Hellum

*1304 Opinion

I.

INTRODUCTION

In the aftermath of their failed investment in Prosper Marketplace, Inc. (Prosper), an online money lending service, Christian Hellum and David Booth (plaintiffs) filed the instant class action lawsuit against Prosper and its corporate officers based on alleged violations of California and federal securities laws. Three of the narned defendants who served as Prosper’s outside directors, James W. Breyer, Larry W. Cheng, and Robert C. Kagle (collectively, the outside directors), 1 filed a demurrer arguing that plaintiffs had failed to plead sufficient facts to establish that the outside directors were liable on any of the three causes of action pled against them pursuant to Corporations Code section 25504 2 and title 15 of the Securities Act of 1933, 15 United States Code section 77o (Title 15 of the Securities Act).

In seeking demurrer, the outside directors argued that in order to state a cause of action under each of plaintiffs’ theories of liability, plaintiffs were required to plead facts showing that the outside directors asserted control over Prosper, the primary violator, and that plaintiffs had failed to allege sufficient facts…