Gustafson v. Alloyd Co.
United States Supreme Court
513 U.S. 561, 115 S.Ct. 1061, 131 L.Ed.2d 1 (1995)
- Written by Rocco Sainato, JD
Facts
Gustafson, McLean, and Butler (collectively, Gustafson) (defendants) were the sole shareholders of Alloyd Company (plaintiff). In 1989, Gustafson sold Alloyd to Wind Point Partners (Wind Point) via a sales contract under which Wind Point purchased Alloyd’s stock. The sales price was partially based on an estimate of Alloyd’s anticipated net worth at year-end. If the estimate proved incorrect, the disadvantaged party was entitled to an adjustment. After the year-end audit, Alloyd’s net worth was less than anticipated. However, instead of accepting an adjustment, Wind Point, via Alloyd, sued Gustafson under § 12(2) of the Securities Act of 1933. Wind Point argued that the sales contract was a prospectus and that the incorrect revenue figures were a misstatement entitling Wind Point to rescission, effectively undoing the sale. The district court ruled in Gustafson’s favor, finding that the sales contract did not constitute a prospectus. The court of appeals vacated the district court’s judgment and remanded. The Supreme Court granted certiorari.
Rule of Law
Issue
Holding and Reasoning (Kennedy, J.)
Dissent (Ginsburg, J.)
Dissent (Thomas, J.)
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