Great Lakes Chemical Corporation v. Monsanto Company case brief

Great Lakes Chemical Corporation v. Monsanto Company case brief summary
96 F.Supp.2d 376 (2000)

CASE SYNOPSIS

Defendant moved to dismiss plaintiff's complaint alleging failure to disclose material information, in violation of 15 U.S.C.S. § 78(j)(b) and state law, in plaintiff's purchase of a limited liability company from defendant, and defendant asserted, inter alia, that the federal statute did not apply because the interests transferred to plaintiff did not constitute securities.

CASE FACTS
Plaintiff corporation alleged that defendants failed to disclose material information in conjunction with the sale of a limited liability company (LLC) in violation of 15 U.S.C.S. § 78(j)(b) and state law, and defendant asserted, inter alia, that the interests in the LLC transferred to plaintiff did not constitute securities subject to the federal statute.

DISCUSSION

• The court held that the federal securities statutes did not apply to the transaction because the interests transferred were not traditional stock, where the LLC was not a corporation, and the instruments purchased by plaintiff did not constitute an investment contract because there was no investment in a common enterprise. 
• Further, no investment contract subject to securities laws was shown where plaintiff's authority to remove LLC managers without cause indicated that plaintiff was not a passive investor whose profits derived solely from the efforts of others. 
• In the absence of the applicability of the federal statute, the court lacked jurisdiction over plaintiff's federal claim and thus declined jurisdiction over the pendent state law claims.

CONCLUSION

Motion to dismiss was granted; federal securities law was inapplicable, and pendent jurisdiction over state claims was declined, because plaintiff's purchase of the limited liability company from defendants was not a transfer of stock, and the lack of a common enterprise or reliance for profits solely on the efforts of others indicated that the interests transferred did not constitute an investment contract.

Suggested Study Aids For Securities Regulation Law
Securities Regulation in a Nutshell, 10th (Nutshell Series)
Securities Regulation: Examples & Explanations, 5th Edition
Securities Regulations: The Essentials