Doran v. Petroleum Management Corp.
545 F.2d 893 (5th Cir. 1977)



PROCEDURE:Plaintiff appealed from the denial of relief by United States District Court for the Northern District of Texas in a case to rescind the purchase of a limited partnership interest under § 4(2) of the Securities Act of 1933, 15 U.S.C.S. § 77d(2)

FACTS: Doran (P) bought a piece of a limited partnership and took out a loan to fund his business. Business declined and the P then 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: Is the purpose of section 4(2) to promote full disclosure to investors and to allow them to make informed business decisions free from fraud?

RULE: To constitute a private offering and thus be exempt from the registration requirements of the Securities Act of 1933, the offeree in a sale must be furnished with or have access to information about the issuer that a registration statement would have disclosed.

HOLDING:The Court of Appeals, held that record failed to support defendants' claim that plaintiff had been sole offeree because all others contacted by defendant were offered “participant” rather than “special participant” interests; that absence of findings of fact that all offerees, whatever their expertise, had been furnished information about issuer that a registration statement would have disclosed or that each offeree had effective access to such information, court erred in concluding that offering of limited partnership interests in oil drilling venture was a private placement exemption from registration requirements; and that deliberate overproduction of wells by defendant in violation of production allowances of Wyoming Oil and Gas Conservation Commission breached partnership agreement arising out of sale of limited partnership interest to plaintiff in oil drilling venture, but plaintiff was in no way damaged by the breach.