## Facts

- Robert G. Westlake bought two commodity-futures options from Lloyd, Carr & Co., a commodity options dealer.
- Westlake alleged Lloyd, Carr & Co. and related individuals used fraudulent sales practices and misrepresentations in selling commodity options, violating federal securities laws and the Commodity Exchange Act.
- Bushnell, Gage & Reizen, an outside law firm, served as general counsel to Lloyd, Carr & Co., primarily handling litigation and regulatory matters.
- Westlake sought to hold the law firm and its partners liable as “controlling persons” under § 15 of the Securities Act and similar provisions, and also on theories akin to aiding-and-abetting by arguing the firm’s legal work helped the enterprise continue operating.
- The law-firm defendants moved for summary judgment, relying on testimony that they did not manage or direct Lloyd, Carr & Co.’s day-to-day operations or sales practices.

## Issues

1. Whether an outside law firm and its partners, acting as general counsel, can be liable as “controlling persons” under § 15 of the Securities Act and analogous provisions absent evidence of managerial or policy-level power over the client.
2. Whether litigation-focused legal representation, allegedly facilitating continued fraudulent operations, is sufficient to create a triable issue of secondary liability on a control-based theory.

## Decision

- The court granted summary judgment for Bushnell, Gage & Reizen and relevant partners on the controlling-person claims.
- The court held the record did not show the law firm had the power to direct Lloyd, Carr & Co.’s management, policies, or the challenged sales practices.
- The firm’s provision of litigation and regulatory defense services, without operational authority, did not establish “control” under the federal controlling-person provisions.
- The case proceeded against other defendants and on other theories not resolved by this ruling.

## Legal Principles

- “Control” for purposes of § 15 of the Securities Act and similar provisions requires power to direct or cause the direction of the primary violator’s management and policies, not merely professional influence or advice.
- A plaintiff must produce evidence that the alleged controlling person possessed (and, in context, could exercise) control over the entity or the specific violative conduct.
- Outside counsel are not controlling persons solely because they serve as general counsel or provide substantial litigation representation; absent evidence of managerial or policy-level authority, controlling-person liability does not attach.
- Legal services that defend a client in litigation or regulatory matters do not, by themselves, constitute control over the client’s underlying business conduct.

## Conclusion

The court ruled that an outside law firm’s litigation-oriented representation of a commodities/options dealer, without evidence of authority to direct management or sales practices, is insufficient to impose controlling-person liability under federal securities-law control provisions, and it entered summary judgment for the law-firm defendants on those claims.


Westlake v. Abrams, 565 F. Supp. 1330 (N.D. Ga. 1983)