be liable as a “seller.” See In re Fortune Systems Securities Litigation, 604 F.Supp. 150 (N.D.Cal.1984) (defendant not liable where not involved in particular sales transaction at issue). Defendants’ motions for summary judgment on plaintiffs’ section 12 claims are therefore granted. Defendant Attorneys In asserting that defendant attorneys are liable under section 12, plaintiffs rely on: (1) Simpson’s status as long-time Tradex attorney together with his firm’s extensive legal work conducted in connection with Tradex’s reorganization and the preparation of the required SEC documents; (2) Simpson’s general knowledge of Tradex’s affairs, resulting from attendance at all board meetings (Simpson was Tradex’s secretary and kept the minutes of these meetings); and (3) Simpson’s participation in the April 12, 1982 meeting at which plaintiffs allege that he urged Tradex’s members to vote for reorganization and to participate in the note program. The mere performance of legal services in connection with a sale of securities does not give rise to liability under section 12. See In re North American Acceptance Corporation Securities Cases, 513 F.Supp. 608 (N.D.Ga.1981). See also In re Diasonics Securities Litigation, 599 F.Supp. 447 [Current] Fed.Sec.L.Rep. (CCH) ¶ 91,815 at 90,091 (N.D.Cal.1984). A lawyer may be liable under section 12, however, if he plays an active role in the sales transaction at issue. See Hudson v. Capital Management International, Inc., 565 F.Supp. 615 (N.D.Cal.1983). Here, plaintiffs have presented evidence that Simpson urged Tradex members to invest in the note program at the April 12, 1982 meeting, attended by a number of the plaintiffs. Although it is not clear which plaintiffs attended or precisely what Simpson said, I conclude that plaintiffs have raised a sufficient question of material fact to prohibit summary judgment in favor of these defendants on the section 12 issue. Defendants also seek summary judgment on plaintiffs’ claims under section 12(1) on the grounds that a valid prospectus was in effect at all relevant times. Although there is no dispute about the existence of a valid prospectus, the plaintiffs assert that some of them received their notes before they received the prospectus. These defendants are not entitled to summary judgment on the Ahern plaintiffs’ section 12(1) claims. In addition, defendant attorneys seek summary judgment on the aiding and abetting claims against them. Defendants argue that there is no liability as an aider and abettor under section 12. Some courts have reached this conclusion, see, e.g., Hokama v. E.F. Hutton & Co., Inc., 566 F.Supp. 636, 642 (C.D.Cal.1983), and others have recognized such liability, but declined to expand its scope beyond that of “participant” liability. See, e.g., In re Itel Securities Litigation, 89 F.R.D. 104, 116 (N.D.Cal.1981). The Ninth Circuit has not decided the issue, although it has expressed doubts about the viability of such liability under section 12. See Admiralty Fund v. Jones, 677 F.2d 1289, 1295 n. 4 (9th Cir.1982). The language of section 12 is specifically focused on those who offer or sell securities while aider and abettor liability “is a theory of secondary liability intended to apply to ‘fringe’ parties who knowingly assist in a primary violation.” Hokama, 566 F.Supp. at 642. The better reasoning causes me to conclude that aider or abettor liability is not available under section 12. Defendant attorneys are entitled to summary judgment avoiding liability as aiders and abettors to any fraudulent sale of securities. Defendant Accountants Plaintiffs assert that defendant accountants are “sellers” under section 12 based on: (1) their work on the registration statements and prospectuses, and (2) Fisher’s speech to Tradex members at the annual meeting held on April 12, 1982. Defendants’ preparation of portions of the registration statements does not render them liable under section 12. See, e.g., Hudson v. Capital Management International, Inc., [1982-83 Transfer Binder] Fed.Sec.L.Rep. (CCH) 1199,222 at 95,899 (N.D.Cal. Aug. 24, 1982). Cf. In re Wickes Companies, Inc. Securities Litigation [1982-83 Transfer Binder] Fed.Sec.L.Rep. it 99,055 at 95,000 (CCH) (S.D.Cal. Jan. 6, 1983). Fisher's speech, an exhibit to the motion, as emphasized by the plaintiffs, says: Our firm gave your Management and its accounting practices a clean bill of health for 1981 ... I am very encouraged by your growth plans and in the way your Board and Management have handled the Company’s business in these recessionary times. Many companies have not done as well: keep up the good work____ I am looking forward to reporting to you a ‘clean bill of health’ at your Annual Meeting for many years to come. Certain plaintiffs swear the above was “a sales pitch” and that it said to them that the note program would be a good investment. Fisher’s remarks, whatever else one may say about them, do not qualify as a solicitation or the sort of “substantial participation” necessary to incur liability under section 12. Defendants’ motions for summary judgment are granted as to plaintiffs’ section 12 claims. Finally, I point out that in addition to the preclusive effect of my prior rulings herein on the “notes as securities” issue, there also exist issues of fact regarding materiality, knowledge of various parties, causation, and due diligence which prohibit a ruling in plaintiffs’ favor here. 5. Section 17(a) of the 1933 Act All defendants seek summary judgment on plaintiffs’ claims under section 17(a) of the 1933 Act, 15 U.S.C. § 77q(a). I have previously held that there is no private right of action under section 17(a). Brabham v. Patenta, 614 F.Supp. 568 (D.Or.1984). For the reasons stated in my Opinion in Brabham, I grant defendants’ motions for summary judgment on plaintiffs’ claims under section 17(a). 6. Section 15 of the 1933 Act The Ahem plaintiffs seek to hold Touche Ross liable as a “controlling person” with respect to Fisher, and to hold Schwabe, Williamson liable as a “controlling person” with respect to Simpson, under section 15 of the 1933 Act, 15 U.S.C. § 77o. Section 15 provides in relevant part: Every person who, by or through stock ownership, agency, or otherwise ... controls any person liable under Section 77k or 771 of this title, shall also