703 F.2d 212 (6th Cir. 1983), 81-1795, Odom v. Slavik
|Citation:||703 F.2d 212|
|Party Name:||Gerald T. ODOM, Plaintiff-Appellant, v. Joseph F. SLAVIK, Stephen F. Slavik, Sr., The Slavik Company and Slavik Investors, Defendants-Appellees.|
|Case Date:||March 23, 1983|
|Court:||United States Courts of Appeals, Court of Appeals for the Sixth Circuit|
Argued Feb. 18, 1983.
Donald F. Tucker (argued), Simon, Deitch, Siefman & Tucker, Southfield, Mich., for plaintiff-appellant.
Abba I. Friedman (argued), Robert Friedman, Hyman, Gurwin, Nachman, Friedman, Southfield, Mich., for defendants-appellees.
Before MARTIN and JONES, Circuit Judges and PECK, Senior Circuit Judge.
Plaintiff, Gerald Odom, appeals from a judgment below dismissing, for lack of jurisdiction, his case alleging, inter alia, a violation of the federal securities law. He contends on appeal that the district court erred when it ruled that his partnership interest in an enterprise called Essex at Hampton was, as a matter of law, not a security under the Securities Exchange Act of 1934, 15 U.S.C. Sec. 78a et seq. Though we believe that the court erred in dismissing the case for lack of jurisdiction, we affirm the district court insofar as it held that the plaintiffs interest is not a security.
The Slavik Company, a Michigan corporation involved in the promotion of residential housing and real estate projects, is owned and controlled by Joseph and Stephen Slavik. Gerald Odom, the plaintiff-appellant, worked for that company prior to 1977. He is, it appears, experienced in the management and development of real estate.
The agreement which forms the basis of the plaintiff's claim to have been defrauded in violation of the Exchange Act involves the Slavik Company's plan to develop a community called Essex at Hampton. Some time in January 1976, Joseph Slavik and Gerald Odom had conversations concerning this development. The appellant describes these conversations as meetings in which the Slaviks offered and proposed that he share in the partnership to develop Essex; the appellees contend that Odom demanded that he be given a share in the project. In any event, these meetings gave rise to the partnership called Essex at Hampton.
In June of 1976, a partnership agreement was executed with Gerald Odom and the Slavik Company as general partners. Odom had a one percent interest in the partnership, while the Slavik Company received four percent. The limited partners, yet to become part of the venture, were to have 95% interest collectively. At the execution of the contract, Odom made his proportionate share of the capital contribution, $50.00.
That summer, a construction contract was executed and the partnership engaged in a series of public offerings of the limited partnership interests. The private placements of these interests amassed $1,620,000. for the project.
Some time in February 1978, the partnership agreement was amended. Slavik Investors, a Michigan partnership of Joseph and Stephen Slavik, was added as a general partner. The Slavik Company and the Slavik Investors partnership shared the four percent general partnership interest, giving them, collectively, an 80% share. After this and a second amendment, the agreement specified that an action of any two general partners would bind the partnership. In essence, this meant that Gerald Odom could not control the partnership business. Joseph and Stephen Slavik, through the Slavik Company and Slavik Investors, had effective control over the project.
This suit was filed because Gerald Odom believed that he had been fraudulently frozen out of the partnership and denied his share and control of the business. Odom's complaint alleged six counts of violation of state law and one count of violation of the Securities Exchange Act's anti-fraud provision, 15 U.S.C. 78j [Securities Exchange Act Sec. 10] and Rule 10(b)-5 promulgated thereunder. The jurisdiction of the federal...
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