DORAN V. PETROLEUM MANAGEMENT CORP.
545 F.2d 893 (5th Cir. 1977)
NATURE OF THE CASE: This case involves the so called 'private offering exception' of section 4(2) of the SEC Act of 1933, which is targeted at small corporations that wish to raise capital. In essence, the exception allows small firms to avoid the costly and time consuming process of filing a registration statement to the SEC. The registration statement is a form of disclosure to potential investors. In this case, the Court tries to balance the burden (in terms of money and time) of filing the registration statement versus the benefit of filing the statement (full disclosure to investors). Doran (P) appealed from denial of relief to rescind purchase of limited partnership interest under 4(2) of the Securities Act of 1933.
FACTS: Doran (P) bought a piece of a limited partnership and took out a loan to fund his commitment. Business declined and P defaulted on the loan. The lender (D) sued P for damages. P argues that he was not given full disclosure from the D when he took out the loan. The district court held that the sale of the partnership to P qualified under the private offering exception and P was denied relief.
ISSUE:
RULE OF LAW:
HOLDING AND
DECISION:
LEGAL ANALYSIS:
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