Opinion ID: 3062188
Heading Depth: 3
Heading Rank: 2

Heading: Marketing and selling the Instruments

Text: According to Thompson, the Instrument was “not offered publicly all at once,” Aplt. Br. at 5, and “what [he] told prospective lenders varied as time passed and as our 4 On the advice of counsel, around February 2007, Novus re-labeled the Instrument a “JOINT VENTURE AGREEMENT” and altered many of its terms, including requiring (1) that the party advancing money to Novus was “an accredited investor, as defined as such by law, or a sophisticated investor,” Aplt. App. at 316, and (2) that the lending party “ha[d] sufficient business and/or investment experience to enter into this Agreement as a joint venture participant . . . .” Id. at 313. The joint venture agreement did not contain the statement that holders’ funds would be used for further investments, but it repeatedly characterized the transaction’s purpose as generating opportunities for “return on investment,” albeit through the provision of “additional working capital” for “expansion of [Novus’s] core business.” Id. at 312-15 (representing also that Novus would “use . . . the joint venture working capital . . . in a manner that shall be in full compliance with . . . all banking and securities acts . . .”). The joint venture agreement contained no “fixed term,” but only a minimum term of six months, after which the “Agreement shall be ongoing, at the pleasure and agreement of the Parties.” Id. at 314. At the summary judgment hearing before the district court, Thompson’s counsel conceded that “there [was] no difference between the joint venture [agreement] and the [unsecured promissory] note. . . . [The joint venture agreement is] a note . . . just gussied up with a different form.” Supp. App. at 424. Throughout his briefs, Thompson refers to both instruments collectively as the “Novus notes” or “Novus loans,” and offers virtually no legal argument as to how the change should affect our analysis. Accordingly, and because Thompson never argues that Novus changed anything about its business practices (e.g., by actually vetting potential holders’ accreditation status) after moving to the joint venture agreement, this opinion’s references to the “Instrument” generally encompass transactions involving both the unsecured promissory note and the joint venture agreement, unless otherwise indicated. 6 company evolved,” Supp. App. at 321. At first, Thompson simply “ma[de] referrals” to his “friends and family” so that they could take out small business loans, as he had, from Chase Bank. Id. at 213. But in so doing, Thompson would “make them aware of the money they could earn . . . how [Thompson] was earning money.” Id. Eventually, Hall agreed to accept the proceeds of “loans” between Novus and Instrument holders, and so early holders “loaned funds to Novus and then [Thompson] loaned them to Casey Hall.” Id. at 230. Thompson told these early holders “the type of business that [he] was doing and what the money was used for.” Id. at 231. As “more and more people were interested in the loan program . . . [Thompson and Johnson] decided to turn [the Instruments] into more of a business.” Id. at 236. As Novus grew, Thompson fielded conference sales calls set up by a third party; he offered existing holders referral fees; he began to advertise the Instruments on Novus’s web site; and by February 2007, he had begun personally touting the Instruments at shopping-mall seminars, where he would explain to prospective holders how they could liquidate equity in their homes and invest in the Instrument, which he “characterized . . . as low risk,” Supp. App. at 262: he claimed that Novus’s product was “more conservative than a 401(k) [or a] mortgage,” Aplt. App. at 458, extoled Novus’s “reserve of cash and assets to cover any money that we borrow for six months,” id. at 479-80, and asserted that “when you put $100,000 into our program, we only use $25,000 of that” for core-business “projects”; “[t]he other $75,000,” he claimed, “we don’t use,” id. at 479. 7