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Department Of Business Oversight Found Liable For Investors' Attorney Fees

In 2011, the Department of Business Oversight filed a civil action against Investco Management & Development LLC and its promoters alleging various violations of the securities laws in connection with the offer and sale of LLC membership interests.  In 2012, the DBO obtained an interlocutory judgment.  The investors subsequently filed their own civil actions.  Investco and the promoters moved to amend the interlocutory judgment to stay all actions.  The DBO filed a written joinder in support of the motion.  The investors successfully opposed the motion to modify and then obtained an attorney fees against the DBO pursuant to Code of Civil Procedure § 1021.5, which has been described as codifying California's version of the private attorney general doctrine.

Yesterday, the Court of Appeal affirmed the award against the state, finding that Superior Court Judge Ernest H. Goldsmith did not abuse his discretion.  People v. Investco Mgmt. & Dev. Llc, 2018 Cal. App. LEXIS 347.  The Court also rejected the DBO's argument that Corporations Code Section 25530(a) insulated it from liability.  That statute provides:

"No action at law or in equity may be maintained by any party against the commissioner, or a receiver, monitor, conservator, or other designated fiduciary or officer of the court, by reason of their exercising these powers or performing these duties pursuant to the order of, or with the approval of, the superior court."

The Court of Appeal reasoned that the statute did not apply because the investors did not maintain an action against the DBO.
 
Gender Mandate Bill Advances
 
As noted in earlier posts, the California legislature is weighing whether to impose a gender mandate on the boards of directors of public companies with their principal executive offices in the state.  Yesterday, the Senate Banking and Financial Institutions Committee approved the bill with only a single negative vote.  The bill's next stop is the Committee on Judiciary.  For more on SB 826, see Legislature Mulls Mandating Board Interviews Of Everyone But Nonbinary Persons And Caucasian Males and California Gender Equity Quota Bill Advances.



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