Court Opinion

ID: 9466629
Source: CourtListenerOpinion
Date Created: 2023-08-05 01:21:22.619677+00
Date Added: 2024-06-11T17:39:50.329673
License: Public Domain

MERRILL, Circuit Judge,
dissenting:
I dissent.
If Mason invested money with Lancelle under an agreement whereby he was to share profits resulting solely from the managerial or entrepreneurial efforts of Lancelle, then, under SEC v. W. J. Howey Co., 328 U.S. 293, 301, 66 S.Ct. 1100, 1104, 90 L.Ed. 1244 (1946),1 the interest of Mason constituted an investment contract and a security. The record here seems to me amply to establish that such was the agreement between Mason and Unkeless. If, because of technical failure to comply with state law, a limited partnership did not result, that would not operate to modify the agreement by giving Mason any managerial voice in the enterprise and would have nothing to do with the Howey test. If the complaint filed by Mason failed sufficiently to allege that Unkeless’s inducement was directed to such an arrangement, and thus to investment in a security, then an opportunity to amend would seem appropriate.
The basic questions presented by this case, in my view, are whether Mason, in truth, was induced by Unkeless through the conversation in question to enter into an investment contract with Lancelle, and whether he relied to his detriment upon Unkeless’s failure to make full disclosure of his connection with Lancelle. These questions were never reached by the district court. I would remand for further proceedings so that they could be reached.

. Recently reaffirmed in International Brotherhood of Teamsters v. Daniel, 439 U.S. 551, 99 S.Ct. 790, 58 L.Ed.2d 808 (1979).