Fed. Sec. L. Rep. P 97,502 Howard H. Mason v. Bradley Unkeless

Plaintiff appeals the district court’s dismissal of his action seeking damages for securities fraud. Initially, the district court dismissed plaintiff’s complaint for lack of subject matter jurisdiction but permitted plaintiff leave to amend. The court then denied a motion to dismiss the action based on the amended complaint, but it granted dismissal after defendant filed a motion to review the denial, along with a certified copy of plaintiff’s answer to a cross-complaint in a related state proceeding. We affirm the district court’s dismissal of the action.

FACTUAL BACKGROUND

During a telephone conversation in 1976, defendant Bradley Unkeless described an investment opportunity to Howard Mason. Mason and Unkeless were attorneys who, at the time of the conversation, had been friends for a few years. Mason alleged that Unkeless suggested that he invest in a profitable photocopy business operated by James Lancelle, who Unkeless said was an experienced businessman. Unkeless did not reveal that he was representing Lancelle and his wife and general partner, Lynne Lancelle, in a pending bankruptcy proceeding.

Mason alleged that he entered into an oral limited partnership agreement…

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…

618 F.2d 597 Fed. Sec. L. Rep. P 97,502 Howard H. MASON, Plaintiff-Appellant, v. Bradley UNKELESS, Defendant-Appellee. No. 78-1944. United States Court of Appeals, Ninth Circuit. May 12, 1980. Gary A. Foltz, Law Offices of Robert L. Purvin, Jr., San Diego, Cal., for plaintiff-appellant. Bradley Unkeless, in pro per. Appeal from the United States District Court for the Southern District of California. Before MERRILL and FERGUSON, Circuit Judges, and SMITH, District Judge. * FERGUSON, Circuit Judge: 1 Plaintiff appeals the district court's dismissal of his action seeking damages for securities fraud. Initially, the district court dismissed plaintiff's complaint for lack of subject matter jurisdiction but permitted plaintiff leave to amend. The court then denied a motion to dismiss the action based on the amended complaint, but it granted dismissal after defendant filed a motion to review the denial, along with a certified copy of plaintiff's answer to a cross-complaint in a related state proceeding. We affirm the district court's dismissal of the action. FACTUAL BACKGROUND 2 During a telephone conversation in 1976, defendant Bradley Unkeless described an investment opportunity to…