VITERBI v. WASSERMAN Part-II
In this case we are presented with an issue of first impression in California: Does the remedy of rescission in a securities fraud claim brought under Corporations Code sections 25504 and 25504.1[1] require privity of contract between the plaintiff and defendant? In other words, can a purchaser of securities sue for rescission under sections 25504 and 25504.1, which provide for liability against "control persons" and "aiders and abettors," if those persons or entities did not sell the security to the plaintiff? We conclude that privity of contract is necessary to maintain an action for rescission under sections 25504 and 25504.1, and therefore a purchaser of securities may not maintain such a claim against someone other than the direct seller. That is so because rescission requires the contracting parties to be placed in the position they were in prior to contracting, and a non-seller, who did not receive any money from the purchaser, cannot return that money to the purchaser. We affirm.
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