Outside directors and their counsel should take note of yesterday’s decision by the First District Court of Appeal in Hellum v. Breyer. The case analyzes what a plaintiff must plead in attempting to assert liability against directors of an issuer that has allegedly violated the registration requirements of the Securities Act of 1933 and the qualification requirements of the Corporate Securities Law of 1968.

Hellum involved a class action lawsuit against an issuer and its corporate officials, including its outside directors. Under state law, the plaintiffs alleged that the outside directors could be held liable under Section 25504 of the Corporations Code. The plaintiffs also sought to impose liability on the outside directors under Section 15 of the Securities Act.