Girdwood Mining Co. v. Comsult LLC

[BUSINESS LAW]

In Girdwood Mining Co. v. Comsult LLC,[1] the supreme court held that an issuer of securities is not barred by statute from seeking to void an illeagal consulting contract.[2] Girdwood Mining Company (“Girdwood”) hired Comsult LLC (“Comsult”) to provide management services and raise capital.[3] When the business relationship went sour, the two companies agreed that Girdwood would compensate Comsult for services rendered.[4] Girdwood then sued Comsult, seeking to void the agreement on the ground that it violated Alaska securities law.[5] The superior court granted summary judgment to Comsult, holding the suit barred by a statute precluding securities suits based on illegal contracts.[6] Girdwood appealed.[7] The supreme court reversed, holding Girdwood’s suit was not barred by the statute.[8] The court reasoned that a suit is based on a contract only if it seeks relief on the basis of the contract’s validity.[9] On the other hand, a suit such as Girdwood’s is not based on a contract if it seeks to void an illegal contract, because the source of the claim lies in the common-law rules of illegal contracts, not in the contract itself.[10] Reversing the superior court’s decision, the supreme court held that Alaska securities laws do not not preclude an issuer of securities from seeking to void an illegal consulting contract.[11]

 

[1] 329 P.3d 194 (2014).

[2] Id. at 196.

[3] Id.

[4] Id.

[5] Id.

[6] Id.

[7] Id. at 197.

[8] Id.

[9] Id.

[10] Id. at 197–98.

[11] Id. at 196.

Girdwood Mining Co. v. Comsult LLC

[BUSINESS LAW]

In Girdwood Mining Co. v. Comsult LLC,[1] the supreme court held that an issuer of securities is not barred by statute from seeking to void an illeagal consulting contract.[2] Girdwood Mining Company (“Girdwood”) hired Comsult LLC (“Comsult”) to provide management services and raise capital.[3] When the business relationship went sour, the two companies agreed that Girdwood would compensate Comsult for services rendered.[4] Girdwood then sued Comsult, seeking to void the agreement on the ground that it violated Alaska securities law.[5] The superior court granted summary judgment to Comsult, holding the suit barred by a statute precluding securities suits based on illegal contracts.[6] Girdwood appealed.[7] The supreme court reversed, holding Girdwood’s suit was not barred by the statute.[8] The court reasoned that a suit is based on a contract only if it seeks relief on the basis of the contract’s validity.[9] On the other hand, a suit such as Girdwood’s is not based on a contract if it seeks to void an illegal contract, because the source of the claim lies in the common-law rules of illegal contracts, not in the contract itself.[10] Reversing the superior court’s decision, the supreme court held that Alaska securities laws do not not preclude an issuer of securities from seeking to void an illegal consulting contract.[11]

 

[1] 329 P.3d 194 (2014).

[2] Id. at 196.

[3] Id.

[4] Id.

[5] Id.

[6] Id.

[7] Id. at 197.

[8] Id.

[9] Id.

[10] Id. at 197–98.

[11] Id. at 196.