Equitable Defenses Under Arizona Securities Law

Nearly all states refuse to read nonstatutory, equitable defenses into their securities statutes. Early Arizona blue-sky cases also refused to consider equitable defenses. These state cases contrast with cases under § 10(b) and Rule 10b-5. Because liability under § 10(b) and Rule 10b-5 is implied, neither the elements of proof nor the defenses are statutorily defined. Consequently, it was left to the courts to judicially define the elements and defenses. On the other hand, express-liability statutes like A.R.S. §§ 44-1991(A) and 44-2001(A) define by their words the elements of proof. They likewise are accompanied by statutes that provide defenses like the statutes of limitation, reasonable care under § 44-2001(B), and failure to tender. After introducing the treatment of equitable defenses under state securities law, the article analyzes the Arizona Court of Appeals 2014 Caruthers decision. Caruthers broke with the near-uniform body of modern-state-securities law decisions that decline to recognize equitable defense to statutory claims.