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961 F.2d 469 (4th Cir. 1992)
In order to prove a claim of securities fraud under section 10(b) of the Securities Exchange Act of 1934(636) (1934 Act) based on a failure to disclose material information, a plaintiff must first prove that the defendant was under a duty to disclose that information to the plaintiff.(637) However, federal securities laws, in and of themselves, do not set forth a basis upon which a duty to disclose can be established.
In Fortson v. Winstead, McGuire, Sechrest & Minick(638) the United States Court of Appeals for the Fourth Circuit examined the relationship between the plaintiffs and defendant to determine if the defendant owed the plaintiffs a duty to disclose. The court refused to find that the defendant law firm, which the general partners of a limited partnership had retained to prepare a tax opinion for the offering memorandum, owed a duty to the limited partners to disclose certain material facts in the offering memorandum. Additionally, the court denied the plaintiffs' plea to create such a duty based on sound public policy.
The Fortson plaintiffs, limited partners in City Centre Partnership, a real estate partnership, alleged that the offering memorandum for the partnership failed to disclose certain material facts regarding the financial condition of the general partners and the projected success of the partnership. The plaintiffs asserted their claims against the syndicator of the offering, Craig Hall; the general partners and other Hall affiliates; and the law firm of Winstead, McGuire, Sechrest & Minick (Winstead). Hall Financial Real Estate Group (HFG), which formed the limited partnership, retained Winstead to render a tax opinion concerning certain tax aspects of the City Centre Partnership. Although the plaintiffs did not challenge the accuracy of the tax opinion, they contended that Winstead breached its duty under federal securities laws and state common law by failing to inquire into the financial disclosures of the partnership and ensuring the completeness and accuracy of the disclosures. The United States District Court for the Eastern District of Virginia granted Winstead's motion for summary judgment on all counts, holding that Winstead owed no duty to the limited partners.