United States Court of Appeals for the Fourth Circuit
349 F.3d 166 (4th Cir. 2003)
Thomas Glynn (defendant) was the chairman of GeoPhone Company, LLC (GeoPhone). James Robinson (plaintiff) agreed to loan Glynn $1 million so that Glynn could test a technology he had developed called Convolutional Ambiguity Multiple Access (CAMA). Robinson agreed to a letter of intent to invest an additional $24 million if the CAMA technology worked in the field test. Glynn then performed the field test without the CAMA technology, and told Robinson that the test had been a success. Robinson then invested the rest of the money according to the letter of intent. Under the ensuing contract, Robinson appointed two members of the GeoPhone board and assumed one of the seats himself, in addition to assuming the role of treasurer. Eventually, Robinson found out that the CAMA technology had not been used in the initial test and he filed suit, alleging that Glynn had committed federal securities fraud, in that Robinson’s interest in GeoPhone was an investment contract, stock, or both. The district court dismissed the claim on the grounds that Robinson’s membership interest in GeoPhone did not constitute a “security” under the Securities Exchange Act of 1934, which defines “security” as any note, stock, security future, bond, debenture, investment contract, or any instrument or interest commonly known as a security. Robinson appealed.
Rule of Law
Holding and Reasoning (Wilkinson, J.)
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