Cheng Hsu v. PBIG Management Co.

MEMORANDUM *

Defendants Ken Huang and David Wu appeal from the district court’s judgment in favor of Plaintiff Cheng Hsu following a bench trial. Defendants challenge the district court’s findings of fact and conclusions of law, its imposition of time limits during trial, and its interpretation of California Corporations Code § 25102(h). We affirm.

Defendants formed a corporation, PBIG Management Co., Inc. (PBIG), and five limited partnerships, and sold securities to Plaintiff in the five partnerships. Based on the district court’s factual findings, which we do not find clearly erroneous, Defendants engaged in general solicitation in connection with the sale of their securities. Defendants offered to sell their securities in a public library during PBIG meetings that the district court found “any interested party could attend.” In addition, Defendants announced the PBIG investment opportunity and invited potential investors to attend the PBIG meetings at Pacific Bay Investment Club (PBIC) meetings. PBIC meetings were open to the public, held in a public library, and announced in a local newspaper. Had Defendants offered or sold PBIG securities at PBIC meetings, they would have…

dissenting in part:

Plaintiff-appellee sued under federal and state securities laws for allegedly improper sale of five unregistered securities by defendants-appellants. After a bench trial, the district court ruled for the plaintiffappellee, holding, inter alia, that defendants-appellants were not exempt from California registration requirements for the five securities. The district court awarded plaintiff-appellee a refund of the amount of his investment plus interest. The panel majority affirms.

I respectfully dissent with respect to the claimed exemption from the registration requirements of California law. The issue is whether defendants-appellants qualified for an exemption by virtue of California *812 Corporations Code § 25102(f). That section contains a number of subsections. In order to qualify for an exemption under § 25102(f), a seller must satisfy the criteria of all of these subsections. My dissent concerns two of these subsections.

First, the majority misunderstands and therefore misapplies subsection 25102(f)(4). Under that subsection, in order to qualify for exemption the “offer and sale” of a security must not be “accomplished by the publication of any…