Donohoe v. Consolidated Operating & Production Corp.
United States Court of Appeals for the Seventh Circuit
30 F.3d 907 (7th Cir. 1994)
Donohoe (plaintiff) was fraudulently induced to invest in an oil-drilling venture run by Bridges, whose fraud was orchestrated through COPCO (defendant), controlled by principals Nortman and Berrettini (defendants); Nortman and Berrettini had thoroughly vetted Bridges's background, monitored his work, and personally invested over $100,000 of their own money in the venture. After Bridges declared bankruptcy, Donohoe pursued Nortman and Berrettini under a control-person theory of securities liability, and on remand the district court again granted them summary judgment based on a good-faith defense.
Whether good faith is a defense to control-person liability for another person's fraudulent behavior under federal securities law.