IN THE SUPREME COURT OF THE STATE OF KANSAS
No. 91,778
ROGER KLEIN,
Appellant,
v.
OPPENHEIMER & CO., INC.,
Appellee.
SYLLABUS BY THE COURT
1. The purpose of the Kansas Securities Act, K.S.A. 17-1252 et seq., is to place the traffic of promoting and dealing in speculative securities under rigid governmental regulation and control to protect investors, thereby preventing, so far as possible, the sale of fraudulent and worthless speculative securities.
2. An action to enforce the Kansas Securities Act may be prosecuted by the Kansas Securities Commissioner under K.S.A. 17-1266, and K.S.A. 17-1268 authorizes a private right of action.
3. K.S.A. 17-1268, by its express terms, defines the category of liability for a private cause of action by a purchaser. The limitations of 17-1268(a) and (b), however, do not apply in defining liability under K.S.A. 17-1266 because they have different goals. The purpose of 17-1268 is to provide civil liability to allow recovery by the purchaser, while 17-1266 is a public cause of action for injury and equitable relief to require accountability by the seller.
4. K.S.A. 17-1268(b) creates separate liability for every person who directly or indirectly controls a seller liable under subsection (a) and every broker-dealer or agent who materially aids in the sale. By the plain language of this provision, direct or indirect control of the sale is not a factor in determining whether a broker-dealer materially aids in the sale.
5. A broker-dealer who materially aids in the sale of unregistered securities is liable to the buyer for damages resulting from the sale unless such broker-dealer can prove it did not know and in the exercise of reasonable care could not have known of the existence of facts by reason of which the liability is alleged to exist. K.S.A. 17-1268(b).
6. Where a case is submitted solely on a stipulation of facts, both the trial court and the appellate court are bound by the stipulations. Neither court can consider additional factual claims by the parties and must render only such judgment as the stipulated facts warrant.
7. Where there is no factual dispute, appellate review of an order regarding summary judgment is de novo.
8. Where the controlling facts are based upon a joint stipulation, this court makes a de novo determination whether the moving party is entitled to a judgment as a matter of law.
Appeal from Johnson district court; JANICE D. RUSSELL, judge. Opinion filed March 24, 2006. Affirmed in part, reversed in part, and remanded with directions.
Joseph C. Long, of Norman, Oklahoma, argued the cause, and Diane A. Nygaard, of Leawood, and Susan F. Meagher, of Leawood, were with him on the briefs for appellant.
Tracy J. Cowan, of Thompson Coburn LLP, of St. Louis, Missouri, argued the cause, and David Wells and Karen M. Volkman, of the same firm, and Roger N. Walter, of Morris, Laing, Evans, Brock & Kennedy, of Topeka, were with him on the brief for appellee.
The opinion of the court was delivered by
ALLEGRUCCI, J.: The principal issue in this case is the liability of a clearing broker for the sale of unregistered securities under the Kansas Securities Act. It is an issue of first impression.
Roger Klein had a brokerage account with L.T. Lawrence. L.T. Lawrence, functioning as an originating or introducing broker, sold unregistered securities through Oppenheimer & Co., Inc. (Oppenheimer), a clearing broker, to Klein. The sale of nonexempt, unregistered securities is prohibited by K.S.A. 17-1255. Klein sued Oppenheimer under K.S.A. 17-1268(a) and (b) of the Kansas Securities Act. (Note: Effective July 1, 2005, the entire Kansas Securities Act was repealed and replaced by the new Kansas Uniform Securities Act, K.S.A. 2005 Supp. 17-12a101 et seq. The provisions of that Act are not relevant to this appeal.) On cross-motions for summary judgment, the district court ruled in favor of Oppenheimer. Klein appealed. This court granted Oppenheimer's motion to transfer the appeal from the Court of Appeals. K.S.A. 20-3017.
The issues on appeal are:
1. Is Oppenheimer liable under K.S.A. 17-1268(a) for aiding and abetting L.T. Lawrence in the sale of unregistered securities?
2. Is Oppenheimer liable under K.S.A. 17-1268(b) for "materially aiding" L. T. Lawrence in the sale of unregistered securities?
3. Were the securities at issue exempt from registration?
4. Were the transactions that occurred on and after October 11, 1996, preempted by the National Securities Markets Improvement Act of 1996, 15 U.S.C. § 78a et seq. (2000)?
Procedural history. This action originally was filed in 1999 by Klein and his uncle, Daniel Brenner, who died in 2002. L.T. Lawrence is currently or has been in bankruptcy and is no longer a named defendant in this case. Klein and Oppenheimer are the only remaining parties.
This is the second time the case has been before this court. In the first instance, Klein and Brenner appealed from the entry of summary judgment in favor of Oppenheimer on the ground that a clearing broker was not liable for the sale of unregistered securities under New York law. Brenner v. Oppenheimer & Co., 273 Kan. 525, 44 P.3d 364 (2002). Appellants argued that the choice of law provision in Oppenheimer's standard form brokerage agreement was unenforceable and that Kansas law should be applied. Concluding that Kansas law governed, the court reversed and remanded for further proceedings. 273 Kan. at 549.
Governing Kansas statutes. The purpose of the Kansas Securities Act, K.S.A. 17-1252 et seq., "is to place the traffic of promoting and dealing in speculative securities under rigid governmental regulation and control to protect investors, thereby preventing, so far as possible, the sale of fraudulent and worthless speculative securities." Activator Supply Co. v. Wurth, 239 Kan. 610, 615, 722 P.2d 1081 (1986). The Act generally accomplishes its purpose by requiring registration of securities, K.S.A. 17-1256, K.S.A. 17-1257, and K.S.A. 17-1258, and prohibiting the sale of unregistered securities, K.S.A. 17-1255. Certain securities and transactions are exempt from the registration requirement. K.S.A. 17-1261 and K.S.A. 17-1262. An action to enforce the Kansas Securities Act may be prosecuted by the Kansas Securities Commissioner under K.S.A. 17-1266, and K.S.A. 17-1268 authorizes a private right of action.
District court decision. Upon remand from the first appeal, the parties filed cross-motions for summary judgment, which were decided entirely in Oppenheimer's favor. The district court first concluded that Oppenheimer could not be liable for the sale of unregistered securities under K.S.A. 17-1268(a) as an aider and abettor. Second, the district court concluded that, even if there is secondary liability under 17-1268(a) for the sale of unregistered securities, the stipulated facts would not support a finding that Oppenheimer was liable as an aider and abettor. Third, the district court concluded that Oppenheimer was not jointly and severally liable under 17-1268(b) because it did not "materially aid" in the sales of unregistered securities within the meaning of the statute. Fourth, the district court concluded that all of the securities at issue, with the exception of MetroGolf, Inc. (MetroGolf), were exempt under K.S.A. 17-1262(b) from the registration requirements. The district court did not address the question whether the security registration requirements of the Kansas Securities Act were preempted by the National Securities Markets Improvement Act of 1996.
Factual statement. For their cross-motions for summary judgment, the parties filed a Joint Statement of Stipulated Undisputed Facts. The following facts are drawn from the stipulated facts and the district court's decision:
L.T. Lawrence was an introducing broker-dealer registered with the Kansas Department of Securities. Oppenheimer, also a broker-dealer registered with the Kansas Department of Securities, acted as a clearing broker for L.T. Lawrence.
In its memorandum opinion, the district court described the functions of an introducing broker and a clearing broker as follows:
"A buyer opens a brokerage account with a broker, who is the agent of the buyer. When the buyer tells his broker that he wishes to purchase a particular stock, whether it is a solicited or unsolicited purchase, the actual stock purchase happens one of two ways. Larger brokerage houses have a seat on the stock exchange and they buy directly for their clients. Smaller brokerage firms frequently do not have a seat on the exchange, so they cannot make direct purchases for their clients. Instead, they contract with one of the larger houses which does have a seat and the larger broker actually executes the purchase. The larger firm is known as the 'clearing broker.' The smaller firm is known as the 'introducing broker.'"
In 1993, Oppenheimer and L.T. Lawrence entered into a clearing agreement that specified what services and functions Oppenheimer was to provide to L.T. Lawrence. Oppenheimer agreed to provide services such as (a) accepting instructions from L.T. Lawrence for the creation of customer account records in Oppenheimer's automated data system, (b) preparing and transmitting confirmations of trades and monthly account statements to L.T. Lawrence and/or its customers, and (c) extending and maintaining margin credit to L.T. Lawrence customers, where required. Oppenheimer agreed to hold cash and securities received for the L.T. Lawrence accounts and collect and disburse dividends and interest and process reorganization and voting instructions with respect to securities held in custody. Oppenheimer also agreed to (a) receive and deliver cash and securities from, to, and for the L.T. Lawrence accounts in accordance with instructions from L.T. Lawrence or written instruments from L.T. Lawrence customers and be responsible for transferring securities for L.T. Lawrence accounts as directed by L.T. Lawrence customers, (b) extend and maintain margin credit to L.T. Lawrence customers to the extent transactions for them require the extension of credit but subject to Oppenheimer margin policies and applicable margin regulations, and (c) be responsible for calculating margin requirements and initiating margin calls and for the administration of the rehypothecation and lending of securities in customer accounts. ("Hypothecation" is the pledging of something as security without delivery of title or possession. Black's Law Dictionary 759 [8th ed. 2004]).
The clearing agreement was a fully disclosed agreement, meaning that the accounts were carried in the customers' names with a notation on Oppenheimer books that the account came to Oppenheimer through L.T. Lawrence. Oppenheimer sent confirmation notices, account statements, and margin calls directly to the customers. Form letters sent from Oppenheimer to investors notifying them of a margin call were addressed "Dear Client." Customers were to send all funds directly to Oppenheimer.
L.T. Lawrence was required by the clearing agreement to provide the following disclosure statement to its customers:
"[Oppenheimer] does not control, audit or otherwise supervise the activities of [L.T. Lawrence] or its registered representatives or employees. [Oppenheimer] does not verify information provided by [L.T. Lawrence] regarding your account or transactions processed for your account nor undertake responsibility for reviewing the appropriateness of transactions entered by [L.T. Lawrence] on your behalf."
Oppenheimer reserved the right to refuse any transactions entered for a customer account.
Under the clearing agreement, L.T. Lawrence was required to maintain compliance and supervisory procedures adequate to assure the compliance of its registered representatives and employees with all federal and state securities laws. At the time of the transactions at issue, Oppenheimer had a reasonable belief that L.T. Lawrence, its agents, and its employees were maintaining compliance and supervisory procedures that were adequate to assure compliance by L.T. Lawrence's registered representatives and employees with all federal and state securities laws.
Oppenheimer did not solicit, recommend, or offer the sale or purchase of any securities purchased by Klein. Oppenheimer cleared all the trades in Klein's accoun, but acted in no capacity other than clearing broker for any securities purchased from L.T. Lawrence by Klein.
In his petition, Klein alleged that he bought from L.T. Lawrence and Oppenheimer the following unregistered securities:
20,000 shares International Nursing Services, Inc.
109,400 shares Ecotyre Technologies, Inc.
15,000 shares Idenet, Inc.
20,000 shares Nouveau International, Inc.
10,000 shares Aegis Consumer Funding
50,000 shares Eastwind Group
20,000 shares MetroGolf, Inc.
10,000 A Warrants Ecotyre Technologies, Inc.
9,000 shares QPQ Corp.
All the securities in this list, with the exception of 30,000 shares of Ecotyre Technologies, Inc., were purchased by Klein on or after October 11, 1996. The parties have stipulated that Klein's purchase of the QPQ Corp. stock was unsolicited, and Klein has agreed to dismiss his claim with regard to that stock.
In oral argument, counsel for Oppenheimer attempted to create a factual issue, arguing that there were two (unidentified) paragraphs in the stipulated facts that establish that Oppenheimer did not execute the stock transactions at issue. In rebuttal, counsel for Klein stated that the stipulations referred to by Oppenheimer's counsel signified that L.T. Lawrence earlier had purchased the stocks from other brokers to put into L.T. Lawrence's own account. When Klein purchased the stocks, Oppenheimer executed the trades by taking the stocks out of L.T. Lawrence's account and putting them into Klein's account. Counsel for Klein is correct. The district court noted that Oppenheimer did execute the stock transactions at issue, stating:
"In paragraph 17 of the stipulated facts, the parties agree that Oppenheimer provided ministerial administrative services to L. T. Lawrence, including: accepting instructions from L. T. Lawrence for the creation of customer account records in Oppenheimer's automated data system; preparing and transmitting confirmations of trades and monthly account statements to L. T. Lawrence and/or its customers; and extending and maintaining margin credit for L. T. Lawrence customers."
Here, the case was tried on a stipulation of facts, which is binding both on the trial court and this court. Neither court can consider additional factual claims by the parties. See Wentz Equip. Co. v. Missouri Pacific R. R. Co., 9 Kan. App. 2d 141, 142, 673 P.2d 1193 (1983), rev. denied 235 Kan. 1042 (1984). Nor can the parties on appeal "be heard to suggest that facts were other than as stipulated or that any material fact was omitted." Columbia Bank for Coop. v. Okeelanta Sugar Coop., 52 So. 2d 670, 673 (Fla. 1951). Accordingly, the court can only render judgment warranted by those facts. C.M. Showroom, Inc. v. Boes, 23 Kan. App. 2d 647, Syl. ¶ 1, 993 P.2d 793 (1997).
Further, there is no indication in the record that such factual claims were made in the district court, nor was any such claim noted in the district court's memorandum opinion. We agree with the district court that the stipulated facts establish that Oppenheimer did execute the stock transactions at issue. Additionally, if Oppenheimer had not executed the trades at issue, Klein would have no cause of action against Oppenheimer and this nearly 6-year-old case would have been dismissed long ago on that ground.
Oppenheimer had no knowledge or information that these securities were not registered with the State of Kansas at or near the time of the purchases. Oppenheimer had no duty or obligation under the clearing agreement, the New York Stock Exchange (NYSE) and National Association of Securities Dealers (NASD) rules, or applicable law to determine whether these securities were registered with the State of Kansas and, therefore, took no actions to do so.
The district court concluded that, of all the securities purchased by Klein from L.T. Lawrence, only the MetroGolf stock was required by the Kansas Securities Act to be registered. The district court concluded that K.S.A. 17-1262(b) exempts the other securities at issue from registration and on this ground entered summary judgment for Oppenheimer on all the stock purchases except MetroGolf.
Klein seeks to impose civil liability on Oppenheimer under two theories and two provisions of the Kansas Securities Act:
First, he contends that Oppenheimer is liable as an aider and abettor of L.T. Lawrence under K.S.A. 17-1268(a) for selling unregistered securities. K.S.A. 17-1268(a) provides that "[a]ny person, who offers or sells a security in violation of K.S.A. 17-1254 or 17-1255, and amendments thereto . . . is liable to the person buying the security from such person . . . ." K.S.A. 17-1255(a) provides that "[i]t is unlawful for any person to offer or sell any security in this state" unless registered under the Kansas Securities Act or the security or transaction is exempt under K.S.A. 17-1261 or K.S.A. 17-1262 and amendments thereto.
Second, Klein contends that Oppenheimer is liable for materially aiding L.T. Lawrence under K.S.A. 17-1268(b) in selling unregistered securities. 17-1268(b) provides that "every broker-dealer or agent who materially aids in the sale is also liable jointly and severally with and to the same extent as the seller, unless the nonseller who is so liable sustains the burden of proof that such nonseller did not know, and in the exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist."
We first consider if Oppenheimer is liable under K.S.A. 17-1268(a) for aiding and abetting L.T. Lawrence in the sale of unregistered securities.
The district court concluded that Klein's cause of action under an aiding and abetting theory failed. First, the district court found that an aiding and abetting theory could not be applied to an action under 17-1268(a) to impose secondary liability on persons listed in 17-1268(b), i.e., a broker-dealer who materially aids in a sale of unregistered securities. Second, the district court concluded that, even if the aiding and abetting could be applied to an action under 17-1268(a), the stipulated facts in the present case would not support a finding that Oppenheimer was liable as an aider and abettor.
On appeal, Klein relies heavily on State ex rel. Mays v. Ridenhour, 248 Kan. 919, 811 P.2d 1220 (1991). Ridenhour was a public action brought by the Kansas Securities Commissioner under K.S.A. 17-1266, which authorizes the Commissioner to bring civil actions seeking equitable relief to enforce the Kansas Securities Act. In contrast, the present case is a private action brought by the purchaser of unregistered securities seeking damages, interest, costs, and attorney fees under 17-1268. In the circumstances of Ridenhour, this court held that there were six factors to consider in determining whether defendants could be held secondarily liable on an aiding and abetting theory. See 248 Kan. at 936-41.
In Ames v. Uranus Inc., 1993 WL 106896, *11 (D. Kan. unpublished opinion filed March 17, 1993), federal District Judge Lungstrum predicted that "the Kansas courts would hold that there is no cause of action pursuant to 17-1255 and 17-1268(a) for aider-and-abettor liability unless it is expressly provided in 17-1268(b)." The federal court reasoned as follows:
"The United States Supreme Court construed federal statutes similar to the Kansas statutes in question in Pinter v. Dahl[, 486 U.S. 622, 100 L. Ed. 2d 658, 108 S. Ct. 2063 (1988),] and found that only securities owners who transfer title to an unregistered security and persons who successfully solicit the purchase of unregistered securities to serve their own financial interests can be liable for sales of unregistered and non-exempt securities. 486 U.S. 622, 647 (1988). Even though Pinter did not address secondary liability, other federal courts have applied the case to find that allowing aider-and-abettor liability under the statutes construed in Pinter would be inconsistent with the holding of the case. See, Ackerman v. Schwartz, 947 F.2d 841, 845 (7th Cir.1991); Royal American Managers, Inc. v. IRC Holding Corp., 885 F.2d 1011, 1017 (2d Cir.1989); Wilson v. Saintine Exploration & Drilling Corp., 872 F.2d 1124, 1127 (2d Cir.1989). The Kansas courts have not yet addressed whether the reasoning set forth in Pinter is applicable to private actions pursuant to the Kansas statutes against sellers of unregistered securities.
"The Supreme Court, in Pinter construed Section 12(1) of the Securities Act of 1933, which states, in pertinent part: 'Any person who . . . offers or sells a security [in violation of the registration requirements of the Securities Act] shall be liable to the person purchasing such security from him.' 15 U.S.C. § 771. 'Sale' or 'sell' are defined as 'every contract of sale or disposition of a security or interest in a security, for value.' 15 U.S.C. § 77b(3). 'Offer to sell,' 'offer for sale,' or 'offer' include 'every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security, for value.' These definitions are very close to the definitions in the Kansas statute.
"In Pinter, the Supreme Court analyzed the statutes listed above to determine who could be liable as a 'seller' or an 'offeror'. It rejected the Fifth Circuit's approach which defined a seller as one 'whose participation in the buy-sell transaction is a substantial factor in causing the transaction to take place.' Id. at 648 (quoting Pharo v. Smith, 621 F.2d 656, 667 (5th Cir.1980)). The Court believed that the statutory language did not allow such an expansive reading. Id. at 650. If this tort doctrine of 'substantial factor' were to be applied to § 12, the Court was concerned that those only remotely associated with the transactions, 'such as accountants and lawyers, whose involvement is only the performance of their professional services,' would be subject to strict liability for violating the statute. Id. at 651. Congress intended for the definition of 'seller' to be more narrow because the statute, in § 12(1), only makes a seller liable to one who 'purchases from' that person. Id. This language focuses on the relationship between the seller and the purchaser rather than the extent of the defendant's involvement in the transaction itself. Id.
"The Kansas Supreme Court rejected the Pinter analysis when applied to Kansas' public enforcement of K.S.A. § 17-1255 in Mays v. Ridenhour. 248 Kan. 919, 811 P.2d 1220 (1991). In Mays, the Securities Commissioner of the State of Kansas brought an action against investors in a pyramid investment scheme to compel them to disgorge profits from the scheme. He brought suit against them as sellers of unregistered securities, even though the investors themselves did not actually offer or sell any securities, on the theory that they entered into a civil conspiracy to aid and abet the unlawful sale of securities. Id. at 924-25. The Court interpreted the provisions of K.S.A. §§ 17-1255 and 17-1266 (the public enforcement statute applicable to 17-1255) to allow a cause of action by the Commissioner against these defendants on the basis of either a civil conspiracy theory, id. at 935, or an aiding and abetting theory. Id. at 940.
"The Kansas Supreme Court rejected the Pinter narrow definition of 'seller' because of a crucial difference between the Kansas and federal statutes. § 12(1) of the federal statute states that a seller is liable to the person 'purchasing' the security from him or her. Pinter found that Congress' focus on the relationship between the buyer and the seller of the security was significant evidence of its intent to limit the class of sellers liable under § 12(1). Pinter, 486 U.S. at 651. In contrast, neither K.S.A. § 17-1255 nor 17-1266 contains similar or equivalent language. Therefore, the Kansas Supreme Court concluded that the Kansas statute contemplated a different approach to defining a 'seller' who could be liable in public enforcement actions for sales of unregistered securities. Ridenhour, 248 Kan. at 934. The Court then went on to construe the statute broadly to include civil conspirators and aiders-and-abettors as 'sellers' subject to liability under 17-1266. Id. at 935, 940.
"This court believes that the Kansas courts would find the Pinter analysis applicable to a private action pursuant to K.S.A. § 17-1268 for sales of unregistered securities. The provisions of 17-1266 and 17-1268 have different goals. 'The purpose of 17-1268 is to provide civil liability to allow recovery by the purchaser, while 17-1266 is a public cause of action for injury and equitable relief to require accountability by the seller.' Id. (emphasis added). In contrast to 17-1266, then, 17-1268 makes a person who sells unregistered securities 'liable to the person buying the security from such person.' K.S.A. 17-1268(a). This language is equivalent to that in § 12(1), construed in Pinter, making a seller of unregistered securities liable to one who 'purchases from' that seller. The language of 17-1268, establishing a private cause of action, shows the Kansas legislature's focus on the relationship between the seller and the buyer rather than the extent of the seller's involvement in the transaction. Therefore, the Pinter analysis is directly applicable to limit who may be liable as a seller to securities owners who transfer title to an unregistered security and persons who successfully solicit the purchase of unregistered securities to serve their own financial interests. See, Pinter, 486 U.S. at 647. Applying the Pinter analysis to the Kansas statute, theories of civil conspiracy or aiding-and-abetting would not suffice to make persons who are not sellers or solicitors, as defined by Pinter, liable for sales of unregistered securities. This would include attorneys 'whose involvement is only the performance of their professional services.' Id. at 651. Therefore, aside from express secondary liability provided under 17-1268(b), there is no secondary liability under 17- 1268 for the sale of an unregistered security." 1993 WL 106896 at *11-12.
The district court in the present case also held that there is no secondary liability under 17-1268(a) for the sale of unregistered securities. The district court noted that in Ridenhour, the court limited the application of the aiding and abetting theory to 17-1266 actions and expressly excluded 17-1268 actions from its sweep. In this regard, the district court quoted the following passage from Ridenhour:
"'A private cause of action is created in 17-1268(a) by the purchase of a security from one who 'offers or sells' a security in violation of the registration requirements of 17-1254 and -1255 . . . . One who is successful under 17-1268(a) may recover consideration paid for the security, plus 15% interest per annum.
"'Under K.S.A. 17-1268(b), joint and several liability is imposed upon (1) persons who control a seller liable under subsection (a); (2) partners, officers, and directors of a seller; (3) an employee who materially aids the seller; and (4) a broker-dealer or agent who materially aids the sale . . . .
"'K.S.A. 17-1268, by its express terms, defines the category of liability for a private cause of action by a purchaser. The limitations of 17-1268(a) and (b), however, do not apply in defining liability under 17-1266 because they have different goals. The purpose of 17-1268 is to provide civil liability to allow recovery by the purchaser, while 17-1266 is a public cause of action for injury and equitable relief to require accountability by the seller.
. . . .
"'Defendants' argument that the same liability should be imposed under 17-1268 and -1266 is not supported by the language of the statutes. Clearly, the legislature intended to give the Commissioner the ability to seek injunctive and other equitable relief without imposing an increased liability, not only for the profits secured through the involvement in the securities, but also all the damages incurred by the purchaser, interest, and attorney fees. 248 Kan. at 941-42.'"
Hence, the district court in the present case concluded that the aiding and abetting theory of Ridenhour "should not be extended to a 17-1268 private action to impose secondary liability on the categories of persons expressly listed in 17-1268(b)." The district court added that its ruling was consistent with the reasoning and analysis of Ames.
Klein contends that Ridenhour controls a private action under 17-1268(a) as well as a public action under 17-1266. His argument seems to be that the Ridenhour analysis regarding sellers is a distinct concept from aiding and abetting and that the two concepts can be applied separately. He seems to advocate applying the Ridenhour proximate cause test so that "all that must be established is that the injury flowed directly and proximately from the actions of the person sought to be held liable." 248 Kan. at 940. His thinking, presumably, is that, using the proximate cause test, Oppenheimer can be held liable as a seller without application of the aiding and abetting theory. The premise of his argument, however, is faulty. The proximate cause test in Ridenhour is how the aiding and abetting theory is applied to the facts of the case. See 248 Kan. at 936-38, 940-41.
Klein also contends that the Ridenhour analysis should apply to this private action because in Ridenhour the court relied on the reported opinions of two private actions, Mosley v. Unruh, 150 Kan. 469, 95 P.2d 537 (1939), and Cook v. Pepco, Inc., Blue Sky L. Rep. (CCH) ¶ 72,694 (Okla. Dist. Ct. 1987). In other words, the argument is that, because the court did not distinguish between private and public actions in formulating its decision in Ridenhour, the court should not distinguish between private and public actions in the application of the Ridenhour test. The argument fails for several reasons. First,