The Washington Public Power Supply System's ("WPPSS") abandonment of two nuclear power projects led to the largest municipal bond default in American history. This default generated an unprecedented volume of securities litigation. Among the many court decisions handed down in the wake of the WPPSS fiasco was the Washington Supreme Court's decision in Haberman v. WPPSS. The Haberman court significantly expanded the civil liability provisions of the Securities Act of Washington ("WSA"). In Haberman, the court expressly included as a "seller" the bond issuer and implicitly suggested that professional consultants who provide services in conjunction with a bond issuance may also be held liable as "sellers." Seller liability was a significantly contested issue in Haberman because WSA's seller liability subsection is its most attractive civil liability provision. The subsection sets a low culpability standard by requiring negligence rather than scienter. It offers stern remedies in the form of rescission or damages plus interest, costs and attorneys' fees, and no relief is given to defendants who assert a good-faith or due diligence defense. This Note examines the WSA seller liability subsection, its language, legislative history and case law. The Haberman decision is reviewed in the context of the WPPSS default and other resulting litigation. The majority's rationale for redefining "seller" and the dissent's repudiation of that rationale is examined. The result apparently sought by the Haberman court is compared with the result actually achieved. Suggestions for defending against WSA seller liability claims are given. Finally, specific statutory amendments are recommended to clarify the scope of WSA seller liability.
Barbara L. Schmidt,
Expanding Seller Liability under the Securities Act of Washington—Habermann v. WPPSS, 109 Wash. 2d 107, 744 P.2d 1032 (1987),
63 Wash. L. Rev.
Available at: https://digitalcommons.law.uw.edu/wlr/vol63/iss3/10