B.J. Loftsgaarden (defendant) created a limited partnership that would operate a motel in Rochester, Minnesota, with the central purpose of creating a tax shelter for investors (Randall) (plaintiffs) in said partnership. The initial offering memorandum to investors indicated the steps the partnership would take to save on startup costs, as well as the techniques the partnership would implement to provide tax savings to investors. When the partnership failed, Randall brought suit against Loftsgaarden for a violation of § 10(b) of the Exchange Act, alleging that his offering memorandum was deceptive. The district court ruled in favor of Randall. Loftsgaarden appealed, arguing that the tax savings enjoyed by Randall, resulting from the limited partnership’s tax shelter, should be subtracted from an award for damages. The circuit court agreed with Loftsgaarden. Randall then petitioned for certiorari to the United States Supreme Court.