Sunday, November 24, 2013

Robinson v. Glynn case brief

Robinson v. Glynn case brief summary
349 F.3d 166 (4th Cir. 2003)

CASE SYNOPSIS
Plaintiff individual sued defendant telecommunications designer, design company, and development company, alleging that the designer committed federal securities fraud when he sold the individual a partial interest in the development company. The United States District Court for the District of Maryland, at Baltimore, dismissed the claim on a motion for summary judgment. The individual appealed.

CASE FACTS
The individual claimed that his membership interest in the company qualified as either an investment contract or stock under 15 U.S.C.S. §§ 77b(a)(1) and 78c(a)(10). The individual's interest was not an investment contract as he was not a passive investor heavily dependent on the efforts of others. Rather, he had the power to appoint two board members, was a board member himself, and was a member of the executive committee to which extensive responsibility had been delegated. He also served as treasurer and the company had to get his approval to incur any indebtedness outside the normal course of business.

DISCUSSION

  • The individual's lack of technological expertise did not prevent him from meaningfully exercising his management rights given that he reviewed the development company's technology and financial records and disapproval of certain disbursements and proposed licenses. 
  • The individual's interest was not a stock as the company's members did not share in the profits in proportion to the number of shares, the individual's interests were not freely negotiable, and the parties viewed the individual's investment as a membership interest.

CONCLUSION
The judgment was affirmed.

Recommended Supplements for Corporations and Business Associations Law

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