Doran v. Petroleum Management Corp.
United States Court of Appeals for the Fifth Circuit
545 F.2d 893 (5th Cir. 1977)
Petroleum Management Corp. (PMC) (defendant) formed a limited partnership for the purpose of operating drilling wells. PMC offered an interest in the drilling program to eight investors. There were only a small number of shares offered for relatively low value, and the offering was made to the eight investors personally, without any public advertising. PMC did not file a registration statement in connection with this offering of securities. William Doran (plaintiff) was the only one out of the eight who ended up investing in PMC. A little more than a year after Doran invested in PMC, the Wyoming Oil and Gas Conservation Commission ordered the drilling wells sealed for about a year due to deliberate overproduction by PMC. As a result of the shutdown, a note on which Doran was liable went into default, and Doran lost a state-court case requiring him to pay significant costs. Doran then brought suit against PMC seeking damages for breach of contract, as well as rescission of his contract with PMC based on a failure to register the offering in violation of the Securities Acts of 1933 and 1934. The district court found that the PMC offering was exempt from registration because the offering was private, as Doran was a “sophisticated investor” and did not need federal securities protection. Doran appealed.
Rule of Law
Holding and Reasoning (Goldberg, J.)
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